Start planning for your final expenses now

I know this post topic is kind of morbid, but this issue is very important. Recently, Mr. Dimes and his family had to bury his grandmother, who died suddenly but not unexpectedly right around Christmas. She had a modest funeral and burial, and her final expenses clocked in around $8,000. My mother-in-law fronted the money and will eventually be reimbursed when the estate has been settled, as the grandmother did have some real estate and other assets which could be sold to cover the expenses. Not everyone is so lucky, though.
I recently had a client whose mother died unexpectedly who was requesting over $16,000 in funeral assistance. Her mother owned no property, had no life insurance, and had done nothing to prepare for her final expenses in advance. While the client has siblings, neither individually nor collectively can they afford the costs of the burial. Their mother desired to be buried in the family plot in an area where real estate is very pricey and the burial costs are over half the cost of the funeral. I had to help a grieving client find an alternative to the burial she wanted in order to have something she could afford. This was not a particularly fun experience. Please, for the love of your survivors, do not do this to them. Plan for your final expenses now and let your family members know where they can find any information about plots, policies, final wishes, etc. Deaths are difficult enough without creating financial stress and trauma for a grieving family.

Here are a few ways to ease the financial burden on your survivors:

• Consider prepayment of funeral expenses: If you know where you want to be placed upon your death, consider buying a plot in advance, and make sure your survivors know where it is. You can also prepay for the funeral, casket, and other mortuary services rather than requiring your relatives to front the expenses at the time of your death.
• Have a life insurance policy specifically for funeral expenses: Both my client's mother and my husband's grandmother had small ($10K-$25K) whole life insurance policies to pay for their funeral expenses, but for one reason or another had let them lapse and when they died, there was no money. If, however, you make sure that you (or someone else) is paying on them and don't let the policies lapse, they can be sufficient to cover burial and funeral costs.
  
• Consider less expensive methods of body disposal: Burials are getting to be insanely expensive, and so are funeral plots. Cremation, on the other hand, is a more frugal alternative to standard burial, and is less harmful to the environment. Some people don't like the idea of cremation for religious or other reasons, but it definitely costs less. It also has the added benefit of allowing for portability of remains; for example, if you want to be buried a great distance away from where you died, ashes are much easier to transport than an intact corpse.
  
• Have a specific set of assets designated for funeral expenses: This would definitely require either a will or a joint account with a person most likely to survive you, but it could solve the problem of a family member having to front expenses and then wait for reimbursement. If you create an account specifically for funeral expenses, then a family member or the executor of your estate should be able to access those funds in order to pay for your funeral. If you're going to do this, you might as well make your wishes known as well as what should be done with any money that remains, in order to keep your relatives from donating your body to science and then flying off to Cancun with your funeral money.
  

While not fun, death is an inevitable (and expensive) part of life, and you can help your family tremendously by making provisions for what to do when it happens.

House Flipping In The Real World-Part 5-Doing Time In Texas

Note: This has turned into another mini-series, this time on the risks and rewards of real estate investing. To start at the beginning scroll down.

Pretty soon I was out of the picture. Cynthia took over and Alice receded into the background with Hepatitis C problems and liver ailments I really didn't want to know about. I did learn that Alice had a pretty rough life with incest, alcoholism, and some drug abuse that undoubtedly contributed to the Hepatitis C and liver issues.

One doesn't meet ex-cons every day and my curiousity got the better of me, again. "Pretty tough in prison, I bet." "Oh, you kinda get used to it." "Which prison?" "Waco." (My son went to Baylor University in Waco and I didn't know Waco even had a prison. Guess the Chamber of Commerce doesn't go out of its way to spotlight the prison.) How long? Nine years. (Wow) Finally I couldn't stand it any longer, "What did you do?" "Forgery."

Forgery? Nine years for forgery? I think the takeaway here is don't do crimes in Texas unless you want to spend a lot of time indoors.

Plunging ahead. "And Alice?" "Attempted murder...but she got framed." That's what they all say, I thought. "Who did she attempt to murder?" I asked like an idiot, I really don't know when to just shut up. "Her sister's boyfriend. The guy was beating up Alice's sister and well you know..." At that point I did decide to drop it but thought about sending Alice over to see Freddy and then dropped that thought as well.

Cynthia didn't go into a lot more detail except to offer that she was a college graduate and that forgery is one of those kind of 'classy' crimes so she got to be a trustee in prison and did a lot of repair and agricultural stuff where she discovered her love of fixing things other than signatures. And boy, could she fix things. The patched holes fit right in, she put up three light fixtures, found a new(er) backdoor, and filled, sanded and replaced the woodwork where necessary. New paint was next.

In the garage I found the realtor's "For Sale" sign, spray painted it and scrawled my phone number on it with a Sharpie. Sue saw it and wondered if I had had a stroke. Placed it in the front yard and got a call from Marion.

Calling all Bloggers - Advice on SeekingAlpha.com Article Submission

Should I submit my articles to seeking alpha?

I received an email from SeekingAlpha.com, to which I used to be a contributor, which prompted me to read the link to one of their articles. As it turns out, the article had several comments from bloggers/contributors to SeekingAlpha imparting their thoughts on the pros and cons of contributing. My particular situation did not arise in the comments section, so I thought I'd post my experience and questions to fellow bloggers both here and in their article.


I am one of the few bloggers cited who left the SA network in the past couple months. I had mixed emotions about doing so and still do. I'll expound on the motivation to do so and perhaps some fellow bloggers can provide their insight into their thoughts on the decision...

First, I want to say that when I requested to have SA stop the auto-syndication of the articles since I was going to go off in my own direction, they were very professional and reacted immediately. As such, I've never had a bad thing to say about SA or their conduct. I left the badge on the page and still refer friends and investors to the site.

My rationale for leaving: When I started getting a decent amount of search traffic from Google (as viewed from my sitemeter), I'd click back to the Google search page with that term and notice my link there; in some cases in the top position. This was great; but occasionally, I noticed it only lasted a day and next thing you know, my link was down below the same article as published by SA.

Obviously, they have a higher page rank, so by posting the same content, unless Google had some sort of method to sort out syndicated articles, the SA article was always appearing first. The example that really got me thinking was when I was getting about 50 hits per day on a single article for a day or two, and then practically nothing. If you extrapolate for that common search term and added in my ECPM, that one article was worth a few hundred bucks a year. And in a day, gone.

On the flipside, a fair amount of traffic had been coming from the SA articles published. Perhaps some of the advertisers that approached me came from SA as well? Not sure how they stumbled upon my site. So, there was a trade-off. As of now, I'm not part of the network, but (if they'd have me), I'm on the fence as to whether to request to rejoin. Any thoughts on the pros/cons that could help inform my decision?

www.everydayfinance.blogspot.com

Doing Your Own Taxes

Basically if you are a single person with student loans and no mortgage, taxes are a breeze. Heck add on an IRA and they are still pretty darned easy.

When you have a blog business and a mortgage and significant things to keep track of, they are still easy. When you have multiple streams of income, that’s when it starts to get annoying for me.

J. Savings of Budgets Are S.e.x.y asked me if I sought help for doing my taxes or if I used a program.

Honestly, as long as you are organized, you don’t need help doing your taxes. I have used Turbo Tax in the past because I am a Quicken user, but I really didn’t like it. I felt like I had to hand-correct or override a great many things with the program. For 2007 taxes, I went back to spreadsheets and Quicken reports for filling out my taxes.

Caveat here is that I make a living writing accounting reports. I am used to looking at the world in monthly and quarterly statements, so I get a kick out of pulling reports for my personal expenses. The main thing is really how you categorize them throughout the year. I pulled my expenses and found that I was really lazy in making categories for myself. I don’t really have ‘Mapgirl’s Fiscal Challenge’ taxable income and expense categories set up, therefore, I had to comb through some of my other categories to get the right numbers.

If you can read, you can do your own taxes. The biggest annoyance for me was having to figure out if I owed AMT. Just doing an additional worksheet was irritating, but the IRS designs the tax forms to be simple word problems a 5th grader could do. “If this, then that”. The challenge is your judgement during the process. Is your home office deductible? What about your dinner bill when you meet a bunch of PF bloggers and talk shop? But don’t fret, the IRS offers you much guidance with Publications about taxes. And if you still can’t figure it out, then go ask a professional. But most of it is pretty straightforward.

PS - The final tally on taxes was ~$1481.00, or about $100 bucks plus change every month. Still not enough for me to feel comfortable adjusting my withholdings. Hooray for procrastination and putting an emphasis on my day job! (There is something else major that got in the way, but I’ll write about that later this week.)

Credit Ratings and Credit Scores

It’s a mysterious thing that we hear people talking about all the time. Credit ratings. For the uninitiated, it holds a mysterious quality and power over the kind of financial clout a person has. Credit ratings seem to affect what we can and can’t buy, what kinds of vehicles we drive, and even where we live in some mysterious way.? Credit ratings appear to be cloaked in a curious jargon the banks seem to hold over us. We’re sure they’re a powerful tool that can work for or against us but we’re not always sure of the ins and outs of how.?

?????????? There are actually two areas of the total package. One is called the credit rating and the other is called the credit score. The information used in both includes your social security number, your address, where you work and your bill payment history. It’s a composite picture of who you are and how you do business and its put together usually by three companies that vary depending on where you live. It’s important because any agency that might consider lending you money will have access to your credit rating or credit score and many of these agencies like banks actually provide information to keep these records accurate.

??So how do all those bad things like a bankruptcy affect your credit rating? Simple. A bankruptcy can hang around on these reports for up to ten years and a criminal record stays with you indefinitely. Even habitually missing payments stays on the reports for up to seven years.

?But because it’s called a credit rating, it stands to reason that the evaluation comes from somewhere, so there must be a credit score as well. The three credit bureaus in your area put together all the information on late payments, any collection actions as well as any outstanding debts. When they have all this information packaged, you get a score between 300 and 850. Obviously, the higher the number the more credit an institution loaning out the money will be happy to give you. There are certain cut off points as well. It seems that a person with a score at 619 or lower will have a hard time getting a credit card no matter where they live.

?There are several ways to monitor you credit rating or credit score and all the institutions that know about these things stress that you should make the proper inquiries at least once every six months. It’s also possible to pay a monitoring company who will let you know immediately if there are any noteworthy changes.?? In America the three major companies that deal with your information are Equifax, Experian, and Trans Union. Although you can contact them and get the necessary information in one of the more traditional methods, going online and paying a monthly fee will get the scores and rating quite a bit faster.? Keeping track of this information is also a good way to monitor for Identity Theft.

Someday I hope to be this guy, without the beer

Click if the image is unclear.

This is from PVP Online, a comic that I like to read. This character won a whole lot of money in the lottery and now spends his days drinking beer and playing video games with his friends.

But seriously, I have been thinking (not in a morbid way) about where I would leave my retirement money when I don't need it anymore. One thing I think would make a big impact on people's lives is to dispose of it to a foundation associated with the hospital I work at. This foundation generally pays for things like cab fares and hotel stays and other little things that are important to getting your cancer treated just like the doctors and nurses are - after all, if you can't afford to get there and you have no place to stay, life is going to be a lot more difficult. I know there are a lot of foundations that support research - and seeing as how I am in research, I certainly appreciate it - but the best drugs in the world will not find you a sitter for your kids while you are in the hospital, or drive you here from two hours away when your car is broken down.

1997 And All That

The year 1997 is never far from the thoughts of many Thai businessmen and economists. That was the year financial markets forced Thailand to abandon its currency peg, and the Thai baht fell from 26 baht per dollar to 56 baht per dollar. In the US, this devaluation is mainly remembered--if at all--as precipitating the collapse of the once high flying hedge fund Long Term Capital Management. Here in Thailand it is remembered for its domestic consequences, especially the transformation of the Thai economy into one heavily dependent on tourism.

For Thais, 1997 is ripe with meaning--psychological, financial and even metaphysical meaning. The Thais view the events of 1997 in religious terms, as demonstrating the cosmic justice central to Buddhism. Years of unsound economic policy had resulted in the accumulation of bad karma. The painful adjustments that followed were the working out of this imbalance, making merit for past excesses.

It's not quite standard monetary theory but before you laugh at the Thais for their superstitions, remember that a Red Sox fan recently attempted to curse the new Yankee Stadium by burying a David Oritz jersey in the foundations. And the Yankees, as if in competition to prove they are even more superstitious than Sox Nation, formally "excavated" the jersey. And while it might seem odd that the Buddhist Thais have defied the market process that forced them to devalue their dollar, they are hardly the first to incorporate Mammon into their holy pantheon. And the lessons about monetary excess that they've learned serve them well. In fact, sitting in a cafe in Chiang Mai, listening to this theory of time, money and karma, I couldn't help but be reminded of the work of both the Chicago and, especially, Austrian schools. And I wondered if Ben Bernanke might want to take a couple of lessons in Buddhism.

--John Carney, who is in exile in Thailand, thinks superstitions are bad luck.

You ask: How do you do it????

In response to my last post, I received the following question:
"How are you putting away $1,000 per month?"

The answer? I work really f'ing hard at it (f-bomb for emphasis). Here's how.

1) Low rent. The single most important factor. My rent is only 12 percent of my monthly income after taxes. This is no accident. I could easily be paying twice or three times that. When I chose not to live in the "trendy" city neighborhoods in my early 20's, a lot of colleagues and friends thought I might as well fall off the planet. But I could not, would not justify paying a rent that was at at the time roughly 50 percent of my monthly income.

My apartment, in its own sleepy, funky suburbia, isn't the most glamorous. It wasn't the nicest one we saw. It doesn't even really have a kitchen, the appliances are old and I have a Barbie-pink bathroom (really). But it does boast an AMAZING location, just one block away from the Metra and the el, and is walking distance to our downtown (restaurants, bars, shopping, gym, banking, etc.). It has two huge bedrooms, two bathrooms and free parking. So what if my "chandelier" is bright turquoise with fake candles and a plastic chain? Or if my carpets are ugly?

I knew when we started renting here that we had a savings goal in mind. I knew the place was small and the layout was cramped. But for the money, it was just what I needed at the time. No more. No less. The trick for me was understanding that I can't have everything I want all the time, at least not right away. And lucky for me, my rent hasn't been raised in four years.

(Sorry New Yorkers, this lesson probably doesn't apply to you :(

2) Staying power. I've been working at the same job for seven years. And I put everything into it. The first couple years were really tough; I made hardly anything. But after five years with the same company, I started to make some nice headway with my salary. I've said before that while it's popular to spend your 20's extending your education, "finding yourself" or floating from job to job, there's a lot of opportunity to be had by staying loyal to one place. It's an old-school idea, but some of the most successful folks I know under 30 have been working at the same company for a number of years.

3) Cap your spending. I don't buy anything, really. I've had the same TV for 10 years and the same computer for five years. I have the same god-awful table and chairs that I had in college, and I bought all the rest of my furniture at discount stores. I got my bed at Sam's Club in 1999 and most of my current apartment decorations came from Ikea. I'm very careful about my discretionary income. Although my monthly income has steadily risen, my lifestyle has not. I don't go to fancy restaurants, and I limit my spending at bars and clubs. Instead of raising my monthly expenses, I just keep raising the amount that goes in my savings and my 401k. That way, I never notice that my lifestyle lags far behind my income.

4) Go without. I don't have a car, and I don't drive. I walk or take the train and the bus everywhere. I'm trying to learn how to drive now, so I'll probably eventually need to purchase some insurance. But B and I have one car between us, and right now we only drive it about once per week. I hitch rides and sometimes chip in for gas. I hitch rides a LOT with people who do drive. But other times, I'm stuck waiting in the snow, the rain, the wind, the cold ... it's just no big deal to me because I don't really know anything else.

Another BIG without... I don't have any kids yet. This isn't something everyone can control, or would want to, for that matter. And it's definitely something that's difficult for me to explain to others sometimes, while other times it's difficult for myself to deal with. It just hasn't happened yet. But I can guarantee you that if I had kids I wouldn't be saving as much, if anything at all.

5) Live for experiences. (Picture at right is me and B ocean kayaking in Monterey Bay on vacation in 2006)...

When I do splurge, I've learned that I'm much more satisfied spending on experiences than I am on things. So I'll drop a lot on a vacation (a budget vacation, of course, that uses free miles and credit card points) that allows me to spend time planning and prepping throughout the year ... and that lives on in my mind forever when it's over. Some people like to spend on big entertainment systems or name brand clothes or house decorations or whatever. I don't. For me, it's much more about the memories in my mind than the art on my wall. Make sense?

So that's really it. Those are my big secrets. Who knows if they're right or wrong, and who knows if they'll help you at all. I'm just a girl trying to save some money and having a good time doing it.

How To Make A Million--The Easy Way

Stealing articles again because I have a lot to do--1,500 miles to go in a UHaul takes your mind off money. And you should take your mind off money too by making investing a habit, not a gamble. See below--pretty dry but makes a lot of sense. An article called Taking A Gamble On Ignorance by Kebin Bailey, an Aussie.

A FRIEND of mine recently told me with great confidence that investing in shares was gambling.

I took offence and assured him that if you use a scientific approach you can wash out most of the speculative risk and be left with ownership of good quality businesses that produce good earnings year after year.

His opinion about the market is not unique -- and is borne out of an ignorance of the evidence that backs up sound portfolio theory.

He has only experienced the hype of stock tips and timing calls of when to get in and when to get out of the market. In a word, his only experience of shares was speculating.

Empirical research has shown that stock selection and market timing techniques contribute virtually nothing to the total return of a broadly based investment portfolio over time and in many cases detract from the overall portfolio performance.

Research conducted by Brinson, Hood and Beebower in several well documented studies showed that over 94 per cent of the long-term return of broadly based investment portfolios were attributable to the asset allocation decision.

Only the remaining 6 per cent was attributable to stock picking and market timing.

However, stock picking and market timing (sometimes called tactical asset allocation) are the very areas that generate the bulk of the revenue for the investment industry.

Many shareholders have failed to match the market return, despite taking far greater concentration risk by picking a relatively small number of shares that they think will be winners.

They tend to blame their broker for poor stock selection without realising the futility of the exercise in the first place.

Most of us rarely compare the total performance of our portfolio relative to the market as a whole and we are often unaware of our poor relative performance.

Some of us are like the gambler who only remembers the wins at the track but conveniently forgets the losers. During a rising or "bull" market when a "rising tide lifts all ships", share clubs spring up and there is a sense that investment is easy and fun.

Interest begins to flag when losses start to accumulate during a prolonged downturn. Nothing substantial is learned about the nature of investment markets and a belief is usually formed that share investment is speculative and dangerous.

The famous author Benjamin Graham used a precise formula to differentiate between investment and speculation. His description has stood the test of time.

"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."

Often, the unsuspecting public is led into purchases that they think are investments when they are in effect, speculations.

The evidence of how to achieve better results is available but ignored by the majority of participants in the advice industry for commercial reasons.

Prior to the advent of the computer, work was already being done on the efficiency of markets.

Some of this research dates back to the work of French mathematician Louis Bachelier, who presented his dissertation in 1900 on "The Theory of Speculation" for his degree of Doctor of Mathematical Sciences at the Sorbonne in Paris.

In this paper he stated that "the mathematical expectation of the speculator is zero." He described this condition as a "fair game".

Bachelier arrived at his conclusion because "it seems that the market, the aggregate of speculators, at a given instant can believe in neither a market rise nor a market fall, since, for each quoted price, there are as many buyers as sellers."

The logic is irrefutable: "Clearly, the price considered most likely by the market is the true current price: if the market judged otherwise, it would quote not this price, but another price higher or lower."

Over time, of course, prices will move in either direction, when the market as a group changes its mind about "what the price considered most likely" is going to be.

My friend who thought investing was about second guessing the market should read Bachelier. He should ignore short term fluctuations, diversify as broadly as possible and focus on the long-term dividend producing potential of every purchase.

And you should read Category 12--All You Need To Know

Monday Morning News Round Up

Today's concerning news round-up for 20-somethings follows...

Student lenders can't offer loans right now (crap). The Wall Street Journal says, "The wave of student lenders backing out of giving federally backed student loans is growing."

The Journal also notes that "Woes in condo market build as new supply floods cities," and that "Chicago Fed data suggests a recession." (Hmm... should we consult the hemlines on this one? My skirt is below the knee this morning, for what it's worth.)

For what it's worth, there is some good news... the NY Times reports that exisiting home sales rose slightly in February, prompted by rate changes. (Though prices have fallen.)

The Times also cautions the regular folks not to freak out about all the financial drama in the news lately ... apparently we shouldn't do anything impulsive because our collective decisions will only get worse if prompted by what we see on the news. Instead, the author is urging a thoughtful review of our spending and saving habits. (That's never a bad thing.)

Is this 13% Yield Worth the Risk?

I came across a closed end fund today that may make for a nice addition to the self directed IRA account. The Van Kampen Dynamic Credit Opportunities Fund (VTA) is showing a steady monthly yield of $.152 per month, which puts it at a 13% yield given the current $13.77 share price. Although the share price has declined since launch last summer with the rest of the financials, I think it's overdone here since it started accumulating assets once most of the sub-prime carnage was already known and starting to circulate. Given that the dividend has been paid steadily at $.152 every month since launch, and will be in March too, it may be worth buying this one that may be unfairly punished for guilt by association.

VTA doesn't show up on dividend screeners, nor does it even show a percentage yield in Yahoo! Finance, but if you check out the dividend history in "historical prices", "dividends", you'll see the steady history. So, to the question, "Is this 13% Yield Worth the Risk?", I think the answer is a resounding "Yes".

www.everydayfinance.blogspot.com

Gotta Quit Singing The Blues

The market hits an all time high but most people think the world is coming to an end. In addition, lots of people say 'so what?' because the market is getting a bit ahead of where it was seven years ago. Number wise, yes but economically no. Seven years ago we had the dot.com nonsense with PEs so out of whack that the bottom had to fall out and it did.

Check out this MarketMinder.com article on the new high. It has one line that should be imprinted on your investing eyeballs so you see it every day which is---Pessimism and undue worry are the stuff of bull markets; euphoria is the bane.

Remember that and read on.

Happy Anniversary!

10/10/2007

Story Notes:

• Yesterday the bull market celebrated its fifth anniversary, but you’d never know it by reading financial headlines over the same period



• Fears about stocks gaining “too much too fast” and “too many years of an up market” aren’t based in reality or logic



• Strong economic and market fundamentals supporting stocks’ climb are still in place—making the immediate future look bright

MarketMinder doesn’t like to dwell on the past because it can’t tell you much of anything about the future. But we feel it’s incumbent upon us to highlight a scarcely recognized fact: The bull market for global stocks is five years old. Here’s one of the few acknowledgements we found:

Happy Birthday, Bull
By David Landis, Kiplinger
http://www.kiplinger.com/features/archives/2007/10/bullmarket.html

Five years ago yesterday, the S&P 500 closed at 776.76. Today, it sits around 1560…over a 100% recovery in five years. Good times!

According to Standard & Poor’s, in those five years Energy stocks were the winner, gaining over 236%. Other economically sensitive sectors also flourished, including Materials with 157%, Industrials with 124%, and Technology’s 144% gain. Traditionally defensive sectors like Consumer Staples and Health Care lagged, each with about 40% gains. An outlier was Utilities, which racked up a whopping 168% rise in the period. On balance, that’s very close to what you might expect from an economy experiencing sustained expansion and high demand. And these are merely US returns—foreign stocks fared even better.

Perversely, such a big recovery scares many—they proclaim it’s been “too much too fast.” But history tells us this recovery wasn’t all that big. The current bull is actually the second weakest of seven post-World War II bull markets that lasted five years or more, according to Standard & Poor's.

The “aging bull” argument doesn’t fly either. It’s a strange thing to believe stocks should go down just because they’ve been going up. This is a perversion of the mean reversion theory, which simply doesn’t pertain to stocks. There’s no mathematical, economic or financial law that says earnings, economic growth, or stock prices must revert back to any kind of average. Trends can last as long as underlying fundamentals support them. (See our past commentary “Vector Investing” 9/27/07 for more.)

To wit, the fundamental drivers propelling this bull remain intact: Better than expected corporate earnings and global GDP, high M&A and share buyback activity, and relatively dour sentiment (among many other positives out there) are all very much a reality today.

Yep, it’s been a good five years. We hope you enjoyed the ride, but we suspect most didn’t. Thinking back, folks fretted over everything from dollar doldrums, energy prices, terrorism, trade and budget deficits, carry trades, credit crunches, inflation, and consumer spending (to name a few). At one time or another each was hailed as the Apocalypse, yet NONE had the potency to slay the bull. We think that’s a great thing: Pessimism and undue worry are the stuff of bull markets; euphoria is the bane.

Today’s real risks (yes, there are always risks) are minimal and well contained. Deleterious government regulation, protectionism against free trade, and monetary or fiscal policy errors are remote. (For more, see yesterday’s commentary, “The Real Risks.”)

Looking back, it’s apparent stocks reflected reality—not media hype—over the past five years. And while it’s crucial to remain vigilant, don’t forget to step back once in awhile and appreciate the positives of this dynamic and wealth-creating global economy. More gains are just ahead.

Need Job Fulfillment? Read this--

I love Ben Stein. Really like the first part of this, not too crazy about the middle part and back on track for the last part. Go, Ben, go.

Arm Yourself for Job Fulfillment and Retirement Bliss

by Ben Stein

Now for some decidedly non-PC thoughts.

I hear a lot of bragging from my pals about how their daughter got into Brown or their son is being courted by Goldman Sachs or their grandchild just got into a fancy prep school.

Worth Bragging About

What I never hear is bragging from parents who say, "My son just got into the Army Special Forces and is risking his life to keep your son and you alive." I never hear parents saying that their kids got into the 82nd Airborne and are now fighting in Afghanistan to give people there a decent life and keep Al-Qaeda tied down so they don't come here to attack us.

Now, you may say, "All well and good, and it's great that these military families are so modest. But what does this have to do with me?"

It has everything to do with you, my friend.

Why It Matters

First, the military people on the ground -- and those in the ground in Section 60 of Arlington National Cemetery -- are the ones who keep your family alive. They're the ones who comprise the wall around America so that we can play and make money for our retirement and enjoy our children. They, whether in training or in traction, are the ones who keep America humming and keep the noblest dream of freedom alive in our hearts.

Again, you may say, "I agree and honor them, but what does this have to do with a column about money, careers, and finance?" Again, everything.

Day after day I get letters from readers who complain about their jobs and their lives. They have dead-end careers. They have bosses who disrespect them. They have colleagues who are strangers. I know that world. I've been in it.

Real Job Satisfaction

But I also get letters aplenty from men and women in the military. They love their jobs. They do exciting work. Dangerous, of course, but exciting. They have immense responsibilities. They get challenged on a scale they would never have dreamed conceivable. They bring more out of themselves than they knew they had.

Yes, they don't get paid as much as they should. But their pay isn't terrible, and they get extraordinary benefits. More than that, they wake up each morning feeling that they matter. They never have to worry if they're making a difference in the world, because they know there would be no civilized world without them. Their colleagues on the battlefield not only treat them with respect, they would give up their lives for them. They have each other's backs in the real sense of the phrase. (Please, someone at a Wall Street firm, tell me if your colleagues feel the same way about you.)

In short, dear reader, you might want to consider a career in the military. The world needs you, and it just might make you feel like you're doing something very worthwhile with your life.

Light at the End of the Tunnel

Second, I want you to think about retirement in a serious, truthful way. This will tell you that while you're going to be fairly vigorous and sprightly for the first part of your golden years, you possibly won't be for all of them. You'll get a bit weak, often more than a bit confused, and generally not totally "there" for your duties and responsibilities.

This is one of the many reasons I love and recommend variable annuities, which you then convert into a lifetime annuity. Once you've set the annuity on autopilot and start adding to it (always with an eye on fees), it compounds month after month free from tax.

True, when you start withdrawing from it, you have to pay income tax on the amount of gains in the account. But for most Americans, that rate is now extremely low. And you get that check from the insurance company or financial house as regularly as clockwork. It mounts up and up during your contributing years, and then you get the money through the mail.

You don't have to study the market. You don't have to worry about ups and downs. The money just comes in every month or every quarter and you live on it. And it's guaranteed to be there until you die, or for some specified number of years thereafter.

Old age, especially the part of old age that involves loss of powers, is frightening enough for anyone. Old age that involves fear of financial insecurity is truly horrifying. Annuities are a safe, easily accessible, low-cost (if you keep an eye on fees) way out of that desolate valley. Keep them in mind, even if others mock them. They work.

Hardly Working

Finally, I have a correspondent who endlessly asks me if I know ways to get rich that don't involve much work so she won't miss her pedicures. She also wants to work only with nice people who are also smart.

I hate to break this to her and to everyone in her situation, but there's no such job. Making money takes hard work. The people who do it well make it look easy, but it isn't. It's hard work. Get used to it. And the people you work with aren't always nice, either.

There's no royal road to quick wealth. Hard work and disciplined, sensible savings will get you there. Not pedicures.

Opening Bell: 4.16.08

Blood On The Floor At WaMu (Forbes)
Congratulations to CtW Investments for successfully forcing out Mary E. Pugh, the chair of WaMu's finance committee. The group had been pushing for this, and last night, after the company posted a big loss, Pugh resigned. The firm also put out an announcement claiming shareholders had withheld over 50 percent of their votes for certain other WaMu directors, underlining their claims that the folks on top ought to go.

House Approves Bill Banning Private Debt Collection Of Taxes (Dow Jones)

We didn't even know that taxes were actually collected by private parties. There's something very... feudal about that. Apparentlyit's just when a payer is delinquent on their taxes that a private agency could get involved, not generally. We'd like to see it the other way. Where private organizations, like H&R Block, are actually responsible for remitting some quota of tax dollars up to the feds. And how they get the money is their own business. We suspect they'd offer free tax filing for one thing. Or do you think they'd resort to intimidation and breaking legs?

Wall Street Winners Get Billion-Dollar Paydays (NYT)

Amidst all the implosions, some hedgefunders ad a great year. That guy John Paulsen, as everyone knows, id pretty well, earning himself some $3.7 billion (that's good, but sucks to be him on tax day). Also, and this surprised us for some reason, George Soros is thought to have made $3 billion last year. Not sure why that's so surprising. Honestly, we sort of assumed he was washed up, which is why he spent so much time on causes.

Intel Net Falls 12%, But Forecast Is Bright (WSJ)

Three months ago, a rough report from Intel totally tanked the market, confirming for many that the recession was here and now. Last night, its report wasn't so bad. Yeah, profit fell as expected, but the outlook didn't show further deterioration. Things aren't perfect yet, overall worse than they could've been. Shares were up 7 percent after hours.

JPMorgan Chase Reports First-Quarter 2008 Net Income of $2.4 Billion; Earnings Per Share of $0.68

There's the report from JPM, and there's some snap analysis from Bloomberg. Looks like the company pretty much led analysts to the right conclusion, as that $.68 number is just what they were expecting.

The shared tax troubles of rich athletes and telecommuters

OK, I know it's hard to muster much sympathy for rich athletes. But I also know I'd like to have some of the money "troubles" they have.

However, over at PGATour.com, columnist John Maginnes says I should be careful about what I wish for, especially at tax time.

"Have you ever wondered if rich people hate taxes, too? I got to be almost rich for a year or two and hated them even more," writes Maginnes.

The main problem is the jock tax, which I've blogged about before (here). Here's Maginnes' take on it:

In short, a player has to file a tax return in every state where he
tees it up. If you got paid $1,200 to play the Monday pro-am in
Milwaukee last year and then missed the cut, you still have to file a
tax return there with all your travel receipts and pay taxes on that
income. Play in 25 tournaments in 20 different states and you are
filing 22 tax returns. Don't forget your home state and the Feds.

You can read the rest Maginnes' tax troubles here.

Worldwide jock tax concerns: The jock tax is not limited to the United States. Just ask the footballers (aka athletes we colonists call soccer players) that David Beckham left behind when he joined the L.A. Galaxy.

The Union of European Football Associations (UEFA) has rejected a bid by Wembley to host the 2010 Champions League finals because of a new interpretation of United Kingdom tax laws that would tax players from non-U.K. clubs on money earned while playing in the country.

UEFA has revealed it awarded the final to Real Madrid's Santiago Bernabeu Stadium rather than the new Wembley stadium because of the change.

"The reason is the taxes," said UEFA president Michel Platini. "The concerns we had over players being taxed were minimized by the English FA, but not confirmed by the British Government." ;

UEFA's decision would be like moving our Super Bowl from Franklin Field to Miami because Pennsylvania collects a jock tax and Florida doesn't. (And yes, I know, the chances of a Super Bowl in Pennsylvania in early February are remote, but you get the idea.)

;Telecommuters, too: And some of us don't have to be highly-paid athletes to get hit by another state's tax laws. Heck, sometimes we don't even have to set foot in the taxing state to end up owing.

In fact, telecommuting workers (like me there to the right) are now a prime, and potentially larger sheer numbers-wise, tax target of some cash-strapped states. I blogged about this situation back in February 2006 (here). Now I have firsthand experience with it.

Take, for example, Georgia. Please.

That state's law says it can tax all Georgia-source income. That means if the compensation is issued by a Georgia-based payer, the recipient, regardless of his or her legal tax residence, must pay a portion of the earnings to the Peach State's treasury.

I know this because the hubby works for a Georgia company. The fact that he does his work from his Austin, Texas, home office makes no difference. Each of his paychecks has a chunk withheld for Georgia taxes.

So even though he uses no Georgia services and doesn't clog up Georgia highways getting to the office each weekday, he (and by he, I mean we) lose a sizable amount of our previously disposable income to a state a thousand miles away.

Worse, since we don't have a state income tax here in Texas, we don't even get a chance to take a credit for those Georgia taxes on a state tax return.

And adding insult to injury, Georgia businesses get a tax break for encouraging their employees to telecommute. Workers, however, are not afforded any such reciprocal tax consideration.

Telework legislation pending: I'm not alone in my frustration with this tax. The Telework Coalition keeps track of unfair interstate taxation of telecommuters. And it's still trying to get the Telecommuter Tax Fairness Act passed.

Introduced by Rep. Christopher Shays (R-Conn.) in the House and Sen. Chris Dodd (D-Conn.) in the Senate, the legislation would prohibit states from taxing nonresidents on the income they earn when they work from home. The measure has support in both federal legislative bodies and has garnered endorsements from both telework and taxpayer advocates.

We did deduct the Georgia state taxes on our federal 1040, as that amount was greater than our allowable Texas sales tax deduction. But it's small consolation. ;

And I also hope that IRS return processors don't get confused when they see that we residents of Texas, which has no state income tax, are claiming a state income tax deduction.

I'm already irritated enough with Georgia's greedy hands in my tax pocket. I definitely do not need the added aggravation of it causing problems with my federal return!

Mortifying moment at a job interview

Last Friday I was interviewing for a job at a local bank. The job is one with a fair amount of potential in and of itself, and should position me to effectively be able to use my AFC certification once I've attained it. Also, since the bank is fairly widespread, I'm hoping that any job with them would be at least somewhat portable. Anyway, I do a couple of skills tests (handwriting legibility, number recognition, workplace attitudes) and then they do the one-on-one questioning. I get the standard "describe your cash-handling experience," "what does 'teamwork' mean to you," "where do you see yourself in five years," questions, and then out of left field, the lady asks "what single word would best describe you?"
Um. I can think of NOTHING. So eventually I stammer out "speechless." Possibly an even better response would have been "flummoxed."
She laughed, at least. Hopefully a sense of humor will save my job candidacy. We'll see. At the very least, I have yet another ridiculous personal anecdote to share.

Oh, and I just remembered, I forgot to send a thank you note. I think I'll run it by tomorrow.

Watch those dollars roll in not out!

Earlier this month, a fellow personal finance blogger, The Simple Dollar, wrote an excellent piece about how he and his family was defining themselves by stuff up until two years ago.? They were buying five DVDs every week along with the latest gadgets, golf clubs, and other stuff on whims.

;

He nearly had a financial meltdown, he says... until he got smart about debt, money, and what's really important.? He started selling off excess junk that he had accumulated, and seriously watched his spending.

Read how The Simple Dollar made life-changing habits to make his debt shrink instead of grow.? Now he and his wife celebrate multiple streams of income and feel financial satisfaction–something completely foreign to them before.

Check out The Simple Dollar for this inspirational story and suggestions for your own transition into control over money.

Thanks To Our Sponsor: Pod6r Media Network Blogging pods are about to take on a whole new name.

Tax Time

Phew! My taxes are filed. I'm glad to be done with them for the year. If you haven't filed yours yet, get moving. You only have about a week left!

I filed my taxes using H&R Block online. As many of you know, my lovely Aunt Mary usually files mine for free, but I ran out of time to send them her way this year so I filed online. For those of you accustomed to having financially savvy relatives or friends do your taxes, the experience was little daunting; I wasn't 100 percent certain I did everything right. Still, it was very convenient to file, took less time than making a trip to the nearest tax place and included a computer-generated error checking system, which comforted me a bit. It was difficult, but I only filed a 1040-A. I'm sure if I had more complicated finances, I'd use a professional.

So... now that you're all filed, what are you doing with your double whammy tax return and tax refund this spring? I'm predictably putting into the savings account, which will be a nice bump towards helping me achieve my savings goals this year, but I'm sure others have bigger, more exciting plans (exotic vacations? new refrigerators?). Share them!

I Hate Payday Mondays

And I hate it even more when my posts get eaten by the system.

I just realized that Monday is payday for me. I get paid on the last day of the month this month.

Sux0rs.

I don’t mind getting paid after Wednesday, but getting my check on Monday or Tuesdays stinks. I pay myself an allowance on Fridays so I can frugalize during the work week if I over spent on the weekend. If I pay myself early in the week, it sucks to frugalize on the weekend if I spent too much during the week. My mental spending plan runs from Friday to Thursday.

I am sure I am not the only one who feels this way.

Who else prefers to be paid later in the week? Does it effect how you spend?

DC Internship Housing: A Brief Guide

Ah… Internships. All of DC runs on the nefarious slave-practice of the unpaid internship. It sucks. Personally, I’ve never done it. I’ve always taken paid work, but being a grad from a local school, I have plenty of pie-eyed friends whose idealism for public policy, civics and government work ended up in DC working for free.

Don’t get me wrong, I lived in ‘intern housing’ myself. I took a language class in DC one summer through my university and when I wasn’t in school, I was working at Express on Pennsylvania Ave, across from the now infamous “Client 9 hotel”, The Mayflower. If my cousin and his best friend, who was my boyfriend, didn’t subsidize my living with food, drinks and entertainment, and my folks weren’t covering my rent, I would have been screwed financially. Heck, I still was since my parents didn’t cover tuition that summer in an attempt to financially blackmail me to come home that summer. Can you say ‘credit card tuition payment’? But I digress.

My own experience for housing was a DC insider secret. I lived at a George Washington University fraternity house with a girl with green hair and a lot of tattoos. It was relatively cheap. I spent about $250 a month for 3 months back in the 1990’s. Of course, it was originally $300 a month, but they refunded a little money because they didn’t have a working kitchen all summer due to renovations. The link above is for a GW (Say ‘G-Dub”) housing website. It looks like a much more formal program than before. But the housing looks much nicer too. I think I heard about it through word of mouth originally.

GW also has dormitory housing for interns. But I find it to be ridiculously expensive. It’s got all kinds of requirements and rules, but a friend of mine used it about 5 years ago and the rooms were decent quality for sight-unseen housing. She was from Texas and it was the most convenient way of getting reliable housing without knowing anything about DC.

Try also the off-campus housing offices, or summer housing offices of other major universities in the area like:

Georgetown (No metro, but a shuttle bus to metro)

American (Red line metro)

Catholic (Red line metro)

Howard (Green/Yello line metro)

George Mason (Commuter school, in Northern VA)

U DC (Commuter school)

Marymount (Orange line metro, in Northern VA)

Gallaudet (Red line metro, deaf community. Might not be an option if you can’t deal with deaf roommates.)

Now, for more creative options:

Craigslist sublets - I think these are expensive, but they are more flexible than the dorms and you can live nearly anywhere in the city. This is probably the most popular way of finding housing if you are from out of town, but try the regular roommate search section as well. If you are willing to pay slightly more than they are asking to compensate for the second search they need to do after you leave, it could work out well for both of you since they can take longer to find the perfect roommate and still have rent coming in.

Ask your family and friends for help - You might be able to live for free in the spare room of someone you know. Of course this could mean that you need a car if you aren’t near public transport. Because traffic in DC sucks and gas is slightly more exspensive than in other east coast cities, that might negate any fun or savings you might have with this option. (Gas is exspensive here because a lot of people are exspensing it to their companies/contractors. But certainly cheaper than in California.)

Call your internship and ask for help - I admit I am now going to give you the most unusual arrangement that I know of. Usually places that have interns keep some resources on hand to give their interns so that housing isn’t a deal breaker. If those resources don’t work out, you could try doing what one of my friends did. She lived with someone from the office. I think she lived for free in a spare bedroom. In exchange my friend was a house/baby sitter for her hosts. The host family had two kids, one was about 12 and the other about 5. There was a maid/cook who came in daily, but wasn’t really a babysitter or au pair. The family left for a month on a European style vacation (diplomatic corps types so they had way more vacation than us Americans) and she had the house to herself for a month. Of course, my friend had to suffer with a metro that was really far away and had no car, but she commuted in the morning with the mom and was allowed to use the car while the family was away. My friend walked a lot that summer.

Later this arrangement worked out for her as she lived there an additional summer or two even when she wasn’t working with the mom at the original internship office. She got great recommendations for future jobs and strong friendships. I know this is really unusual, but be open to a creative solution like this. It could have serious upsides.

Try your local alumni club - Many people have done the intern track and are sympathetic. You might find a local alum who is willing to host you just because you go to their alma mater.

The thing is to broaden your reach here and be clear about what you can or cannot afford. Budgeting is crucial when you’re unpaid or on a stupidly small stipend. Most interns work during the day, and again at night/weekends as waitstaff or retail.

Be safe and vet your hosts/roommates. Get your own phone if you don’t already have a cell phone. Living in a group housing situation in DC can be a lot of fun. I met a lot of really nice kids at the house in GW and later when I lived in Georgetown as a working adult. You want to stay on their good side and in contact if you eventually need a security clearance. (One of my old G’town roommates is a drinking buddy and reference.) My friend in the weird housing situation lived in Georgetown another year in a sublet and those roommates were at her wedding. So it can be a rewarding experience. (Trust me though, yes, it can be crappy, as in having no kitchen. There are downsides, just be aware of them.)

Some other advice:

Do not ignore the cost of food and transport when making your budget. Again, THE METRO IS NOT CHEAP. Let me put it in terms that college kids can understand.

One round trip during rush hour = Cost of one beer

Food is also very expensive here due to the dining tax of 9+%. DC’s tax base is driven by consumption taxes like the dining tax, so keep that in mind if you want to dine out. It is not cheap.

Bring a bicycle if you can. It makes for cheap transport and entertainment. The metro is expensive here. Plus you can ride all over town on the C&O Canal, the Tidal Basin and Rock Creek Park for fun.

One great thing though is that there is a plethora of free entertainment all summer long on the Mall. There are summer film festivals that are screened for free. (Try Screen on the Green) Smithsonian’s folk life festival, the 4th of July, free Kennedy Center concerts, etc.

ps- This post was inspired by a reader at Madame X’s blog.

Gold and Platinum Hit Record highs

Well, this one was telegraphed like Chris Iallegio's roundhouse in 6th grade...but this time, I reacted a little more quickly. Gold again hit a record high of $992 an ounce and is likely to break $1,000 this week. Platinum broke through $2245 per ounce.

In short:

• Our currency is continually weakening and our Fed has precipitated this decline even further by projecting further rate cuts.
• We are in a recession. There's very little doubt. The economists will look back and say it had already begun.
• Inflation is stoked and investors flock to gold in these times.
• Overseas, gold and platinum are still in short supply and consumption is outstripping supply.

Note several recent posts on African mining troubles, cheap car production worldwide driving platinum for catalytic converters and more.

So, this time around, I saw it coming. I went long gold with GLD, the gold bullion ETF and long platinum/palladium with Stillwater mining (SWC). SWC was up 8% today alone!

I don't believe it's too late to catch another couple months of continued ascension. The Fed's actions and our country's inability to spend less than we take in will continue to weaken our currency for some time to come. As other countries fail to cut their rates in lockstep with ours, I don't see what drives the dollar higher and depresses these commodity prices from here.

If you really want to jump on this commodities bandwagon, check out my other posts on the continuous commodities ETF to get exposure to soft commodities and the leveraged ETFs where you can double the return of gold:

http://everydayfinance.blogspot.com/2008/03/new-gold-etns-allow-for-double-return.html

http://everydayfinance.blogspot.com/2008/02/fair-and-balanced-new-commodity-etf.html

www.everydayfinance.blogspot.com

Happy To Be Single

My apologies. I’ve been fighting a cold for the last few days. Luckily, I’m in training so I can still work through the illness. I love being a knowledge-worker disconnected from the physical state of my being. *cough* I get a lot done.

While I was writing my March net worth outlook post and writing about my friend in need, I realized that since I am single, I can make a lot of financial decisions myself. I realize that’s an obvious statement, but if I were married, there’s no way I could offer up my apartment and a wad of cash on the spot. I’d have to consult my spouse first.

As it was, I did have to consult my boyfriend about moving in for a few days and it caused me a lot of personal stress. He was super busy and there didn’t seem a good way to approach the subject. He doesn’t mind though, but I’m lucky that he’s nice like that. What if he wasn’t ready for me to be a 24/7 presence? In that case, I wouldn’t have been able to offer my friend my apartment. I’d have to tell her to get a hotel for a few days till my pay day and then loan her the money right away. Honestly, as I consider it, that is what I would have done. Sometimes I wish I had a 2 bedroom condo instead of a studio.

What about you marrieds out there? What if one of your friends, who is not known to your spouse, said they needed a place to live for 2 weeks and borrow about a thousand dollars? What would you do? Is this one of those relationship finances conversations that couples have? This might seem like a contrived ‘what if’ scenario, but I’m in my middle 30’s and all those early marriages are either having kids or falling apart now. It’s not as crazy as it sounds. I can think of at least two people I know who suddenly moved out when they knew their relationships were over and the logistics weren’t easy.

A new direction for my net worth this month...

I compiled my net worth statement this month and wasn't too surprised by the results - I'm down about $5,000 - because I finally decided to spend some of my damn money. :) This August, Boyfriend and I will be taking a week-long trip to Rome! I love to travel and Boyfriend took Italian all year, so it works out well. I am so psyched I cannot even begin to tell you.

I am doing pretty well on my "save all my salary, live on business earnings" plan - I am getting a little chicken though, since with paying for the Rome trip I'm down to only (gasp) two or three months worth of living expenses in the emergency fund. You can tell how chicken I am.

I've taken a new philosophy over the past six months or so - I'm finally realizing that I do in fact earn quite a bit of money, and that money isn't any good if you don't use it to get what you want. At first what I wanted was assurance of financial security, now and in the future, so my focus was on building up an emergency fund and retirement savings. Well, I have over $10,000 in cash, albeit earmarked for different purposes, and as of now I have a smidge over $40k in retirement savings. My outlook on savings could best be described as "starvation mode" - you can never have enough. But I am relaxing some, and not saving every dime. Another facet of my realization is that I am spending a good deal more now on restaurants, entertainment, movies, etc, and often paying for my friends (most of whom are students) because I've realized that one thing that I want is to go out and have a good time with my friends, and there is No Good Reason to not use my money to accomplish this end. :)

Next month I will be moving into a more expensive apartment (it's a duplex) and I am also really excited about this. We need more space, and I want a backyard very badly. (My guinea pigs haven't been outside except to go to the vet in a year and a half.) Boyfriend is getting a grill, partially because it is entirely my idea to move as he's perfectly comfortable in our current apartment, and he is putting up graciously with my shenanigans. (Of course, he also has a room to himself as an office, while my desk is in the bedroom.) Now we'll both have an office, and a very nice kitchen and dining room area, which we use extensively. Of course it is more expensive than where we live now, but this is yet another arena in which I need to remind myself that I can well and easily afford this. There is quite a difference between living below your means, and living vastly below them to the point of unhappiness.

I fully expect my net worth to reverse next month, as I am paying off the Rome trip in a lump sum. I also need to contribute more to my SEP IRA, but I have until April 2008 to do that, so I'm not in a hurry.

Investment Options for the Frustrated Investor in a Bear Market

Although I called the 2008 bear market months ago now, and sold about half my holdings, I'm still wishing I had the fortitude to pull everything out completely, but that would be market timing, right? Most of the best investors in the world get it wrong, so what's the next best thing?

Diversification and Hedging...

Over the past couple months, I've diversified into commodities more heavily; initially with the gold bullion ETF GLD and more recently into the 2X leveraged ETF for gold, DGP. Unfortunately, I delved into platinum the only way I knew how with Stillwater mining (SWC) and realized an initial 15% runup to be followed by a precipitous crash. The only thing I can say is that where you can, avoid the operational risk of owning individual stocks like miners, oil drillers, etc., and buy ETFs where you can.

Regarding hedging, I had routinely held a few QQQQ puts at any given time and sold each time the market dropped another 5-8%. Adding a few hundred dollars here and there on the way down is nice, but hasn't quite done the trick considering the other high Beta holdings I've been seeing decline at 2x market rates.

To add some additional hedging power, there are some other powerful 2X inverse ETFs and funds out there. To bet against the Nasdaq, there's QID, the 2x inverse. Next, there's SKF, the 2X inverse of the Financials if you think there are more subprime surprises in store. Finally, it looks as though the hot air has deflated from the China bubble. As the markets continue to react to this reality, you may want to consider the 2X inverse of the Chinese market with FXP.

In order to realize a nice floor on some of your holdings, you may want to consider high yield stocks with steady dividends (outside of financials). Feel free to review my high yield self-directed IRA account holdings here:

http://everydayfinance.blogspot.com/2008/02/everyday-finance-high-yield-self.html

www.everydayfinance.blogspot.com

Dual-Class Shares Unloved But Don’t Write Them Off Too Quickly

By and large, dual-class shares are unloved by investors and PF bloggers because the structure creates a double standard that gives one class of investors unfair voting power over another. ThickenMyWallet recently wrote a post on dual-class shares titled “You're a fool if you buy...“:

The primary disadvantage of a company with a dual-class share structure is there are no effective checks and balances to management excesses such as excessive executive compensation... The larger issue is that companies with dual-class structures tend to be poorer performing stocks than their single-class structure counterparts (ask someone who invested in shares of Ford).

Yesterday, The Dividend Guy followed up with “Dual-class shares suck“:

From a statistical perspective, it would be better to hold the single-class stock in the industry you are looking at, compared to the dual-class company.

Both bloggers singled out controlling shareholder, Conrad Black, whose extravagant lifestyle single-handedly brought Hollinger International down to its knees. While both bloggers put forth rationales with strong merits, ThickenMyWallet did offer a glimpse of hope suggesting good stocks do exist in the dual-class structure.

Admittedly, I haven't paid much attention to dual-class structure although I may have to adjust my stock selection process. So far in my endeavor, I've found no reasons to shy away from *all* dual-class stocks even though the door is open for management to act in their personal interests. My view is that result should speak louder than share structure, so I tend to stick with management with a strong track record of delivering excellence.

There are many profitable dual-class Canadian stocks with smoking-hot cashflow, and management teams aren't afraid to share the wealth with generous dividend policies. Reitmans, for example, is a debt-free high quality retailer with a long history of dividend increases. Another one is Teck Cominco which hiked their dividend 10-fold since 2004. AGF Financial also recently boosted their payout by 25%. All three stocks have so much money, at least 3 years worth of dividend is parked in cash or cash equivalents.

Perhaps dual-class structures do raise some eyebrows, but a meticulous screening process should weed out the looters.

WSJ says being LC is hard work

If you're anything like my friends, many of you are closet "The Hills" fans. While I'm always intrigued by the girly drama on the show (who doesn't love a good LC/Heidi "confrontation"), I can't help but wonder sometimes who these girls actually are and where their money comes from. Most 20-somethings I know can barely afford their rent. I think it's safe to say that for some viewers, the show is a type of escapism... the chance to spend 30 minutes in the lives of beautiful people who are blissfully unburdened by finances and don't mind living off mom and dad.


But an article in today's Wall Street Journal profiles LC and claims her life isn't as effortless as it looks. There apparently is actual work involved in selling Lauren as a brand beyond the MTV market. While she may have several advantages to propel her above 99.5 percent of 20-somethings, turns out she's just another gal trying to make a name for herself.

You can enjoy the article here.

And props once again to the Wall Street Journal online, which continues to entice young women to become financially savvy by luring us in with stories about our favorite subjects. It may be a transparent tactic, but I really like that the Journal is showing interest in the younger generation. And it's a welcome respite from reading about LC in UsWeekly and on Perez!

PS - Chicago is MISERABLE today. There is actually snow on the ground. It's wet, cold and dark here. At least we're all saving money during this LOOOOOOOONG winter. Everyone's too groggy, crabby and down on the weather to go out.

Everyday Finance Portfolio Update

Given the rather abysmal market conditions, I've made a number of adjustments to the portfolio of late. In addition to purchasing the commodity plays recently to exploit opportunities in Gold with GLD and Platinum with SWC, I sold the following stocks, as I want to be heavier in cash here with more downward movements likely. When the market doesn't even react kindly to the prospects of further rate cuts, we are in serious trouble. The concern of the precipitously falling dollar has now outweighed any notion of a near term benefit from the rate cuts. Anyway:

I sold my positions in AAPL, CRL and BPHX. I don't see any near term catalysts for these.
I purchased 3 QQQQ March 42's.
A while back, I had sold a credit spread of QQQQ Short March 47s and Long March 50's. That position's up over $100 already.
Finally, I bought options on the continuous commodity ETF GCC: Jun 33's.

The way I see it, if by some miracle, the market breaks out and I lose a thousand bucks or so on these hedges, I've made well more than that in my remaining long holdings. I don't see that happening, nor will the dollar recover any time soon, so I feel like I'm rather neutral on the market here, not necessarily short or exiting and US and moving to China like Jim Rogers.

Good luck; post here what you're doing to protect yourself from further declines.

www.everydayfinance.blogspot.com

Taking the big plunge

Today I filled out the paperwork - effective as of my payday at the end of April (since I get paid once a month) I will have about 86% of my salary deducted pre-tax and put into my retirement accounts. I have plenty of money in liquid savings, and will have more by then, so I know logically it will be perfectly fine even if I don't bring in another dime from CashDuck for at least six months, but it's still a little scary to only draw $500 of salary a month! (That is, before my deductions for my insurance premium, gym membership, and FSA.. that's why it's not 100% of my salary.) So I might only bring home $200 a month. I went in to my TIAA-CREF account and put in some allocations for it - I am hoping that the gibberishly named account that doesn't have any money in it is the 457. (All the other gibberishly named accounts have deposits from which I can figure out whether it's my involuntary contributions, voluntary contributions, or the Roth.)

I also signed up with Citi to get the $50 signup bonus (read about it here) but I forgot to put in the code. I was supposed to take out the code that was there, and enter another. Oh well, I can always use more bank accounts. :) I wonder what the original code was supposed to get you.

Bah, oh well

So we went to take a look at this house.. and I must say, I was a little taken aback. While I was fully prepared for the cracked kitchen tile and lumpy, painted-over siding, I was not prepared for the several joists in the basement holding up the central floor beam, nor for the fact that all the floors are sloped and a little spongy. Least of all was I prepared for the ladder made of 2x4's that is the method for getting into the attic (which is actually finished quite nicely and is, by the reports of Boyfriend, the nicest room in the house - I was too scared to go up the ladder since it leaned backwards somewhat.)

So just from our initial trip 'round the house, we decided this was not for us. I had been prepared to put $30,000 into this house, but not $60,000 or $70,000 - especially with the damp basement and potential house-sliding-into-one-corner problems. I had been under the impression that the house had been a rental for a few years, but apparently it had been rented out for TWENTY - and it really looks it. There are lots of repairs (like the 2x4 ladder) that look like a cheap, quick, not-particularly-durable solution to a problem. The roof similarly looked like it had been put on by an amateur with cheap materials - it wasn't evenly spaced, and we found part of a shingle on the ground. It's too bad because the backyard was pretty great for this area (yes, you really can buy a house on 1/50th of an acre) and it might be a nice house, if I had $70k. The real deal breaker though were the upstairs bedrooms, which are all quite small, and only one has a normal sized closet. One had a closet literally ten inches deep, and the third had no closet at all. So I backed away from this house - maybe in another few years. :)

So now I'm looking at places to rent, since I do want a bigger place. I found a place that looks great on paper, but I want to talk to the landlord and see what experience they have since I get the impression it's just some guy who owns a house and felt like renting it out. From the county auditor's site, I found that it sold in 2005 (presumably to this guy or someone he works for) for $228,000 - and you can do the math that the rent of $1200 is not going to cover that mortgage. So who knows what the deal is there. I also have my eye on a few other nice places, so hopefully they don't get rented out before I make the final call! My lease is up August 15th so that's a bit early for around here (most things are Sept to Sept) so I'm hoping to get someplace for August 1st, so we have two weeks to move.

In other news, CashDuck is quite busy now and I have added another person to my crew. :) At this point she's mostly helping me catch up on tasks that have been long neglected, and taking only a little workload off of me and my other crew member. Ah, such is business.. it grows faster than I can manage to hire people to take work off me. But things are going quite well. My wonderful ducklings raised $350 for breast cancer research with this month's promotion so I'm pretty pleased with that too! I am pretty much ducking when I am not eating, sleeping, or at work though. Yesterday, I took an hour to relax, which I am not good at, and watched some TV.

In other news, I fear that between my work and CashDuck and attempting to have a real life, I do not have time to administer the Under 30 Honor Roll and I'm not doing it proper justice. So for any fellow Honor Roll members, if you are interested in taking over the Honor Roll and making it the best it can be, drop me an email.