ALBERT HERTER

Archive for May, 2009|Monthly archive page

‘EIGHT PROFESSIONALS WORTH SPENDING MONEY ON, ‘ from Kiplinger Magazine. To lighten the load and reduce stress these eight pros are worth the money spent on them.

In Uncategorized on May 31, 2009 at 13:31

If you need to lighten your work — or stress — load, let someone else do the heavy lifting. We have chosen eight professionals who can help make your life a little easier. Visit kiplinger.com/simplify for phone numbers and Web sites to help you find local professionals.

Financial adviser

A financial planner can help ease the burden of saving for retirement or college, or managing investments. Choose an adviser who is paid a set fee or who works on commission, or a combination of the two. Cost: $100 to $300 per hour (fee-only).

Tax preparer

If you have a simple return but don’t want to do it yourself, try H&R Block or another commercial preparer. Need more guidance throughout the year or have a complicated tax situation? Consider a CPA. Cost: H&R Block patrons pay an average of $170; a CPA could charge from $150 to $500, depending on your situation.

Travel agent

An agent provides one-stop shopping for your next escape and can be especially valuable if you are venturing to a faraway destination. Cost: about $30 per person for a domestic trip, or $60 if you’re heading overseas or have an intricate itinerary (there may be no fee to book a cruise).

Medical-bills manager

A claims assistant can review your medical bills and organize paperwork as well as file, track and challenge your insurance claims. Cost: $60 to $120 per hour.

Elder caregiver

When you can’t be there, a caregiver can assist with daily tasks and errands, monitor medications and medical care, and provide companionship. Cost: $16 to $20 per hour.

Independent insurance agent

These brokers sell insurance from multiple carriers, so they can shop for the best policy. And they will help when you need to file a claim. Commissions on policies are typically the same as when you buy directly from the company.

College-admissions consultant

A consultant can identify schools tailored to your student’s interests, enforce deadlines, and supervise (but not write) applications and essays. Cost: $175 per hour on average, or about $3,800 for a two-year coaching program.

Professional organizer

This pro can tame your pack-rat tendencies, maximize closet space, help prepare boxes for a move or set up a system for filing paperwork. Cost: $40 to $200 per hour, or by flat fee per project.

‘THE BIG INFLATION SCARE, ‘ by Paul Krugman. ‘BUT WHEN IT COMES TO INFLATION, THE ONLY THING WE HAVE TO FEAR IS INFLATION FEAR ITSELF.’ Right on!

In Uncategorized on May 29, 2009 at 15:45

But does the big inflation scare make any sense? Basically, no — with one caveat I’ll get to later. And I suspect that the scare is at least partly about politics rather than economics.

First things first. It’s important to realize that there’s no hint of inflationary pressures in the economy right now. Consumer prices are lower now than they were a year ago, and wage increases have stalled in the face of high unemployment. Deflation, not inflation, is the clear and present danger.

So if prices aren’t rising, why the inflation worries? Some claim that the Federal Reserve is printing lots of money, which must be inflationary, while others claim that budget deficits will eventually force the U.S. government to inflate away its debt.

The first story is just wrong. The second could be right, but isn’t.

Now, it’s true that the Fed has taken unprecedented actions lately. More specifically, it has been buying lots of debt both from the government and from the private sector, and paying for these purchases by crediting banks with extra reserves. And in ordinary times, this would be highly inflationary: banks, flush with reserves, would increase loans, which would drive up demand, which would push up prices.

But these aren’t ordinary times. Banks aren’t lending out their extra reserves. They’re just sitting on them — in effect, they’re sending the money right back to the Fed. So the Fed isn’t really printing money after all.

Still, don’t such actions have to be inflationary sooner or later? No. The Bank of Japan, faced with economic difficulties not too different from those we face today, purchased debt on a huge scale between 1997 and 2003. What happened to consumer prices? They fell.

All in all, much of the current inflation discussion calls to mind what happened during the early years of the Great Depression when many influential people were warning about inflation even as prices plunged. As the British economist Ralph Hawtrey wrote, “Fantastic fears of inflation were expressed. That was to cry, Fire, Fire in Noah’s Flood.” And he went on, “It is after depression and unemployment have subsided that inflation becomes dangerous.”

Is there a risk that we’ll have inflation after the economy recovers? That’s the claim of those who look at projections that federal debt may rise to more than 100 percent of G.D.P. and say that America will eventually have to inflate away that debt — that is, drive up prices so that the real value of the debt is reduced.

Such things have happened in the past. For example, France ultimately inflated away much of the debt it incurred while fighting World War I.

But more modern examples are lacking. Over the past two decades, Belgium, Canada and, of course, Japan have all gone through episodes when debt exceeded 100 percent of G.D.P. And the United States itself emerged from World War II with debt exceeding 120 percent of G.D.P. In none of these cases did governments resort to inflation to resolve their problems.

So is there any reason to think that inflation is coming? Some economists have argued for moderate inflation as a deliberate policy, as a way to encourage lending and reduce private debt burdens. I’m sympathetic to these arguments and made a similar case for Japan in the 1990s. But the case for inflation never made headway with Japanese policy makers then, and there’s no sign it’s getting traction with U.S. policy makers now.

All of this raises the question: If inflation isn’t a real risk, why all the claims that it is?

Well, as you may have noticed, economists sometimes disagree. And big disagreements are especially likely in weird times like the present, when many of the normal rules no longer apply.

But it’s hard to escape the sense that the current inflation fear-mongering is partly political, coming largely from economists who had no problem with deficits caused by tax cuts but suddenly became fiscal scolds when the government started spending money to rescue the economy. And their goal seems to be to bully the Obama administration into abandoning those rescue efforts.

Needless to say, the president should not let himself be bullied. The economy is still in deep trouble and needs continuing help.

Yes, we have a long-run budget problem, and we need to start laying the groundwork for a long-run solution. But when it comes to inflation, the only thing we have to fear is inflation fear itself.

MUNI BONDS. ‘What a difference a year makes. Since the financial crisis began last summer, the muni bond market has been anything but dull.’ From Fidelity Investments.

In Uncategorized on May 29, 2009 at 13:10

Many Wall Street pros have long held that for safety in a quiet, even boring, sector of the market, with steady tax-sheltered income to boot, municipal bonds were the way to go.

What a difference a year makes. Since the financial crisis began last summer, the muni bond market has been anything but dull.

The total return on municipal bonds fell into negative territory in 2008 for the first time in a decade – but then snapped back with a 6.3% total gain from December through April, outperforming stocks and U.S. government bonds over the same period.

“It’s been quite a run,” said Jamie Pagliocco, a municipal bond portfolio manager with Fidelity Investments, adding that “there’s been more volatility than in the past.”

The gyrations have ended, and the big bounce back from severely depressed levels is unlikely to continue, money managers and bond strategists said, though there is still a case to be made for owning tax-free municipal bonds.

Munis can pay the taxable equivalent of more than 6% for those in the highest tax brackets – and with tax rates rising, such investments become more valuable. Indeed, with municipal yields not far from the yields on comparable taxable bonds, they may offer an attractive source of income for many portfolios.

Struggling states

The relatively high yields of munis right now reflect problems that state and local governments face.

Exhibit 1 is California, which faces a $24 billion budget deficit, and is desperately slashing spending. At least 46 other states are struggling to make ends meet, according to the Center on Budget and Policy Priorities, a Washington think tank.

State and local governments rely on bonds to pay for things like bridges, hospitals and schools, but the market for the bonds tumbled last year as investors fled to the safest of safe havens, U.S. Treasury securities. The market froze up just as states were issuing record amounts of debt to cover their expenses, throwing state finances into turmoil.

In some cases, new issues were pulled before they got to market. Even wealthy investors who tend to snap up munis for their tax advantages got skittish. In part, this reflected the implosion of the insurance used to guarantee the bonds against default, a victim of last year’s credit crisis.

Since then the federal government has extended a hand through special financing aimed at helping states weather the storm. Washington now subsidizes the interest payments states make to bondholders on Build America Bonds – a new type of taxable bond meant for state and local projects.

Although these bonds are not tax-free, the financial relief they offered to states shored up the muni market as well. The states can offer the bonds and the federal government pays a third of the interest rate as a subsidy to the states.

“Munis really began to recover in expectation of federal assistance – an expectation that proved on the mark,” said Matt Fabian, managing director of Municipal Market Advisors in Westport, Conn., a research firm specializing in municipal finance.

Fidelity New York Income Fund (FTFMX | Get Prospectus

, for example, a tax-free fund for investors who live in the state, is up 7.17% so far this year. The interest rate the funds pays is about 4%, tax-free. A New Yorker in the 28% tax bracket would have to find a yield of 6.04% on a taxable fund to earn an equivalent amount.

In comparison, after a tremendous rally in 2008, long-term U.S. Treasury bonds are down more than 13.5% year-to-date. The total return is the bond’s market value plus the interest paid. Yields, which are taxable, are around 3.7% on the benchmark 10-year note, near the highs hit last November.

How much risk?

Still, many investors use funds to diversify muni holdings and spread their risk. Whether muni bonds work for an individual investor depends on a number of factors, including portfolio allocation between stocks and bonds, the investor’s tax bracket, and taste for risk.

In April, Moody’s

 Investors Service issued a negative outlook on the debt of all local governments in the United States. Warren Buffett in his annual shareholder letter also discussed the possibility of municipal defaults.

“How risky are munis over the long run? Well, you have to be very sensitive to credit quality and focus on the highest-rated issues,” said Evan Rourke, vice president at Eaton Vance Tax Advantaged Bond Strategies. But he, like others, noted that muni defaults are “almost non-existent.”

Individuals can focus on credit quality by buying highly rated bonds or funds wedded to the same goal. Bond funds can spread their holdings to limit the impact of a default by an individual state or local government.

Fidelity’s Pagliocco also noted that fund managers can navigate the shoals to pick up the highest quality bonds. Moody’s statement, he said, “was not a reflection on individual credits.”

After their recent recovery it is unclear whether munis will continue to rally. The federal government’s stimulus probably has put a floor under the market through 2010, the money managers and strategists said. And while the program could be extended, states remain under financial pressure.

“The market still feels more fragile than before the crisis,” said Pagliocco, adding, however, that he does see more stability in munis than during the depths of the market crisis last fall.

SMART MONEY’S 17TH ANNUAL SURVEY OF BROKERAGE & MUTUAL FUND COMPANIES. THE BEST & THE WORST NAMED!!!

In Uncategorized on May 27, 2009 at 16:15

What do you want from your brokerage firm? Sorry, they can’t make the market march back to its old highs. But what about commissions, research, investment products and customer service?

To find the best—and worst—discount brokers in these and other categories, our 17th annual broker survey relied on our own tests, consulting-firm analysis and surveys of the brokerages themselves. No detail was too small. We noticed, for example, that WellsTrade and Banc of America charge $75 to close a retirement account—a service provided for free by some of their competitors. OptionsXpress left us on hold for nearly four minutes when we requested its interest rate on cash balances. (The company later said it shouldn’t have taken that long.) But when we contacted Fidelity with a query on interest rates, the rep gave us a quick answer and even a compliment: “Good question.”

Yes, it’s a lot of work, but our efforts haven’t gone unnoticed. For two years now, the Web site ConsumerSearch has said SmartMoney has the best broker survey among magazines and newspapers. Our category-by-category-findings:

Commissions & fees

Best: Just2Trade
Worst: WellsTrade

The winner in this category, Just2Trade, is new to our survey this year. Launched in 2007 and geared toward experienced investors, the firm took top honors with the price of $2.50 for both equity and mutual fund trades. It also boasted some of the lowest rates on margin interest. Just2Trade edged out Zecco, which got its start just a few years ago by pitching 40 free trades each month to any customer holding a $2,500 balance. Zecco has angered some customers by lowering the number of free trades to 10 and increasing the required balance to $25,000. Fall short and the cost is $4.50 a trade. The firm also set new fees for paper statements and trade confirmations. “It’s a recession,” says Gabriel Dalporto, Zecco’s chief strategy officer. “Our margins are down.”

 
 
), doles out up to 100 free trades a year. But it rounds out the bottom of this category because customers qualify only if they link their brokerage account to a Wells Fargo bank account. Without that link and $25,000 in combined assets, commissions start at a pricey $19.95 and run as high as $60 for some broker-assisted trades.

Investment products & mutual funds

Best: Fidelity
Worst: SogoTrade

This year’s race came down to Fidelity, Charles Schwab and TD Ameritrade. Together the trio has more than double the number of customers of the remaining firms in our survey combined, and each has a smorgasbord of offerings, including municipal bonds, certificates of deposit and access to initial public offerings. In the end, Fidelity led the pack with its impressive mix of more than 16,000 mutual funds, many of which don’t carry transaction fees.

The firms with the fewest mutual funds generally had the slimmest pickings when it came to the other investment products. Just2Trade and ShareBuilder, for example, offered fewer mutual funds than the competition, and both lacked corporate, municipal and U.S. Treasury bonds. Zecco and SogoTrade carried exchange-traded funds but not much else on our wish list. SogoTrade scored the lowest overall because it was the only firm without a single mutual fund offering. The company says it’s focused on active traders who come to the firm for its low commissions on stock trades.

Customer service

Best: Muriel Siebert
Worst: WallStreet*E

Discount brokerage customers don’t typically count on their firm for extra hand-holding. But in today’s turbulent market, they want to know that their brokerage will be there to answer questions, whether it’s in a phone call, e-mail or online chat. After months of market swings, financial crises and industry scandals, experts say quality customer service is more important than ever. That’s why we were surprised when WallStreet*E, for the second year in a row, didn’t reply to our e-mail as a prospective customer, while Banc of America and WellsTrade had no e-mail address at all for prospective customers to get in touch. (WallStreet*E says it mistakenly thought it had answered our e-mail.)

WallStreet*E was one of the fastest to the phone, answering our calls in 20 seconds on average and offering bucketfuls of extras: a free “valet account” with access to a Visa debit card, check writing and customized statements. But the firm didn’t offer 24/7 phone help, access to our account through a mobile phone, or an online summary about our tax gains or losses (it says it’s working on the latter two). Muriel Siebert, which inched past TradeKing for the best overall customer service, answered our phone calls and e-mails promptly with thorough and cordial responses.

Trading tools

Best: TD Ameritrade
Worst: ShareBuilder

Last October the Dow (.DJI

 
 
 
 

) swung more than 1,000 points within a single day—the first time that had happened in its 112-year history. And as we all know, things didn’t exactly quiet down after that. In today’s fast-moving market, investors need to be able to place trades wherever they are and as quickly as possible. TD Ameritrade offered the 13 trading tools on our wish list. Premarket and aftermarket trading? Check. News alerts about our stocks sent directly to our in-box? Yep. And what about the technology that lets us make trades over our smartphone? TD Ameritrade was one of 10 firms with this convenience.

Of course, nifty tools aren’t worth much if it takes too long to make a trade. Once again we teamed up with Gomez, a Web site–monitoring company that timed how long it took to sign in to brokerage accounts, fill out a trade and preview the order at different points in 2008. TD Ameritrade and E*Trade tied with an average of just over five seconds for the year. Yet they weren’t the fastest of the bunch. That distinction went to Scottrade, which clocked in at a mere four seconds. WellsTrade managed to improve from the 21 seconds it took in last year’s survey, but it was still sluggish compared with the rest of the group—17 seconds. The only trading tool ShareBuilder offered from our list was a dividend-reinvestment program, landing it in last place in this category. ShareBuilder President Dan Greenshields says the firm likes to keep things simple.

Banking services

Best: Fidelity, E*Trade and WellsTrade
Worst: SogoTrade and Scottrade

Banc of America (the discount-brokerage arm of Bank of America) offers many of the services on our wish list, and Fidelity and E*Trade earned top scores by providing virtually everything we were looking for—without added charges. That includes the ability to pay bills online, make instant cash transfers and have fees for ATM withdrawals automatically rebated to our account. WellsTrade also offers many free banking services and even a place to store precious metals. This helped the firm garner its only five-star category rating in this year’s survey.

Some competitors beefed up their own services and inched higher in this category. ShareBuilder, taking advantage of its acquisition by the online bank ING Direct, took the biggest leap, adding a debit card, plus a tool to pay bills online. Scottrade and SogoTrade tied for last, with the fewest banking services. A spokesperson for Scottrade says the company is planning to roll out new banking products such as checking accounts or credit cards. But at SogoTrade, President Dave Whitmore says he’s “not looking to attract people for their banking money.”

Research

Best: Charles Schwab and E*Trade
Worst: Zecco and WallStreet*E

As investors increasingly worry about the safety and appropriateness of the financial products they buy, they’re looking for much more than standard research reports from Wall Street analysts. That might explain why Scottrade’s investor education podcasts have ranked in the 20 most-popular investment-related podcasts on iTunes. The St. Louis–based firm, which jumped up a notch in this category, doubled its video podcasts last year to meet the “tremendous demand for investor education,” says Kevin Dodson, director of online financial services. Fidelity, another iTunes regular, bulked up its research with ratings of how companies perform on environmental, social and governance issues. “More customers want help on how to do it themselves,” says Jim Burton, president of Fidelity’s retail brokerage.

Charles Schwab and E*Trade tied for first by adding their own new offerings. Schwab introduced a new, easier to navigate Web site, while E*Trade upped its menu of Web-based seminars by 50 percent. The Web sites of Zecco and WallStreet*E took the longest to navigate, and the firms earned some of the lowest marks on research. WallStreet*E says the firm is hoping to correct its “research problem” with a planned partnership with Zacks Investment Research. Zecco says it has beefed up in this area by adding Standard & Poor’s research reports and a mutual fund center.

Of course, not every firm aims to be the best in each category. SogoTrade, for example, wants to be known as a great place for active traders seeking low commissions, and ShareBuilder touts its system for automatic investments in stocks and mutual funds. ShareBuilder says its customers don’t really want a lot of bells and whistles, and if they did, it would add to the cost of the product. When it comes to investing, says ShareBuilder President Greenshields, “there’s no free lunch.”

MY 12 SUGGESTED STEPS TO LIVING MORE SIMPLY, BELOW YOUR MEANS, ADJUSTING TO THE NEW REALITIES. PUBLISHED BY TERRY DEAN SCHMIDT IN HIS MONTHLY NEWSLETTER. HE’S ON MY FACE BOOK PAGE SO YOU CAN CONTACT HIM. AUTHOR, MGMT. CONSULTANT, UNIV. PROFESSOR. FRIEND FOR 30 YEARS.

In Uncategorized on May 25, 2009 at 01:10

During the 1970s when I worked for the government in Washington DC, I shared a group house with Al Herter.  Al is a self-made millionaire and successful investor, and is called “the hippie philanthropist”.

Al mastered the art of living comfortably on a small budget. By living simply and following the Quaker philosophy, he became financially independent by doing both well and good. In these topsy-turvy financial times, his twelve steps offer practical and simple advice we can all benefit from.

Notice: These smart steps can alter your life and your future outcomes. Following them again and again will put some traction in your action.

  1. Think simple living. The Quakers are the standard. Want what you have. Do what you can. Be who you are. Count your blessings.
  2. For a month, keep track of every penny you spend in a small notebook (but don’t go out and buy one). Review each bill you pay or have paid. Need all those cable channels? The lattes? The smokes? The cleaners? The maid twice a week?
  3. Mend clothes, darn socks, turn off lights, and re-heat leftovers. Think small, cheap, and affordable.
  4. Sell anything you don’t use, want, need, or are just storing for posterity, for the children, or for a rainy day. Get onto craigslist.com and sell all that extra stuff you have and don’t use. It declutters and puts money in your pocket.
  5. Look for other revenue centers that you can profit from, such as rent out a small room as an office; or rent out the garage or even the basement for storage. Explore how you can rent or exchange apartments rather than use hotels.
  6. Health is number one on my list. Eat better. Eat less. Practice yoga, take walks, ride your bike.
  7. Plant a veggie garden. It saves money and is better for you-and may even be something you can sell to others and/or barter with them. You do tomatoes, and the neighbors do corn/beans/squash. You share the tools, knowledge and harvest. Not only will your garden grow, but so will your neighborly community.
  8. Starting to get the drift that the landscape has changed dramatically?
  9. Cook and entertain at home. Invite others over for potlucks. They’re cheaper, easier nicer and more fun!
  10. Walk, use public transit, use your bike, car pool, or any combination thereof (but not all at once, of course).
  11. Be preventative with your health through diet, exercise and relax. When necessary, use generic drugs.
  12. Breathe, relax and enjoy life! You’ve only got this very moment to live it to the fullest-and that’s one thing that is for certain!

Check out Al’s blog www.TheSmartMoney.wordpress.com.

GO TO: MINT.COM founded by Aaron Patzer. ‘Transforms personal finance from an onerous task into a fun diversion.’ Sunday N.Y. Times Magazine article by Virginia Heffernan.

In Uncategorized on May 24, 2009 at 15:28

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The Medium

For adventures in digital culture, don’t miss The Medium, a blog by Virginia Heffernan.

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Napa. Nice. I admire Patzer’s Facebook presence. It suggests that he leads a full life. He plans to head to Costa Rica for surfing and Spanish lessons. He ran a marathon. And on behalf of Mint, he will accept two 2009 Webby Awards in June. Mint also won second prize in the Edison Best New Product Award competition.

Mint absolutely deserved the awards — as well as the praise it has received from just about every quarter. The site helps you track how much money you have, how much you spend and how much you owe. Artfully designed, it comes off like a patient and discreet friend who knows your awkward financial secrets and stands by you anyway. “There are a number of people we’ve heard from that say Mint is literally the first thing they look at every single morning with their cup of coffee,” Patzer told me recently by e-mail. I’m not quite first-thing yet myself, but still: Mint opens on my desktop every weekday.

The service seems simple enough, though Patzer says there are five separate patents pending to the technology. All I know is that once you slip Mint the user names and passwords for your online accounts, the site collates your mortgages, bank accounts, credit and debit cards, I.R.A.’s, 401(k)’s and more. (Mint, which is connected to about 7,500 financial institutions in the United States, does not itself view or store the information.) Mint can also show trends in your cash flow. It sends you weekly financial summaries via e-mail, while also alerting you to anomalies like unusually high bank fees or sudden surges  in expenses. Ordinarily, dealing with banks and credit- card companies requires personal vigilance. With Mint, someone seems to watch over you. And that love comes free of charge.

Mint’s seductive interface has a very gentle, almost-diaphanous graphic scheme that centers on a sprig of mint. (The tacit part of the conceit — “mint” as in U.S. Mint — is, visually, nowhere to be found.) Open the Mint window, and a translucent, vernal interface greets you. A sample pie chart shows, in laxative-ad hues, a mythical Mint user’s monthly expenditures: $1,200 in rent, $400 in groceries, $750 in auto. Halcyon.

Under the pie chart, amid tufts of pretty green grass, Mint presents options to “Understand Your Money,” “Pay Your Student Loans” and “Create a Budget.” You can visit your own accounts and survey them and customize the way that Mint categorizes them.

Significantly, the site also proposes seemingly advantageous ways to switch credit cards or take advantage of various other financial deals. This is where Mint makes its money: it advertises financial-service companies directly to users whose economic circumstances suggest a need for them. If you click on “Ways to Save,” for instance, you’re not given advice on how to darn socks or make stews you can freeze. Instead, logos and promotions for companies like American ExpressStarwood and Discover come up. This makes Mint seem somewhat less benevolent. In fact, it’s downright sinister. Unlike other personal-finance guides, Mint does little, if anything, to discourage credit-card use; rather, it encourages users to find “better” cards. Hasn’t the option of hopping from one zero-percent mirage to the next helped to sustain America’s credit delusions?

My anxiety about Mint — that users come to budget and stay to borrow — is quickly allayed by a return to the main interface. Phew: no logos but Mint’s own. And Mint is suffused with a consoling, feel-good quality, as hard to resist as Citigroup’s old “Live Richly” campaign.

By my lights, the best Mint feature is one that lets you compare your own financial freakiness to other people’s. Bar graphs in a beachy palette compare how much you spend at Neiman Marcus or Trader Joe’s, say, with how much money people nationwide — or people just in your state — spend in those franchises. By running my expenses up against those of other household economies, Mint has permitted me raptures of smugness at the thought that, for example, I don’t own a car. It has also chagrined me for days with the realization that I’ve retained so many chump habits from 2006 and am still blowing way too much money at Starbucks.

Joy and chagrin — I’d say those are the emotions activated by Mint. Not bad, right? At least they supplant the anxiety, compulsion and misery that are my usual responses to personal finance. On the service’s testimonials page, users express a kind of soft-rock ardor. “Mint has truly helped my wife and I see light at the end of the financial tunnel,” writes one.

Such emotional reactions suggest that the site is, at its core, something other than a mere bookkeeping tool. After only a few weeks, I was regularly on Mint and essentially playing with it, as with a crossword puzzle: analyzing my spending habits, lowering my monthly caps on this or that category and calling my bank to contest Mint-flagged charges. This new diversion was — I noticed — distracting me from other sites, namely eBay and Etsy. That was rich. Where eBay had once turned shopping into a game, Mint had now turned saving into one.

Lately when I use Mint, I try to ignore what Patzer said when I asked if Mint had a house ideology: he described his crew as “quite a free-market bunch” and said that there are “a number of objectivists and/or libertarians at Mint.” Is Mint an Ayn Rand shop? Should I care? Mint offers a video of Patzer making an industry presentation in 2007. At that time, the occasion of his site’s unveiling, Patzer told the audience that he hoped with his advertiser tie-ins to achieve an “audacious” goal: to help America learn to save. I think Mint has helped me save. And if I’m saving so that the men and women of Mint can go wine-tasting — well, that shouldn’t bother me. Should it? Maybe profiting off people’s recent compulsion to budget is a new American way.


‘INCOME-ORIENTED OPTIONS FOR THE COMING YEARS,’ from Smart Money. GREAT READ on income investing. Looking for better yields vs. less than one per-cent on money market funds.

In Uncategorized on May 20, 2009 at 17:30

REGARDLESS OF WHAT happens in the stock market, the reality is that an increasing number of investors will be looking for income-oriented options over the coming years. As the baby boom generation continues to retire in greater numbers, more portfolios will be built around preserving principle and generating income rather than capital gain and thinking “long term.

Unfortunately, it’s very difficult to be an income investor now that the government is so blatantly gaming the system, borrowing massive amounts while forcing questionable lending through programs like TARP and TALF. Meanwhile, the Federal Reserve’s campaign of quantitative easing has pushed down interest rates for bank CDs and money-market accounts to almost absurdly low levels. According to the Money Fund Report, the 30-day average yield on money-market mutual funds now rests near 0.19%.

Income investing is somewhat foreign to me as it is against my nature and investment philosophy to buy anything simply for a yield. My belief is that you want to buy strong assets — period. Too often investors are lured to weak sectors or stocks because of their high yields, which mean nothing as the price of the underlying securities themselves decline.

Just as with equities, income investors must keep aware of the major prevailing trend. To that end, they must get in the habit of keeping an eye on the general direction of interest rates, a process made increasingly easy thanks to the myriad of indexes and ETFs that track various fixed-income benchmarks. Worth watching is the CBOE 10-Year Treasury Yield Index ($TNX.X), which provides a simple glance of the Treasury’s 10-year yield. Rates were as high at 8% in 1995 before dropping to 2% earlier this year.

A Further Fall for Rates?

CBOE 10-Year Treasury Yield Index (TNX)-15 year
CBOE 10-Year Treasury Yield Index (TNX)-15 year (30 = 3.0%, etc.)

Wherever you search for income, you can’t simply buy a bond fund and expect to collect above-average yield with no potential risk to principal. Just as with equities, however, risk can be mitigated through basic techniques such as appropriate position size and stop-loss orders, always aiming to cut losses short while letting winners run.

More than anything, avoid making large all-or-none allocations in a short period of time. Just consider the dramatic rally in stocks over just a few months. The same type of volatility, and shifts in trend, occur in credit markets — meaning that income investors must also monitor and alter their portfolios as market conditions change.

Here are a few of my current top choices for investors searching for yield within a diversified income-oriented portfolio.

Bank Loan Funds

Longtime readers will recall these were favorites of ours back in the credit boom, offering attractive yields and consistent price appreciation not closely correlated with other major asset classes. As the credit markets deteriorated, the buyout business, and leveraged lending in general, collapsed. Many investors became forced sellers as the markets froze. Bank loan funds were destroyed.

Now many are selling at dramatic double-digit discounts to their published NAVs, meaning that investors are able to buy assets for below their fair-market value. Of course, discounts in closed-end funds can persist, often for years at a time, especially in out-of-favor assets. But it’s hard to argue that investors who like a bargain aren’t getting one with funds like First Trust/Four Corners Senior Floating Rate Income II (FCT9.79*, +0.09, +0.92%), down 50% from 2007 levels, yielding 6% and trading 18% below its underlying NAV. Others to consider include Eaton Vance Senior Income Trust (EVF4.63*, +0.13, +2.88%) (8.11% yield, 12.6% discount to NAV), Eaton Vance Senior Floating Rate (EFR10.12*, +0.12, +1.20%) (8.28% yield, -9.08% discount to NAV) and First Trust/Four Corners Senior Floating Rate Income Fund (FCM9.35*, +0.10, +1.08%) (6.31% yield, 19.16% discount to NAV).

Moreover, if interest rates rise, bank loan funds could outperform as most hold loans that reset based on changes in short-term interest rates.

Foreign Currency Funds

Another idea for an income-oriented portfolio: currency funds, which provide diversification out of the U.S. dollar and, in some cases, a comparatively attractive income stream.

In an era of low rates world-wide, it’s hard to find high yields, even in emerging market countries, but some of the most attractive include CurrencyShares Mexico Peso (FXM77.99*, +0.44, +0.56%) (yielding 5.5%),CurrencyShares Russian Ruble (XRU31.14, -0.09, -0.28%) (yielding 4.15%) and CurrencyShares Australian Dollar (FXA77.88*, +0.26, +0.33%) (yielding 2.3%).

Also worth looking at is the newly launched WisdomTree Dreyfus Emerging Currency Fund (CEW20.68*,+0.14, +0.68%) we wrote about a few weeks back, which offers a basket of emerging market currencies, helping to diversify away from one country-specific risk. Keep in mind that the risk in these funds isn’t primarily interest rate, but currency: If the value of the U.S. dollar rises, these funds will most certainly fall.

For investors interested in combining currency risk and interest rate risk, foreign bond funds such as Templeton Global Income Fund, Inc (GIM8.29*, +0.10, +1.22%) (6.29% yield, -6.75% discount to NAV), Aberdeen Asia-Pacific Income Fund (FAX5.39*, +0.00, +0.00%) (7.87% yield, -5.15% discount to NAV) and Aberdeen Global Income Fund (FCO10.32*, +0.14, +1.37%) (8.55% yield, -2.19% discount to NAV) can also be considered.

Municipal Bond Funds

Many investors were shocked last year as their municipal bonds and bond funds, long thought of as the conservative ballast of their portfolio, actually lost money. Closed-end funds that use borrowed money were burned twice as badly, with price declines that far outweighed the income generated.

As risk appetite has returned, so has interest in munis, with many investors anticipating the higher taxes likely needed to pay for the dramatic jump in government spending. Value-oriented investors will also find bargains in closed-end muni funds, with many trading at notable discounts to NAV. On my short list in the sector are names likeWestern Asset Municipal Partners Fund, Inc (MNP12.12, +0.06, +0.49%) (5.45% yield, -12% discount to NAV), Nuveen Insured Municipal Opportunity Fund (NIO12.55*, +0.10, +0.80%) (5.85% yield, -9.6% discount to NAV), Nuveen Municipal Market Opportunity Fund (NMO12.18*, -0.02, -0.16%) (6.84% yield, -6.85% discount to NAV).

Because each person’s tax situation is unique, an investment in municipal bonds should be discussed with a competent tax professional.

Ultimately, the same philosophies we use while investing in stocks should also be employed when investing in bonds and other income securities. Given the historic uncertainties, especially in the credit markets, investors more than ever must approach the markets with a commitment to patiencediversification, and suitable risk.

WINNERS OF THIS YEAR’S WASHINGTON POST MENSA INVITATIONAL. AND MORE. VERY FUNNY. A LIGHTER TOUCH. ENJOY.

In Uncategorized on May 20, 2009 at 01:19

Mensa  Invitational:   Here are the winners of this year’s Washington
Post’s Mensa Invitational which once again asked readers to take
any word from the dictionary, alter it by adding, subtracting, or
changing one letter and supply a new definition:

1. Cashtration  (n.):  The act of buying a house, which renders the
   subject financially impotent for an indefinite period of time.

 2 Ignoranus:  A person who is both stupid and an asshole.

 3. Intaxication:  Euphoria at getting a tax refund, which lasts until 
     you realize it was your money to start with.

4. Reintarnation:  Coming back to life as a hillbilly.

5. Bozone (n.):  The substance surrounding stupid people that stops
    bright ideas from penetrating.   The bozone layer, unfortunately,
    shows little sign of breaking down in the near future.

6. Foreploy:  Any misrepresentation about yourself  for the purpose
    of getting laid.

7. Giraffiti:  Vandalism spray-painted very, very high

8. Sarchasm:  The gulf between the author of sarcastic wit and the
    person who doesn’t get it.

9. Inoculatte:  To take coffee intravenously when you are running late.

10. Osteopornosis:  A degenerate disease. (This one got extra credit.)

11. Karmageddon:  It’s, like, when everybody is sending off all these 
      really bad vibes, right?  And then, like, the Earth explodes and it’s 
      like, a serious bummer.
12.  Decafalon (n.):  The grueling event of getting through the day
       consuming only things that are good  for you.

13. Glibido:  All talk and no action.

14. Dopeler Effect:  The tendency of stupid ideas to seem smarter
      when they come at you rapidly.

15. Arachnoleptic Fit (n.):  The frantic dance performed just after
       you’ve accidentally walked through a spider  web.

16. Beelzebug (n.):  Satan in the form of a mosquito, that gets into 
      your bedroom at three in the morning and cannot be cast out.
 
17.  Caterpallor (n.):  The color you turn after finding half a worm
       in the fruit you’re eating.

The Washington Post has also published the winning submissions to its
yearly contest in which readers are asked to supply alternate meanings for
common words.  And the winners are:

1. Coffee, n.  The person upon whom one coughs.

2. Flabbergasted, adj.  Appalled by discovering how much weight one has gained.

3. Abdicate, v  To give up all hope of ever having a  flat  stomach.

4. Esplanade, v,  To attempt an explanation while drunk.

5. Willy-nilly, adj.  Impotent.

6. Negligent,  adj.  Absentmindedly  answering the door when wearing only a nightgown.

7. Lymph, v.  To walk with a lisp.

8. Gargoyle,  n.  Olive-flavored  mouthwash.

9.  Flatulence, n..  Emergency vehicle that picks up someone who’s been run over by a steamroller.

10. Balderdash, n.  A rapidly receding  hairline.

11. Testicle n.  A humorous question on an  exam.

12. Rectitude, n.  The formal, dignified bearing adopted by proctologists.

13. Pokemon, n.  A Rastafarian proctologist.

14 . Oyster, n.  A person who sprinkles his conversation with yiddishisms.

15. Frisbeetarianism, n.  The belief that, after death, the soul flies up onto the roof and gets stuck there.

16. Circumvent, n.  An opening in the front of boxer shorts worn by Jewish men.
 

‘ELEVEN WAYS TO SAVE MONEY NOW.’ From Money Magazine. Read it and see if any apply to you.

In Uncategorized on May 19, 2009 at 02:45

BY CARLA FRIED, DAVID FUTRELLE, AMANDA GENGLER AND GEORGE MANNES,  MONEY MAGAZINE — 05/08/0

Don’t let this recession keep you down. Grab the opportunity to build a stronger portfolio, cut the fat from your budget, and give yourself a head-to-toe fiscal makeover.

1. Get your portfolio off the couch …

…and bring balance to your stocks and bonds.

If you’re like most 401(k) investors, you didn’t touch your investments last year, in the darkest hours of the bear market. That was hardly a sign of buy-and-hold discipline. The majority of 401(k) participants haven’t done anything with their accounts in years.

Say you entered last year with a 60%-stock/40%-bond mix. If you didn’t rebalance, that’s now a fifty-fifty split. Since 1926, the annual return for a 60-40 mix has been 8.5%, vs. 8.1% for the even split. Over 10 years that can mean an extra $41,000 in a portfolio worth $500,000 today.

On the plus side, the bear market has already “rebalanced” the portfolios of those who took on too much risk. In 2007 a third of workers in their fifties – for whom a 60/40 portfolio is typically a sensible proposition – held more than 80% of their 401(k)s in stocks; that’s down now.

But rebalancing isn’t a one-time event. Check your portfolio at least once a year, and reset it to your long-term targets if your allocation shifts by more than five percentage points. Don’t have that kind of discipline? See if your 401(k) offers an auto-rebalancing option (half of large-company plans do). Unsure what the right mix is for you? Go to cnnmoney.com/allocator.

2. Go on a Treasury diet…

…and bulk up on other types of bonds.

As investors have been slowly shifting out of low-yielding Treasury bonds – the shelter of choice in last year’s market storm – into higher-returning assets, Treasury prices have fallen this year. The result: Long-term government bond mutual funds are down 12.6% on average*, making them one of the poorest- performing fund categories year to date.

Worse, losses could continue if there are signs of an economic recovery or inflation ahead. So rebalance your fixed-income portfolio by shifting some money out of debt issued by Uncle Sam and putting it into other bonds. Both high-grade corporate bonds and high-quality municipals are offering much higher yields than Treasuries (corporates are yielding around twice as much).

In this environment, “no more than 20% of your bond portfolio should be in Treasuries,” says New York financial planner Karen Altfest. An easy way to gain exposure to munis and corporate bonds is through a professionally managed fixed-income fund, such as those found in the Money 70, our recommended list of funds.

3. Accept the new norm…

…and set realistic investment goals.

You got used to double-digit returns when times were good, which makes the pain caused by what’s happening now feel downright excruciating. If you had simply set realistic expectations – no, it’s not normal for stocks to rise 20% in a year – you wouldn’t feel so bad.

But our brains don’t work that way. And prior to the downturn, our most recent experience was one of the most extraordinary eras in history, marked by quarter-century bull markets for stocks and bonds, and a huge run-up in home prices earlier this decade.

Now that you’re faced with a true financial crisis, you need a coping mechanism. Try this on for size: On a piece of paper write out a series of “what ifs.” What if your portfolio doesn’t recoup its losses for another seven years? What if it takes another decade before your home value recovers?

Then jot down ways you’d adjust to these possibilities. Perhaps you agree to postpone retirement by a few years. Maybe you stay in your home longer than you planned.

By documenting how you’ll react to these scenarios, you’re creating lower expectations. And that will leave you plenty of possibilities for happy surprises.

4. Lose rate by refinancing your mortgage

Rates on standard 30-year fixed loans are at or just below 5%, about the lowest they’ve been in decades. So if you’re paying more than 6% on your loan – or have an adjustable-rate mortgage – and plan to stay in your home for at least a few more years, look into refinancing.

There are restrictions. Your new loan can’t be greater than $417,000. In pricey markets like New York City, that figure goes up to $729,750. Rates on larger jumbo mortgages are a stiffer 6.4%.

Also, lenders are shifting back toward old standards. Your monthly mortgage, insurance, and taxes shouldn’t eat up more than 31% of your monthly income, nor should your total monthly debt payments exceed 43%.

Before you forge ahead, make sure refinancing is worth it. Use the refinance calculator to run through your figures.

5. Juice your credit score an extra 20 points

Now that lenders are demanding to see what shape your credit is really in, the standards for good scores have changed.

While a FICO of around 720 used to give you a shot at the lowest mortgage rates, today you’ll need a 740 or higher to qualify for the best terms.

How can you bridge the gap? First, make sure mistakes on your credit reports aren’t dragging you down. Go to annualcreditreport.com and get a free report from the major credit bureaus: Equifax (EFX), Experian, and TransUnion.

Next, goose your score by lowering your debt-to-credit ratio. If you owe $2,000 but can borrow as much as $15,000, your ratio would be about 13%. Pay off enough debt to “get your overall utilization down below 10%, and you will see your score improve,” says score expert Gerri Detweiler of Credit.com.

Another trick: Avoid using your cards in the month or so before applying for a loan. Even if you pay off your balances at the end of the month, there’s a chance a lender might “pull” your score the day before those payments are recorded, making it look as though you’re tapping your credit.

And ask issuers to raise the limits on your existing accounts. “For all the news that card issuers are cutting credit, they are also selectively offering more credit to their best clients,” says Craig Watts of FICO.

6. Go cold turkey on monthly services…

…or at least threaten to quit.

When families resolve to lower spending, their instinct is to cut back on day-to-day splurges, like lattes or lunches out. Not the greatest idea. You’re forced to make a conscious decision to save every day.

An easier way: Take a second look at all the recurring monthly charges that accrue automatically on your credit cards. Those movie channels that you never watch? Drop them. The overseas calling plan on your landline? A phone card is cheaper for those annual calls to Finland. Whatever the silent drain, put a stop to it.

Even if you’re eager to keep the service but just want a better price, call and threaten to quit. Telling your provider you want out might get you a price break. If the customer rep can’t help you, you may end up with a retention specialist, who can offer even better deals, says Lyn Kramer, managing director of Kramer & Associates, a call-center consulting firm. Remember, in a shrinking economy, businesses can ill afford to lose the paying customers that they already have.

7. Turn off the TV…

…if that’s too hard, stop watching Desperate Housewives.

Television viewership is up in this down economy, which isn’t all that surprising. TV is, after all, a cheap form of escapism. But before you tune in to tune out the realities of recession, remember that prime-time TV is full of pretty people and even prettier things. All this glamour affects how you think about your position in the world.

According to Boston College sociologist Juliet Schor, “Television viewing results in an upscaling of desire. And that in turn leads people to buy.” Her study found that every additional hour of TV viewing per week boosts spending by roughly $200 a year. So a handful of sitcoms and a reality series or two can cost you more than a grand a year. Forget keeping up with the Joneses; now people are struggling to keep up with the Kardashians.

If you can’t bring yourself to give up TV entirely, at least stop watching shows centered on the lifestyles of the fictionally rich. Try COPS or The NewsHour With Jim Lehrer. No one ever looked at the PBS anchor and said, “I’ve got to get a blazer like that!”

8. Reorganize your insurance drawer

The lousy stock market has pushed down insurance company investment profits. This explains why your auto coverage is expected to climb 4% this year and premiums on your homeowners policies are set to rise 3% – even though your house is probably worth less today than it was last year.

This is a good excuse to rebid those services. Shop around for your auto coverage first, and then see what it will cost you to add homeowners insurance as well. Most of the time, you’ll save money on a package deal.

As you shop for deals, get quotes on higher deductible options for auto and homeowners coverage, to see if you can lower your bill that way.

As for life insurance, Prudential (PRU), Banner (BANR), and ING (ING) are among carriers that are boosting rates, reversing a multi-year industry trend of falling prices. It’s still worth shopping around if your policy is at least five years old and your health hasn’t deteriorated.

Start your search online. But also consult with a broker – specifically, one who sells policies from multiple carriers. Brokers can help identify quirks in pricing, says Judith Maurer, CEO of Tampa-based Low Load Insurance Services.

9. De-stress with the help of a health-care coach

As the downsizing of corporate America continues, the workers who remain are being asked to do more with less – a lot less. And chances are, this added stress is taking a toll on your physical and mental health.

Ignoring the symptoms can be costly. Not only can stress make you less efficient and more mistake-prone on the job – which could lead to a pink slip in the short term – but it can also lead to long-term health problems that might jeopardize your most valuable asset: your physical ability to bring home a paycheck for years to come.

Time to call in the coach. Today 56% of large employers offer the services of so-called health-care coaches, on the theory that good health will lower medical costs and increase productivity. The coaches are typically nurses or other specialists who can help you manage chronic conditions, says Scott Keyes, a health-care consultant at Watson Wyatt. They can also help with workout regimens, meal plans, and remedies to alleviate anxiety. So ask HR or your insurer if you can get one-on-one attention.

10. Be part of society’s safety net

Even Adam Smith knew that taking an interest in the “fortunes of others,” as capitalism’s leading thinker put it, can bring you a glow you can’t get from merely accumulating your own fortune. Studies have shown Smith was right.

Volunteer work on behalf of those less well-off than you costs nothing, connects you with others, burnishes your résumé, and reminds you just how lucky you are to have whatever it is you have – even if it is worth 40% less than before the bear market. And, oh yeah, helping others is the right thing to do.

Before you choose a charity, think about your passions, where help is most needed in your community, and what type of work might polish your job-related skills. To find inspiration for charities that need you but also fit your needs, check out CharityNavigator.org.

That said, skip those big charity balls. It turns out that how happy you are with what you have depends a lot on just who you’re comparing yourself to. These sorts of invidious comparisons can cost you actual money without your even realizing it (see No. 7).

11. Start your own “working capital” fund

With unemployment on the verge of hitting double digits for the first time since the early 1980s, investing in yourself is really another form of an emergency fund. So start a capital fund for your career.

Put in enough money to cover travel and other job-hunting expenses for at least six months, the average length of unemployment for baby boomers who are currently out of work. And over time, use the fund to save money for career education and training – either to move up in your current field or to switch professions altogether.

“Pretend your career is a rental property,” says Wisconsin financial adviser Michael Haubrich. “If you don’t rehab it every so often, it goes down in value. And the rents you collect on it are going to go down too.”

Of course, the same is true for almost every other aspect of your financial life. What’s more, the investments you make now may pay off a lot sooner than you think.

12 RULES FOR THE NEXT BULL MARKET, by Brett Arends in the W.S.J. Great stuff!!!! Short, simple, wide-ranging, informative. READ IT!!

In Uncategorized on May 15, 2009 at 00:22

Is this a new bull market? Nobody really knows for certain. But one will — presumably — come along in due course. Will investors make the same mistakes they made last time, or will they be wiser? Here are 12 rules for the next bull market — whenever it turns up.

1. Go global.

Most investors prefer to stick to their “home” market. It’s a mistake. America accounts for only a fifth of the world economy but a third of its share values. No one knows where the best or worst returns will be, so spread your bets across the board. And you already have an oversized bet on the U.S. economy:, because you likely live, work and own a home here.

2. Avoid big moves.

If you buy or sell heavily in one shot you’re taking a needless risk. And waiting for the right moment to make your move is futile. You probably won’t catch the bottom or the peak anyway. If a market trend has much further to run, then what’s the rush? And if it doesn’t … what’s the rush?

3. Remember the market is just “us.”

No wonder shares rose when everyone was buying, and fell when they were selling. That was the reason. And when everyone is trying to predict “the market,” they are effectively chasing themselves through a hall of mirrors.

4. Don’t get fooled, don’t get tense… and don’t get fooled by the wrong tense.

Wall Street is riddled with people who mistake the past perfect (“these shares have risen”) with the present (“these shares are rising”) or the future (“these shares will rise.”). Don’t get suckered.

5. Pay no attention to TINA.

Sooner or later someone will urge you to buy shares, even at very high prices, because There Is No Alternative. It is a popular hustle at the peak of the market. There are always alternatives — like holding more cash until valuations are more attractive.

6. Be truly diversified.

That means investing across a spread of different asset classes and strategies. As investors discovered last year, “large cap value” and “mid cap blend” funds don’t offer diversification. They’re just marketing gimmicks.

7. Treat forecasts with a grain of salt.

Most economists missed the recession, most strategists missed the crash, and most analysts are bullish just before a stock falls. Even the good experts are prone to group think, office politics, career risk – and hall of mirror syndrome (see point 3, above).

8. Never invest in what you don’t understand.

Be happy to underperform a bull market. During the last boom, many investors were advised to go all-in on shares to get the biggest long-term gains. But the stock market has infinite risk tolerance and an infinite time horizon. Real people can’t compete with market indices, and shouldn’t try.

9. Ignore what everyone else is doing.

It’s natural to want to “join the crowd” and avoid being “left behind.” Leave those instincts in eighth grade. When it comes to investing, do what’s right for you and your family.

10. Be patient.

Investment opportunities are like buses. If you missed one, you don’t have to chase it. Relax. If history is any guide, others will be along shortly.

11. Don’t sit on the sidelines completely until it’s too late.

You’ll probably end up splurging at the last moment. If you are afraid to invest, do it early, little, and often.

12. And above all: Price matters.

After all, an investment is just a claim check on future cash flows, whether it be a company’s profits, a bond’s coupons or an annuity’s income stream. By definition, shares in a solvent company are twice as good at half the price… and vice versa. It’s amazing how many people get suckered into thinking it’s the other way around.

I’d like to hear from readers: If you have any suggested rules of your own, let me know.

Write to Brett Arends at brett.arends@wsj.com