So here’s something I stumbled upon at one of my credit unions.  I was contemplating taking a loan out to pay off one of my student loans who’s interest rate climbed to 6.9% and homey don’t like to pay interest that high!   I walked in to the credit union and asked for the loan rates and something caught my eye: 1.75% share secured rate!   What is a share secured loan?   Well essentially, you deposit money into a share (savings) account and “lend” yourself that money back at a rate of 1.75 percent.   I was looking at 30k so the difference in interest on 30k @ 6.9% vs. 1.75% is about $2,500 over 3 years.

But now I’m thinking I might be able to move some IRA money into an IRA savings account at the credit union and borrow at 1.75% and pay the remaining balance of my mortgage off which is currently at a low 3.25% interest rate.   Alternatively if I am ever in the market for any kind of loan, why not borrow from myself at 1.75 percent?   I haven’t officially asked if I can do this and that’s my next step on it but it makes perfect sense.

You may be asking why I don’t simply take the money and pay off the loan and avoid all interest altogether and the answer is simple:  reserves.   The money I’m using is essentially emergency cash reserves that I use for emergencies but since I also have secondary reserves at my brokerage account and I still have most of that student loan money in another credit union sitting in cash it makes sense to borrow at nearly negative rates (if inflation is running 3% then borrowing at 1.75% means I’m deflating the debt nicely).

If you’re interested in looking into this strategy I suggest you google “credit union share secured loan” or visit your local credit unions.  Shop around as rates vary and each major city has at least dozens of credit unions.

I have been raking in the cash lately using my favorite system of trading and it seems the trade of a decade…perhaps lifetime is coming in January 2012.   With the European debt fiasco and the upcoming portfolio rollover in January this may be the best opportunity to trade the market.   I am personally biased to a big correction down in the market and I think it’s going to happen in January.    To test my theory I’ve been investing in inverse leveraged ETF’s and selling covered call options but money can be easily made simply buying the ETF outright or even buying the options outright.    To date, I’ve made almost $5,000 selling FAZ covered call options and as soon as December expiry gets close, I’ll likely do another heavy trade.

So how to profit?

Option 1 – Covered calls on FAZ.   As of this writing, FAZ closed at $40.63 and the January $41 strikes are selling for $6.21.   The strategy here is buying 100 share blocks of FAZ and selling at-the-money calls for January.  Assuming the market drops by January expiry (FAZ rises) then you’ll be assigned and keep the premium (16.19%) in a little over 45 days!

Option 2 – Buy FAZ at-the-money or in-the-money calls.  As stated above, the options are trading at $6.21 and with $1300 you could purchase a couple of contracts and if the market tanks these options will be worth quite a bit as FAZ rises.  Money will be made if FAZ rises above $46.21 by January expiry.

Option 3 – Setup a Strangle.   Sell FAZ $36 strike (PUT) for $4.05 and buy the FAZ $41 strike for $6.21 (net cost of 6.21-4.05 = $2.16) which allows you to utilize that same $1300 to buy more for less.  I personally would expect the PUTS to expire worthless (since I’m biased to the market falling which means FAZ would rise) and the calls would be worth more.

For option 3, it goes without saying that you should be well capitalized to be able to take the PUT assignments, meaning for every contract you sell you need to have $3,600 in the bank to absorb the shock.  Also note that leveraged ETFs do swing violently on a daily basis so this strategy isn’t for the faint of heart or cry babies.

Choo….choo!  What’s that sound?  It’s the sound of the money express leaving the train station heading to richville…’ll find me giggling all the way to the bank 😉


I’ve spent the last two weeks on a business trip and I continue to experience the same horrible experience on Continental/United. I’m flying through areas where this is the airline that offers the most flight options between the cities I’m flying and I often have to change my itinerary the last minute so it has been the only reason I’m flying this airline but here are some recent observations:

1. I got bumped up to biz class and while we were waiting to board the plane, I was talking with a coworker as to why I went and grabbed a burger right before we board when a lady came up and started talking with us. I told my co-worker that the last time I got upgraded, I was expecting a hot meal but got a slice of turkey and crackers – in business class! I was hungry and didn’t want to be on a 3 hr flight out of L.A. with another slice of turkey. The lady waiting in biz class to board the plane agreed and said she has been horribly disappointed with Continental/United ever since the merger.
2. Flash forward 45 minutes later and the flight attendant asks what I’d like to drink. I usually only drink white or red wine so I asked what was available. She responds with, “we only have red wine, someone messed up and we’re out of inventory everywhere of white wine.” I’m not sure if this was yet another computer glitch or some penny pinching move to cut wine inventory but once again, it illustrates the horrible level of incompetence to provide some basic services on a long flight. My own personal theory is that flying this airline has become so horrible that vast amounts of alcohol are needed to get through the experience and the “glitch” was underestimating how the customer would cope with the misery.
3. Okay so I’m stuck with red wine, no problem since at least I’m getting *some* wine and I can drown out my misery but then my choice of meal is between a shrimp salad or a chicken snack wrap. I chose the chicken snack wrap then what shows up on my table is what appears to be one of those horrible burritos you’ll find at a 7-11 gas station that you microwave and only eat after being left stranded for hours or after a late night party binge when everything else is closed. Later you end up vomiting it all out….another sign of deterioration: quality of food.
4. I finally arrive at the airport and head for the luggage bay and I wait…and wait…and wait… Curiously, a guy is announcing where the bags are for which flight as evidently every computer screen is directing people to the WRONG luggage pickup area. I’m waiting for 25 minutes until I finally give up and start walking around until I find my bag about 200 yards down another luggage bay. Out of courtesy to others, I walk back to the wrong bay where everyone from L.A. is still waiting for their luggage and yell out, “if you just arrived from L.A., your luggage is in bay 5 not bay 7!!! Or at least that’s where I found my bag!” A large mass of people leaves the bay and heads for 5 to try to find their bags.

Now someone will ask how this post pertains to anything related to personal finance and why I bother with these rants but it has everything to do with personal finance and personal living. On the first level, this airline’s value chain is disintegrating right before my eyes (food, service, experience) and that is a huge opportunity to make money by shorting this stock or buying puts. I’m still trying to find a good entry point but with the market volatility I’m waiting for a period of a bit of stability. This airline no longer cares about its customers. Elite users could once board the plane first but for $95, that opportunity is offered to everyone who’s willing to get a United Credit card. Essentially, that’s the value of being a loyal customer to the airlines, about $95 and for that fee they’ll treat you the same whether you fly 100 miles or 100,000. Yet another indicator of the deteriorating nature of the value chain!

On a second level and why I am so frustrated is that this airline is costing me money in the form of lost time that I will never get back. Air travel is already a horrid experience with wasted hours in long lines for worthless and pointless security checkpoints, long flight delays, lousy food, and long wait times for baggage. After 9/11, I gave up flying when going to a city that’s two to three hours away because the proposition is a no brainer: 1 hr drive to airport, 1 hr in security, 0.5 to 1 hr flight delay vs. getting in a car and driving straight to the location. Driving is cheaper, faster, and better!

The only good thing I have to say is about the pilots who all seem to take it in stride. I’ve heard plenty of flight attendants complain just about everything as I usually sit just a few feet away from where they’re making the coffee and perhaps it’s unfair if the pilots are doing the same behind a locked door but things just keeps getting worse.

The pain and anguish on the faces of passengers has become all too familiar for me this week as I’ve been on three United/Continental flights and been delayed three times; it’s sad but it presents an opportunity for profit.

The common theme to United’s problems seems to be computer glitches but dropping morale can’t be helping any.

I recently witnessed someone get downgraded from first to economy undoubtedly because of a computer glitch. I have also recently witnessed flight attendants helping themselves to first class. I can’t quite make out that one except to think that many will get laid off after the merger so why not splurge?

I am so confident that United is going to fail with this merger that I’m going to buy puts on the airline. With the recent market meltdown today, it’s probably not the best day to do it but January 2012 put options look juicy.

It is a real tragedy because I remember a few years ago, Continental won various JD Power awards and now they win the big turd award.

To top off the miserable experience, we have to sit through the smug dickhead face of Jeff Smisek telling us the great progress they’re making painting airplanes. Really Jeff? You are proud of your major accomplishment of painting airplanes? Well maybe your crack team can start on the computer systems next.

Jeff, you better stay in your ivory tower because if you show your face at any airport, I’m pretty sure you’re going t get slapped and maybe have your neck wrung Bart Simpson style. I’ll keep you posted on those UAL put options…

Regular readers know that I am no big fan of charities.   The few times I have  given money I ended up regretting as these charities squander my money with mass mailing for just more requests for more money….so I finally decided to try to give money directly away to people that I knew would have a direct positive impact on someone’s life.

I first started with an amazing idea, I will allow a local church group to earn $1,500 for re-landscaping my backyard.  I would go out an buy all the plants, soil, materials, etc needed for this project and the local church group need only provide the labor.  With quite a few (needy) kids, I figured this would be a no-brainer but guess what?   After FOUR months of failed promises to appear and constant rescheduling, we finally got into mid-April and my landscape still looks like total crap.

To make matters worse, my wife decided to host Easter and invite a ton of people over to our house.  Well gee…that’s a great idea except an Easter egg hunt is an outdoor activity and my landscape looks like crap.   Well since the church group never delivered, I opted to hire kids directly to do the project.   I got word out to a couple of kids to come over this past weekend to help clear weeds and plant new plants and although there was interest, no one could commit because of other (non-paying) engagements.

I understand sports, clubs, and friends are important but if you need money and someone is offering to pay you WAY ABOVE average pay rates, then you’d think people would jump at the chance but it didn’t happen.    I could have easily gone to Home Depot to pick up 3 or 4 illegals and paid them $50 for a day of work to do it all but that is just so wrong on so many levels but I see them eager to get work on any day of the week.  When it was all said and done, my wife, kids and I spent our entire weekend planting a variety of trees, shrubs and plants for our front and backyard all by ourselves.   I obviously saved $1,500 but I really wanted to give that money to charity.   Oh well, as a reward my wife and kids will get iPads 2 as soon as I can find them in stock somewhere.    It’ll be their summer end–0f-school gifts and a birthday present for my wife – they earned it!


So I finally began enjoying Amazon shipping groceries to my door.   To be honest, my wife and I continue to work like dogs and both of our companies continue to either lay off or offshore work and we’re left to pick up the pieces so we don’t have much free time to do grocery shopping.

Interestingly, I don’t miss grocery shopping one bit;  The crowds, the parking lot fights, the traffic and the long lines at the checkout make grocery shopping an unpleasant experience and I think the future of the grocery store my be grim unless things change.

The more I think about it the more I think that grocery stores may be dinosaurs in some respects at least for dry goods.   When we shop at a grocery store we are essentially paying for the lights, the ac (or heat), the staff, etc.   When I order from Amazon, although there are computer and electric bills to pay, I doubt they are as high as the aggregate grocery store chain.   Ultimately, I would imagine that this will lead to cheaper prices online than at the grocer store as there is less overhead.   Additionally, 80 million baby boomers that can’t drive to the grocery store or probably shouldn’t be on the road will benefit from this in the near future.

Well that’s all theory anyway because this is what I got today when I realized that I hadn’t received my boxes of Apple Jacks.

I am not sure if this has proven too popular for Amazon or if inflation is eating into profits or they just can’t source the goods but I hope they fix it soon!   I am ready to expand.

So I’ve been experimenting with Groupon and I can’t decide yet if I like it or not.    The way Groupon works is that it basically acts as a giant “coupon” discount repository but the coupons are only good for a period of time.   The plus is that often the coupons have a 50% discount value so you could buy $50 worth of services or products for $25.   I recently purchased one however I was told that the coupon wasn’t immediately available for use and I would need to wait a day for the coupon to work.

This is certainly understandable but a disappointment nonetheless because a one day delay means you have to wait a day to use the coupon.   I will follow up with my experiences with this but does anyone out there have any good or bad experiences with Groupon?   I found this very interesting discussion here on Groupon’s partners and it seems the best thing to do is avoid services places (restaurants, massage spas, helicopter rides) and stick to consumables (CafePress, online retailers, etc.)

Well it’s easy to say why the market is up, the third quarter is coming to a close and all those mutual fund money “managers” have to justify their existence and bonuses that will be doled out during Christmas so why not pump up the market, make the numbers look good and then let it all go to hell in a hand basket in fourth quarter?

Be very very weary of October and as I’ve noted before, the market almost always goes down in the third week in January too and then finds direction after that so be very careful out there!

I’m always in the look out for new investment opportunities and a few years ago, the peer to peer lending scene was starting to take shape and I was intrigued and wanted in on the fad but I suspected it might be a fad and stayed away.    Flash forward about three years later and I can’t find any top tier personal finance blogger writing about Prosper or Lending Club and such!  What happened?

I suspect that the sour economy has a lot to do with the situation as savings are eaten up by the unemployed to pay for basic necessities as well as the distrust that any lending will actually be paid back but seriously, why haven’t these entities filed for bankruptcy yet?   Is there hope?  I did a quick search on on “prosper” and “lending club” and came up empty on any updates with the peer to peer lending entities except one lone article from August 25th.

The irony here is that the Fed has the discount window at ZIRP and has been there for some time now, geez if banks and peers can’t lend when rates are at zero percent interest then when will they loan?   I went over to Lending Club to try to borrow 25k and got an interest rate of 7.83% with a 720+ FICO score and claims rates as low as 7.25 percent.  Wow, that’s expensive considering other alternatives to borrowing out there so it sounds like it should be profitable for these guys.

Whether you want to call it a recovery or just exuberant optimism about the economy improving, the one question that’s been begging in my mind is what’s going to happen with oil if and when the economy booms?  If oil is currently at $85 during a recession then what will it be during a real recovery?   The more I run through the scenarios the more I don’t like the outcome:

Scenario 1:  Assume the economy picks up steam, oil rises from $85 to $120 which quickly begins to take the steam out of any recovery and plunges us back into recession.

Scenario 2: Assume the economy remains stagnant, oil rises from $85 to $110 because of the Fed’s $2 trillion dollar inflationary pumping into the economy.

Scenario 3: Assume the economy dips back into recession, oil rises from $85 to $115 because the US will incur more deficit spending and the US dollar loses value against other currencies thus raising the price of oil.

Scenario 4: Assume Greece defaults and sends cascading domino shocks across Europe, oil rises from $85 to $100 because Opec cuts production in their October 2010 meeting.

There are more scenarios but you get the picture and I find very little scenarios in which oil will drop but ironically the biggest scenario that will drop oil is the mass adaptation of electric vehicles like the Nissan Leaf or Chevy Volt and the push toward natural gas for power generation.

I’ve positioned myself with natural gas ETFs and energy ETF plays because its the only thing that makes sense in this current economic climate.  I hope my bets pay off!

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