Archive for November, 2006

My wife’s cell phone finally died and we called up our provider to see what options we had to get an replacement. Unfortunately, any new phone would require a new two year contract and to add misery to injury, her old plan would no longer be available and the new plan would go up $10/month in cost. Doing some math, $10/month x 24 months = $240 for 1 new phone = bad deal.

We were glancing through a Walgreens flyer and came across an advertisement for a Motorola C139 phone that seemed to offer the perfect solution: A cheap replacement ($19.99) phone which appeared to be GSM compatible.
We asked the clerk if the phone was GSM capable and he adamantly said, “No, that’s a prepaid cell phone and you need the prepaid cards.”

I had a feeling that the phone was GSM capable and we figured what the hell, we’d just lose $20 if it didn’t work. I took the phone home, took my wife’s SIM and plugged it in. No go, got an error message reading, “INVALID SIM”

I googled the net for some possible solutions and came across a link that offered a free download of some software that would allow you to completely wipe the phone and restore it to an original manufacturer condition. I ran the application (I did have to order a cable for $10 from somewhere else) and the phone was completely wiped! The pre-paid vendor’s logo was wiped and replaced with a cheerful Motorola Logo. I took the wife’s Sim card and put it in the phone and it worked perfectly!

I will likely go and buy a couple of more phones and wipe them to keep as spares in the event she loses or breaks one and I might even buy one for myself too! Before any of you question the legality of my action, I will simply refer you to this CNN article about the US Copyright office lifting restrictions on doing exactly what I just did…..

http://www.cnn.com/2006/TECH/11/23/digital.copyright.ap/index.html

I have been researching brokers to open a new “arbitrage” brokerage account as an experiment on my fairly successful ETF covered call trades. I’m planning on executing a few covered calls on ETFs to gain at least an 8% return on my money over a 60 to 90 day peroid. The biggest bite out of my returns are the brokerage commissions and Zecco appeared very appealing with zero commissions until I read the Terms of Service.

The particularly disturbing section included the following

You also understand and agree that the Service may include advertisements and that these advertisements are
necessary for Zecco to provide the Service….You agree not to access the Service by any means other than through the interfaces that are provided by Zecco for use in accessing the Service.

There are a few references to Zecco’s Privacy Policy and upon reviewing that document, I spotted some troubling wording

(2) we may share limited information with third parties to assist in the analysis of customer demographics, business analysis and marketing strategies; these third parties must agree to strict confidentiality provisions to assure the protection of your information;

The issue, of course, is that Zecco seems all to willing to sell/share my personal info to third parties and appears to make a half-hearted attempt to say that my info will be protected. What does “these third parties must agree to strict confidentiality provisions” mean?

What is the penalty if they violate these provisions? What recourse is taken if my info is misused?

Worse yet is that I’ll have to sit through ads while accessing my brokerage account. Do I really need the distraction of ads while I’m trying to make a trade? If I use Adblock am I violating the terms of service since I’ve agreed not to access via any interface not provided by Zecco? What kind of spyware will I end up with on my machine?

Perhaps my biggest gripe is that Zecco is promoting itself as a commission “free” broker when in fact they sound more like a marketing machine ready to SPAM me to death with ads, third party offers and who knows what else. The “free” commissions aren’t really free when my personal info is being sold on the auction block to the highest bidder.

I wonder if this is the new information age future for consumers. GM doesn’t make money selling cars any more, they make money financing the cars. Brokers don’t make money on commissions but selling personal info to marketing companies. Oh well, I’ll keep looking for a decent broker.

I wrote about my HSBC fiasco on Monday and while that situation hasn’t been resolved yet, I’ve decided that I don’t want to take any chances with my HSBC Retail Credit Card.   Last year I purchased an LCD TV on a 0% APR for 18 months credit card offered by a retail store.  It turns out that the retail store uses HSBC as their bank for the stores credit cards and it also turns out that the 0% APR actually accrues interest during the 18 month period and defers it until the period is over.

After carefully examining the last bill, I noticed that I had close to $300 in deferred interest charges.  Given the problems I’m having with HSBC right now,  I decided that I’d pay off the remaining balance and close the account just to be on the safe side.

This is why it is so important that you ALWAYS have sufficient cash to be able to pay back arbitrage and 0% APR offers since you never what kind of shenanigans  will be pulled on you during the course of the year!

I wrote yesterday that I was doing some house cleaning on various financial accounts. One of the accounts I closed down was my ING Direct account. Over the past year, ING simply hasn’t kept up with HSBC’s or Emigrant’s yields and I didn’t see any point to leaving the account open. I’m also leaning towards maintaining and opening accounts with full service banks that offer checking, credit cards, high yield savings, and other services and products.

I give kudos to ING for being one of the first to offer competitive rates and forcing traditional banks to either up their rates or create new “online” accounts that compete with web-based banks.

Over the past couple of weeks, I’ve been reviewing all my accounts, closing down some unused accounts and updating the balances on all my credit card accounts.  I was shocked this weekend to learn that my 12 month 0% APR HSBC Credit Card account began charging interest ($100) right in the middle of my 12 month term.  The 0% APR should be good through at least March 2007.

I spoke with a rep and she noticed the problem and passed me on to her supervisor who also reviewed the account and agreed that there was no reason why there should have been interest charged on the account.  My 0% APR should be good through March 2007 (by which time it’ll be completely paid off).   She did some more research and finally apologized and said she would put in a request to fix the issue with some other group.   I asked how long this would take and she responded, “10 to 14 days.”

I seriously hope they fix this problem or I’ll be closing down all my accounts with HSBC.   I also hope this isn’t some new tactic to screw with their customers hoping they don’t notice the slight of hand trick.

Happy Thanksgiving!
As a special holiday treat, I ran the ETF-Cashinator™ last night and posted the results over at http://www.etfcoveredcalls.com.   Have a safe and happy Thanksgiving Holiday.

I wasn’t completely satisfied with my earlier post today.  Something kept bothering me about the whole “spend less than you earn” mantra and I couldn’t put my finger on it until now.  As long as inflation exists the cost of everything will always go up, you will ALWAYS need to spend more no matter what unless you’re willing to let your standard of living deteriorate considerably.  Education will cost more, housing will cost more, food will cost more, and everything else will cost more tomorrow than it does today.  Your goal in life should be to MAKE MORE THAN YOU SPEND and not spend less than you earn.  This is my new mantra:  MAKE MORE THAN YOU SPEND!

I’m always amused by advertisements claiming 50% off or 75% off of a product with a strong proclamation that you will SAVE money!  You can easily save 110% by not shopping at all; you get to keep 100% savings of not shopping and you save another 10% in gas, vehicle maintenance, tolls, parking and other “shopping” related expenses.  Part of my strategy, like everyone else with a finance blog has already pointed out, is to spend less than you earn.

I must admit, however, that the higher your income the easier it gets to spend less than you earn and this seems to escape many people.   I won’t hit you over the head with the “spend less than you earn” mantra because I think overall, while a good strategy, it is wholly unrealistic for most people.   All too often, co-workers, friends and family I speak with aren’t living lavish lifestyles flushing money down the toilet; they struggle in large part because their income levels aren’t keeping up with the cost of living: medical expenses, insurance, taxes, and inflation; all these things take their bite and it is unrealistic that you’ll frugal yourself into lower medical expenses, lower insurance, lower taxes and lower inflation.
I will say that in addition to “spend less than you earn” you need to INCREASE your INCOME!  Preferably, having multiple streams of income to offset expenses should be your goal.

How do you increase your income levels?

Invest in your education!  Whether you go back to college for an undergraduate degree, a second undergraduate degree, a graduate degree or other professional development such as industry certifications, the world is full of limitless possibilities.

I’ve written extensively about my disdain for mutual funds and the ONLY time I would recommend investing in mutual funds is when you’re a captive investor. When are you a captive investor? When you work for a living and your company has a 401k plan then you’re pretty much a captive investor.

My game plan for 401k investing is pretty simple. For the past 2 calendar years, I maxed out my contribution at around 15k each year. This year, however, I’ve reduced my contribution to 6% which would capitalize on the maximum company match. What magic mutual funds do I invest in? NONE.

I keep most of my money liquid in cash which usually pays only about 3 to 4 pct.

Why do I do this? Years of experience have taught me that market cycles come and go and returns on mutual funds slide up and down and it is therefore important to me not to be caught in a downward spiral right when I’m getting ready to move to a new job. Investing in mutual funds longer term WILL yield some decent returns but the average worker changes job every three to five years so you’ll likely miss out on that long time horizon if you move over to a new company and have to reinvest in a new set of funds all over again.

When I have left previous employers, I have always rolled over my money into a brokerage IRA. I have complete and total control over my money and I’m not limited to mutual funds an employer chooses to provide to me. I can buy stocks, bonds, funds, ETFs, and a whole bunch of other things. I am only limited by my creativity.
Am I concerned about losing out on mutual funds returns during that period? No. I am only concerned about LOSING that money and then be forced to take the loss if I change employers.

Everyone’s heard the story of the tortoise and the hare.  The childhood story tries to teach a lesson that slow and steady will always get you to your final destination.  While I agree wholeheartedly, you can’t help but appreciate the hare’s quickness and potential for a quick win.

If you were a betting person, who would you really put your money on the tortoise or the hare?

Personally, I’d place bets on both because I know that the tortoise will always finish the race and the hare will, when not sleeping, come in first, fast and furiously.

This also explains my attitude toward investing.  I prefer to get rich slow using traditional methods of investing and I try to get rich quick using more aggressive investment strategies.

This week I’ll be posting some of my strategies for getting rich slow; it’ll be boring and unexciting but much like the tortoise it’ll take me to my final destination.