What I Wish I Did Before I Got a Mortgage, Pt. 1

The most important thing I didn't do properly was to remember that I get paid twice a month. I was budgeting my income on a monthly basis, which works out great when you don't have a mortgage, but badly, when mortgage goes right out your bank account the second it goes in there from your company.

This month is the first month I paid my mortgage (the first real month is paid for in closing costs), and so I'm realizing that too much of my cash is going out the door in the first week of the month, and almost nothing in the last week of the month. This will cause a 2-3 week period where credit cards can not be fully paid off, since I don't actually have the cash to do so.

What I should have done was to call my credit card companies and change all my due dates to the second half of the month. That way, cash outflows are not so front-loaded in a month.

Most credit card companies will allow you to make a due date change every 6 to 12 months, but you'll only need it once.

Need to post more frequently

All the recent activity with people reading and commenting on my prior post about the fraud perpetuated by the Google Money Machine people has guilted me back to blogging. I took a break for a while because work was burning me out, and frankly, I was running out of material.

Now that I have my house, there will always be a source of material to write about.

Interestingly, today I finally discovered a use for getting the print editions of newspapers. Normally, I don't even want the print edition of the Wall Street Journal (and I send that to my parents' house), but since I just moved in, every person and their mother is trying to sell my subscriptions of one thing or another.

Today's local paper had the coupon insert inside it. I figured, hey, I'll save some money and I'll flip through it. Turns out, Reese's is doing a 55 cents off promotion off any of their candy. When I went to Target to look for some, Target had a sale going for an 8-pack of peanut butter cups for a $1. BAM! $0.45 for candy.

Great deal. Now, if only I found a way to save over $200K and pay off this mortgage....

Long time

Time to catch up. Big NEWS!

On contract for a house, closing July 31st. Going to set me back about $210K and I've been scrambling to get inspections, mortgages, and lawyers.

Recent economic improvement and then subsequent further news about declines has been wrecking havoc with mortgage rates.

When I started looking, 30-yr mortgage rates were around 5.00% and then started to creep up to 5.6%. In the last week, the rates are starting drop and come down to around 5.4%. Hopefully within 1-2 weeks, I can lock in right around 5.00% again.

That's it for now. Be back tomorrow with some thoughts on the economy.

Networth Update

Wow, looking back, it's been a good two months since I've posted a networth update.

On the whole, things are going pretty well. Now that the stock market is back, my investment account and 401(k) are both steadily rising, while no new major expenditures have helped keep me heading toward the break-even point.

As of May 31, 2009, my networth is -$5,569.23. My networth increases about $610 a month with a 62.3% probability. I'm trying to increase that probability month to month by sticking closely to my budget.

Is the dead cat bouncing?

As I blogged before, there's plenty of belief out there that the last month's worth of bounceback in the stock market is just a momentary uptick during an otherwise downward trend.

One big economic statistic driving the market down today was the release of foreclosure data, suggesting last month was a record high level of foreclosures. Then you have retail sales data below expectations and a round of negative earnings from insurance companies, and we're back to where we started.

So do I think we're in a dead cat bounce? I still don't believe in it. I think in general, investors are behaving rationally as economic data comes. The horde mentality and the wild swings are gone. Drops are within regular variance in the stock market.

What we need now is a more solidified banking sector and a final decision on the failing US auto manufacturers, and we can start digging ourselves out of this mess.

Up day counter to bad news

Investors seem unmoved by news of the swine flu pandemic and worse than expected GDP news released this morning.

Sentiment seems to have shifted to the positive, as everyone believes we have hit or are close to market bottoms, especially after successfully going through 1Q earnings reports from the major banks and the changes around mark-to-market accounting rules.

However, the late afternoon saw a quick pop and drop due to the Federal Open Market Committee statement:

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

It looks as though the FOMC thinks the economy could still get worse, but they are willing to stay actively involved in keeping the fed funds rates at an effective 0%.

New Credit Card Rules

Finally, our elected leaders are doing something that should help the average consumer, passing new rules on credit cards.

Yesterday, the House Financial Services Committee approved new (although borrowed heavily from previously released Fed Reserve guidelines going into place July 1, 2010) legislation that help counter heavy-handed and unfair credit card company practices.

Some of the benefits, quoting from MarketWatch.com's article:

• Prohibiting rate hikes on existing balances, except in certain circumstances.
• Requiring 45 days notice for interest rate increases and significant contract changes.
• Prohibiting "over-the-limit" fees when cardholders have set their own credit limits.
• Prohibiting "double cycle" billing, a practice in which interest is charged on debt that has already been paid on time.
• Prohibiting fees for payments made over the phone or Internet.
• Prohibiting payments from being applied first to a consumer's lowest interest rate balance.
• Establishing standard definitions for terms such as "fixed rate" and "prime rate."

Industry advocates, as they often do, claim that these new rules will prevent access to credit and higher overall fees.

This is highly dubious.

Already, prior to regulation, credit card companies have CHOSEN to remove credit lines from many customers, and increase interest rates on good credit. I have a credit score over 740 and two of my credit cards saw interest rates shoot up to 19% from 9%.

It is time to get some of these "fine-print" practices removed.

Going positive

We're past tax day. People are done dumping teabags and complaining about high tax rates that a majority of Americans don't actually pay.

The stock market ended up last week, and a significant part of the financials reported positive earnings.

Come on economy. It's time to go up and up!

Profit taking

Looks like the markets did some profit taking today, ahead of possible volatile earnings from banks. I personally thought it was a good time to bull into financials at near-term lows. I think after the bailouts, TARP, and new FASB rules, banks should have strong earnings.

Dead Cat Bounce?

Wall Street traders like to give names to everything, and this week, the phrase has been "dead cat bounce". As the saying goes, even a dead cat bounces when it hits the pavement. It is a reference to a phenomenon that as stocks tank, there are times that there will be a quick revival upward before a continued drop.

The past month, the Dow Jones Industrial Average is up 17.5% (including today's decline). Some would suggest that this week's decline is continued fall of the last 3 week's of the cat bouncing.

I disagree.

Unlike other situations, there are good fundamental reasons for a general uptrend. First off, the unemployment rate is still rising, but it is getting to a high point where it becomes difficult to understand where new job cuts will come from.

Second, the Financial Accounting Standards Board (FASB) passed new rules relating to how impaired assets are reflected on bank balance sheets and especially at valuing assets that currently only have "distressed transaction" prices. This I believe will improve bank balance sheets.

Third, the general market feeling is of awakening rather than fear.

Networth Update

It's been a while since I've posted my networth. There has been significant improvement since my last networth post in November (-$16,488) and even from last month, which I didn't post of -$10,801.

As of March month end, my networth was -$7,050.

Much of this rapid increase in my networth has been due to year-end bonus payouts and an increase in my 401(K) account thanks to the stock market getting better.

Also, I have become much more conscious about sticking to my budget, and every month, I have been able to pay down my debt by spending less than budget and using the leftover for debt.

Homebuyer Credit

Recently, I posted about my renewed desire to purchase a home. Someone commented about what $8,000 credit I was referencing, so I did a bit more research.

There are currently two tax different, but mutually exclusive, new homebuyer credits.

1) If you purchased between April 8, 2008 - December 31, 2008, you are eligible for a 10% tax credit on the value of your purchased home, up to $7,500. This credit is essentially an interest-free loan for 15 years. More information can be found here: IRS link

2) If you purchase(d) anytime before December 1, 2009, qualify for a $8,000 credit that does not have to be paid back. Additionally, if the purchase is after April 15 (filing date for taxes), you can file an amended tax return. More information can be found here: IRS link

I had actually been wondering about what would happen if I purchased after taxes were due, since I could definitely use that $8K after I buy the house.

Time to Buy a House

I have been contemplating a house purchase for a while now. I know I'm going to be in the area for at least 3 more years, and the housing market looks like its at or near the bottom.

Last week, the Fed's move to pump more money into mortgages and to back the purchase of "Toxic" mortgage backed securities sent mortgages rates down significantly.

As you can see from the chart, interest rates have been steadily falling, and I believe its at its lowest possible point.

On top of of that, there is still a $8K credit from the IRS.

I think its time to help out the economy, save myself some taxes, and save on rent payments that don't build nay equity.

Market Rallies... but why?

Today, the Dow started up 200 points, and ended the day up nearly 500 points, or a gain of 6.84%.

In the last two weeks, the Dow is up 1149 points or a gain of 17.34%.

How do you even begin contemplating the rationale behind such a huge upward swing, which is so counter to the past 6 months of bearish movements? Over the past 6 months, the Dow is still down 3078 points or a decline of 28.36%.

So what explains this?

I still think we're in a period of rash exuberance, heavily led by day to day government policy decisions. However, I still want to see some good economic data points to back this up.

While housing sales have increased, this has been primarily driven by increased foreclosure sales. Gas prices are still going up, driven by the falling value of the dollar. Unemployment rates continue to rise, heading toward 10%.

I think its possible that the stock market is close to a recovery period. But for the average investor, I would suggest waiting a bit more, to wait until something more substantive than a quick 2-week upswing, that could easily become a dead cat bounce by week's end.

FRAUD ALERT: Google Money Machine IS A get rich quick SCAM

Recently, I have been checking out various blogs on the blogtopsites.com list, of which I am a member. Quite often, I am seeing sites proclaiming "Google Money Machine" and "Earn $150/day" in some of the top 50 finance sites. Obviously, this peaks my interest.

When I went, this is what the website looks like:

Immediately, I'm suspicious. Are there really that many altruistic people out there trying to make YOU $1000s a day? No way!

But I am always curious, so I kept clicking. Eventually, you land on the page in the second picture.

Here, a care-free cute female greets you with a pile of cash and an excited smile.

This should instantly cause warning bells to go off.

On the right side, they use two devices that advertisers use to confuse you.

First, they tell you in bold capital letters to "Take Control of Your Financial Future"; a call to action. Second, they create a false sense of urgency, by running a 15-minute countdown timer. Interestingly, as I was writing this post, a message box from this site (running in a different tab), opened up to ask me if I needed more time since the 15 minutes was up. When I clicked "no", the timer restarted, regardless.

That should be the second warning bell.

Now, how most scamming sites work, and how they avoid legal prosecution, is by having a terms and conditions set forth that prevent you from actually taking legal action.

I looked for it, and I reproduce it here, in bullet form, the most important parts of the scam (Full terms & Conditions reprinted at the bottom of this post).

• $69.90 a month after 7 day trial
• You agree to be billed monthly
  
• $2.95 for setup of 'Home Business Kit'
• They will never send any billing notifications and you agree that this is okay
• No refunds will be given if you don't use the services

I haven't bothered to figure out what the services are, but I have yet to find a site that actually has any verifiable checks or endorsements of this service. The site even claims that major news networks have discussed them, which is certainly not the case.

Finally, the address of this company is:
4240 West Flamingo Rd. Suite #201
Las Vegas, NV 89103

And their phone number: 1-800-497-4988

When you Google that address, two interesting points pop up:

• The location houses an "At Home Consulting Group"
• A Rip-Off report describing the same address: http://www.ripoffreport.com/reports/0/433/RipOff0433555.htm
  

And here's a log of complaints about that number and the related credit card charges:
http://800notes.com/Phone.aspx/1-800-497-4988/2

I don't know how these guys get away with it, but PLEASE PLEASE PLEASE, don't get scammed by them.

Further research of the referring site, browsefreetrials.com, leads to this address:
15111 N. Hayden Rd., Ste 160, PMB 353
Scottsdale,Arizona 85260

And to the company Domains by Proxy (http://domainsbyproxy.com/), who helps people mask the identifying information for their domain registrations.

While not immediately damning, the fact that a company needs to hide their location and their employees names should tell you something.

====

Full Terms & Conditions:
"By submitting this form I authorize Google ATM (DRI*GoogleATM) to immediately charge my credit card $2.95 USD for the setup of the Google ATM Home Business Kit. I hereby request that Google ATM (DRI*GoogleATM) activate my account and authorize them to advance funds as indicated. Monthly Service fees will commence seven days from the date of this purchase, and will be billed monthly thereafter. After the seven day trial you will be billed sixty nine dollars and ninety cents USD monthly for the continued access to the Google Money Making System. No refunds will be given for failure to use the requested and provided services. You may cancel at anytime by writing to 4240 West Flamingo Rd. Suite #201, Las Vegas, NV 89103 or calling 1-800-497-4988 (International customers please call 1-866-321-2728). I agree that Google ATM (DRI*GoogleATM) shall be fully protected in honoring any electronic transfer or collection. Google ATM shall not be responsible for refunding any Account Set-Up fees. By submitting this information I am agreeing to the terms stated herein. Google ATM (DRI*GoogleATM) will not send notification, postal or electronic, when a billing occurs."

Not every finance guy (gal) is evil

As Wall Street's fortunes blow raggedly in the wind like an old flag, it has become easier and easier to lump every finance person into the same money-grubbing, soulless, and otherwise parasitic member of society as the likes of Madoff and Liddy (AIG's CEO).

It simply isn't true.

I constantly have philosophical struggles with combining the cutthroat nature of capitalism and the softer, and more humane, qualities of socialism. I think of socialism not as the original Marxist idea of full governmental/public ownership of all means of production, but rather the existence of a social structure in which those who have fallen on hard times can be lent a helping hand.

It is tough, and especially in the current environment, to not be hit in the face with the struggles of other people, rather from the 9% unemployed or the larger numbers of who are turned off from the job search altogether.

But beyond that, there are so many more social issues that still remain unresolved. Racism, wars, genocides, torture, environmental well-being, education, healthcare, etc, etc. The list of social causes to ascribe to is long. And my time to devote to any is short.

I think of the world with 3 types of people: social activists, average, social supporters.

The activists are those who, to borrow a religious term, have been given or felt a calling for a cause. They would be the ones tirelessly, perhaps even solely, grinding against the grain of society to right a social wrong.

The average are the average, going about their lives in a pursuit to learn about what their lives mean.

The supporters are those who, while unable to find one calling, have the financial means to support causes. I find myself in this category. Certainly I benefit from the pursuit of capital, but at the same time, I know that as I gain material wealth, I should also ensure through charity, a gradual societal improvement.

There is no question that activists are perhaps more noble or selfless. They have found a passion and pursue it, perhaps to the detriment of their own well-being. But they still need supporters to open doors or provide the funds to fight social structures.

Why can't I see myself as an activist? I do like material goods too much. I don't think I can be as noble or selfless, nor could I pretend to be without an ulterior motive.

Every year, I do give to causes that I believe are forces of social good. I think of Buffett and Gates as the role models of this wealthy to charity notion.

It will take a while for me to get there, and it will certainly be hard to do no evil while in the confines of capitalism, but I think this is the struggle of any professional, including finance.

Tax Returns

Say what you will about the way the government runs, but this year, I am thoroughly impressed with the speediness of my tax refunds. This past Tuesday, I submitted by e-File both my Federal and State refunds. By Thursday, I had my State refund in the bank account, and by checking the "Where's My Return" on the IRS website, I know I will have my Federal return by March 24th.

As much as I hate to say, it does appear that the IRS has gotten more user-friendly.

Cramer on Daily Show was Ball-LESS!

That's right. Ball-less. Without balls. Neutered.

Was Cramer on to beg and plead with a COMEDY show?! Christ.

Cramer needed some sort of help there.

CNBC needed to at least prep him. Cramer is almost crying.

This is stupid.

I have no particular love for Cramer, but this was a situation where a little kid got a sever talking to by an adult.

To quote Cramer, "a wall of shame".

This is sad.

e-Filing Taxes and Refund Tracking

I've been using tax prep software for my taxes the past two years, and I've really enjoyed the simplicity of it. This year, I had most of my information typed in, but I had been waiting for any new tax laws to go through.

While waiting, I had been debating the merits e-Filing like I did last year, or mailing in a paper copy. The only real detriment in e-Filing that I can discover, outside of paying a fee, is that it is easier for the government to audit your statements and make you pay more.

Well, I just take the standard deduction and I have some capital gains losses, so I don't have much to worry about.

I did however, discover an additional benefit: the government has a website setup to help track tax refunds, and for e-Filers, the tracking starts 72 hours after filing, rather than 3-4 weeks for the paper version.

The address is here: http://www.irs.gov/individuals/article/0,,id=96596,00.html

Recession: Who is it hitting?

This past weekend, I was in Rochester, NY meeting up with some B(usiness)-School and college buddies for some drinks. One night, my b-school buddies and I went to an old haunt: an upscale restaurant named 2Vine. I've linked to the menu, but the average entree is about $30 with a typical meal averaging about $50-60 a person.

I was surprised when I called up the night before to get dinner reservations. We had to go at an earlier hour because they had much of their time slots reserved already. When I showed up, they had to turn away quiet a few people because they had no spots for walk-ins until 8:30PM.

This is surprising to me that they were doing so well. This isn't the first time I've been to a nice restaurant and seen it packed to the gills with people in the past few months. Sometimes I think that there are MORE people going to nice restaurants than before.

Perhaps people are choosing dine in or go out to eat nicely, but stop visiting the mid-tier resturants like an Applebee's or TGIFridays?

I don't know how I would collect that evidence, but certainly from this weekend, the rich don't seem to be that much poorer than before.

Obama's Speech Last Night

Thanks Les@SpillingBuckets for suggesting this blog post.

Last night Obama gave his first speech to a joint session of Congress which was filled with promises and hope, but steeped in realism and candor that had been missing from Bush's speeches. The quick and easy reaction can be seen from the reaction of the stock market. There, red was the predominant color of the day, albeit muted from Monday's dip.

The problem remains that Obama's overall rhetoric remains just that: rhetoric. Without a definitive plan and a focused method of exiting the current financial crisis, it is difficult to see the impact of Obama's speech other than to let the nation know that their president knows what they are going through.

One major issue that Obama did not address last night is the possible nationalization of some major financial institutions, such as Bank of America and Citigroup, as well as the status of the de facto nationalized company, AIG.

As the government continues to haphazardly provide capital for equity stakes, the government is becoming a larger and larger shareholder in many companies, and even though this is not technical nationalization, it might as well be.

What will the Obama administration do? There is no answer.

The rest of his speech was similarly lacking in answers, and was reminiscent of his recent "Recovery Plan is Coming from Geithner tomorrow", which was then followed by Geithner's "We swear we'll do something" speech the day after: a lot of pretty words without real substance.

Financial Times said it best:

One wonders how much longer Mr. Obama will be able to give this speech. He said nothing new. He offered no real information to explain what will become of the banks, or how the budget deficit will eventually be brought back under control, or how his expensive and increasingly confident promises to reform education and healthcare will be paid for. In every case, it was “details to follow".

Well Obama (and Geithner), if you want to solve this crisis anytime soon, its time to pony us some details.

Gotta start postin'

Ok, just a post to get going.

Unbelievable ain't it? Almost a year into this recession, and we still can't see the light at the end of the tunnel.

Not only that, but a President who ran on the platform of Hope seems to be plumb out.

From the people I talk to about these things, we all think the best thing to do is give it time. A CNBC commentator made a good point this morning: the market is fluctuating and falling more due to rash government speech-making than any Wall Street-created mess.

Citigroup: The fall of a giant

Unbelievable.

Citigroup, once the world's biggest financial services firm, still with 300K employees worldwide, will announce their 4Q 2008 earnings Friday. It is expected to be dismal. Their stock today hit a low of about $4.50 a share. They are planning to cut themselves down to a third of their formal glory.

And all this, while receiving TWO bailouts from the US TARP fund totaling $45 Billion.

As a former employee (I left over a year and half ago), I am amazed. When I joined the company, it's stock was at about $35/share. Its future looked bright and landing a job at the company meant a lifelong career, if you played your cards right.

Today? People still want to go, but that lifelong career option is quickly fading.

However, Citigroup is representative of many companies in the US. Sure, while the CDS issues and general stock market malaise has contributed to Citigroup's downfall, just like the other failing/failed companies (GM, AIG, Chrysler, Lehman, etc), the root causes of the problems came from within.

Its management never fully integrated any acquisitions. Management was paid to maximize annual profits, and they did. Unfortunately, too often, annual profit maximization led to wild speculation and taking on mountains of undeterminable risk.

And so the government came up with a great plan: keep management in power but give them more money.

No.

The problem isn't the lack of money. The problem is the lack of management.

Why doesn't anyone see this?

Simple Math

What's happened with basic math skills in the US?

Recently, I have seen a number of obvious bad deals hocked by cashiers who truly believed they were a good deal.

For instance, I wanted to buy coffee for my house, so while I was at Dunkin' Donuts, I saw a sign that said, Buy 1lb, Get 1lb Free - $9.99.

I approached the counter to buy it. While the cashier was directing me toward the coffee area so I could pick the flavors, she says, "You know, we have another great offer. Buy 2lbs and Get 1lb Free."

I asked, "How much is that?"

She replies, "$16.99. Do you want it?"

I looked at her oddly, doing the calculation, 9.99/2 = about $5 each, and 16.99 / 3 = about $5.60 each, over and over and finally I just shook my head and bought 2 pounds after thinking a good minute about rather my math skills were really off.

Is this some devious ploy DD is trying to trick customers? I don't think so. I truly believe someone thought this would be a great promotion without thinking through the logic.

An extra twist of Inspiration

I stopped blogging for two months, not because I was particularly busy or ran out of things to write about. Rather, I became extremely disillusioned about why I bother blogging. While perhaps my finances and my knowledge provide some voyeuristic pleasure and maybe some money-making investment advice, the blog itself stopped having purpose to me.

Why am I writing it? I don't think I ever knew to begin with, and I probably won't ever fully figure it out. But today, listening to a podcast of Democracy Now's December 22, 2008 show about how a Utah college student, Tim DeChristopher, successfully, peacefully, and on his own disrupted the government auction of 150,000 acres of wilderness by posing as a bidder made me realize that very simple acts, that I could be performing, could make huge differences.

Tim, an economics student, saw an opportunity to disrupt the auction while standing outside pondering the effectiveness of protesters pounding the pavement, even though the real decision makers were inside. He took the initiative, passed himself off as a potential bidder, and then began to bid on land. Early on, he only tried to raise the prices of land, but later, as he grew more confident, he began to acquire them for himself.

Tim didn't have the money to actually buy the land. The auction didn't even finish. He was arrested by federal agents when auction organizers realized he wasn't a real bidder. But it didn't matter. The auction was over.

I want to start blogging about these stories. I may not have the opportunities, or the courage, or perhaps the means to be the story, but at the very least, I can start talking about them.

I quote Tim from his interview:

For all the problems that people can talk about in this country and for all the apathy and, you know, the eight years of oppression and the decades of eroding civil liberties, America is still very much the kind of place that when you stand up for what is right, you never stand alone.

Yes, I know this is extremely idealistic and perhaps a romanticism of civil disobedience. But this is certainly a stark contrast to my daily, very realistic and cold job performing financial analysis.

This is what I want to try for the rest of the year. Finance + Inspiration. Something for others and a purpose for me.