Archive for December, 2006

It is getting so ridiculous now to pay for health insurance that I am certain we are on the verge of the collapse of the health insurance industry. Our new health insurance premiums were unveiled this week at my company and I now have the privilege of paying $450/month for health insurance.

It gets worse! I’ll have $500 deductible (per family member) and Out of Pocket of $4000. Coverage is 90% so I’ll pay the remaining 10% out of pocket too. It gets even worse for out of network but I’ll likely stay in network to avoid that nightmare.

So let me do some math. $450/month + $166/month (deductibles) + $333/month (Out of Pocket) = $950/month for health coverage plus I still need to cover the remaining 10%.

These calculations assume that we’ll fully hit our deductibles and have one $4000 out of pocket major expense. Based on historical usage, these calculations are about right. No matter how careful we are with our health things happen – kids break arm, wife twists knee, etc. Does anyone think $950/month is truly ridiculous? I’m not even adding in prescriptions or other stuff like emergency visits.

As bad as these expenses are they are really only the half of it as my employer picks up about 60% of the expense on the business side of things so it’s really costing about $1800/month to insure an employee and that is totally ridiculous.

Ultimately, this may be the last year I pay health insurance premiums since it will become officially cheaper for me to fly my family first class to Mexico, South America, Canada, the Carribean or perhaps India to receive medical treatment than to utilize American health care.

I purchased a 42″ LCD TV for my parents this Christmas over at MicroCenter for about $1200. While at the store, I asked the sales guy if they offered shipping and he said that they only delivered locally. My parents live about 400 miles away so delivery wasn’t an option. I purchased the TV and brought it home and gave to my parents -new in the box. Unfortunately, the TV wouldn’t fit inside their SUV.

We figured we could fit the TV inside the car without the box so we opened it up and measured the dimensions of the TV itself and it wasn’t going to fit even without the box. After much debate and deliberation about swapping cars (it fit in mine), renting a u-haul, borrowing a truck we finally decided that the easiest thing to do was to return the TV, write my parents a check and have them buy a TV locally in their home town and have it delivered and setup.

I went over to Microcenter two days after the fiasco to return the TV, still new in the box never been setup, opened or otherwise used and Microcenter demanded I pay a 10% restocking fee. I felt like yelling at the clerk but she was very nice about it apologizing and pointing out in my receipt where it states that there is a 10% restocking fee for LCD TV returns. I argued that it was still new in the box and all I did was open it up to measure the dimensions but she said her hands were tied.

I ended up paying $120 restocking fee since the TV was for my parents and I had already purchased a similar one the year before at Microcenter. I won’t EVER set foot in that store again which is really unfortunate for Microcenter since I personally spent about $2500 a year there. Over the course of 10 years I would have spent $25,000 there but that business will end up elsewhere now.

Was Microcenter unfair about the whole thing? I honestly think so since the TV was totally brand new and my only “crime” was breaking the seal to measure the stupid TV and I took it back two days later. I understand why they would have such a policy because no doubt, their return policy has likely been abused by people trying to game the system or perhaps a few “freeloaders” wanting to have the TV for 30 days only to return it later for full refund.

It’s a free market economy and Microcenter can penalize it’s customers any way they want to but in this instance it’ll cost them at least $25,000 all over $120.

Here is a short list of my goals for 2007.

1. Grow Power Funds & Mini Account Portfolios by 20 percent using ETF Covered Calls.

2. Get Subscription Service for the ETF-Cashinator up and running.

3. Decide on whether or not to go back to school to get an Executive MBA (largely decided by Admissions office 😉 )

4. Decide on changing employers and possibly pursuing other career opportunities.

5. Keep challenging PF Bloggers conventional wisdom.

I came across an excellent article written by Tony Sagami over at Money & Markets on US companies forays into China that I’d think everyone who’s interested in investing in China should read.  You can read the article here.

I received an unintentional and unexpected gift this holiday season from a commenter in the form of a link to his blog. Why was it a great gift? It was a gift because his (or her) blog focuses on capitalist ideology and he (or she) has links to a wide variety of capitalist investor blogs. I’m reviewing the links and I’ve found two that I really enjoy so far in addition to enjoying Moom’s website http://moominhouse.blogspot.com/.

To Mr. or Ms. Moom thank you for the unexpected and unintentional gift.

What does this have to do with the Breakfast Club movie? In the movie, the cast of characters portraying high school kids end up together in detention. The characters are riveting in their portrayal of the distinct persona(s) you see in your typical high school. The variety of “cliques” high school teenagers group in and their feelings and attitudes about each other is played dramatically well.

I think we bloggers are segmenting into our own Breakfast Club. I think I’m finding my own capitalist clique.

Who do we think we are?

“Dear Mr. Vernon, we accept the fact that we had to sacrifice a whole Saturday in detention for whatever it was we did wrong. But we think you’re crazy to make an essay telling you who we think we are. You see us as you want to see us… In the simplest terms, in the most convenient definitions. But what we found out is that each one of us is a brain…
…and a debtor…
…and a frugalist…
…a headliner…
…and a capitalist…
Does that answer your question?”

Merry Christmas & Happy Holidays Everyone…..

I received some comments and emails on this topic and evidently it stirs up emotions in a lot of people so I’m going to frame this arguement in a context I hope everyone can understand but this will be the end of it.  I’ve spent too much time on this topic already and I need to focus on investment opportunities.
If you are a die hard frugalist and you won $10,000 in a lottery would your lifestyle change?

I’m sure almost all of you will say, of course not I’d live exactly the same way.

If, however, you won $1,000,000 in a lottery would your lifestyle change?

For some of you, if you’re honest, would acknowledge a slight change in your lifestyle and pinching the last penny wouldn’t be as big a deal.

If, however, you won $100,000,000 in a lottery would your lifestyle change?

For anyone who says they wouldn’t change a thing in their life, I think you’re being disingenuous.  Upon winning 100 million dollars I bet you wouldn’t give a damn about saving 10% off using a coupon or spend two hours on Fatwallet.com or Slickdeals.net looking for a discount item.  I doubt you’d waste your time buying refurbished items or shopping at a second hand store.
I’m sure someone will post a comment saying, “oh that wouldn’t be me, I’d still be a frugal guy/gal” but we all know that it’ll be pure bull.

I’ll say that Moom posted an interesting comment on my blog here writing, “…But many of these PF bloggers seem trapped in the penny-pinching mode. They regard debt or spending as sinful. There is a huge divide between investing blogs and PF blogs.”

Trapped in penny-pinching mode is exactly the issue I concerned myself when this whole debate began and the issue still exists and seems like  it will continue to exist with pinchers creating all sorts of rationalizations for pursuing their methods.

The fundamental problem with American’s debt isn’t that they overspend it’s that they under earn.  If people constantly want or need things they can’t afford then they need to make more income to fill the gap but EVERY PF BLOGGER out there is telling people to cut back and spend less than you earn -this is the EASIEST, LAZIEST cop out advice for someone. “Spend less than you earn” -Gee whiz, did it take you all night to think up that great advice?

When someone asks me what I think they should do if they’re not making ends meet,  my response always varies based on their situation:

1. Go get a college degree

2. Go get some certifications CPA, CFA, CCIE, RN, etc

3. Change your career path

4. Start a business

5. Learn a new skill or trade

6. Learn to trade stocks / options / commodities / whatever

If they refuse to do any of the above things then the advice turns into “live within your means”  and  “spend less than you earn” but only after I’ve exhausted trying to give them resources, ideas, and advice to help them achieve their goals and lifestyle comfort levels.
WHY IS LIVING FRUGALLY CONSIDERED SUPERIOR TO LIVING WHATEVER LIFESTYLE SOMEONE WANTS?
I’m not advocating materialism or unlimited consumption so please don’t go there I’m just arguing that we are living in the greatest free market capital market in the world to achieve unlimited wealth and PF Bloggers are advocating discount coupons as a way to financial success.

A couple of weeks ago, I bought 1000 shares of SMH and sold January 2007 $35 Calls for $0.85 and I’m contemplating buying them back since SMH has dropped down to $33.27 and those same calls are now selling for $0.25.  This would translate into a profit of $600 for a couple of weeks work.   I’m contemplating buying back the options because the volume and interest in the calls is high and I think the drop is temporary.  We’ll see what happens next week.

smh2007_Jan.png

I’ve been reading many doom & gloom forecasts for the US economy primarily because the housing sector is slumping  but  the real story behind the economy can be extrapolated in part by what is happening on Monster.com. Monster is a huge job board and I periodically log on to see how the job market is doing.  I usually browse three sectors: Healthcare, Energy & Technology.   I choose these three industries because I believe they are the current and future economic engine of the United States.   Over the past few weeks I have seen a tremendous surge in job postings in these industries and the salaries offered for many positions are often at a premium.  Technology is hot.  Energy (Oil & Gas) is hot. Health care is hot.
Additionally, a housing sector slump won’t necessarily derail the healthcare/energy/technology industries and this is important because I will be basing some investment decisions on what is happening in these sectors.

If you’ve been following my trading over at www.etfcoveredcalls.com you might have noticed that I recently bought 1000 shares of SMH and sold 10 January $35 Call contracts to earn a quick 2.5% profit with upside potential of 4.7% profit.

With Microsoft releasing Vista & new office suite, Apple red hot with iPods, Macbooks and possibly iPhones & TVs and the healthcare, energy and technology industries all hiring I’d say the economy is firing on 3 of 4 cylinders.

Having said all this I do think there are some potential problems.  Instability in the middle east could send oil to $100/barrel which would sour any economy along with the usual grab bag of issues: North Korea, Africa, Israel/Palestine, Iran, and so forth but overall I’m becoming more optimistic.

Lazy Man & Money replied with a counter argument to my post regarding Frugalism vs. Capitalism and the old chap put on a good show but I have to issue a response and here it is:
“That extra dollar will be taxed”
Are you seriously arguing that you shouldn’t earn extra money because you’ll be taxed for it? I think this epitomizes why frugalist won’t ever achieve superior wealth (note I’m not saying they won’t achieve a level of wealth – just not superior wealth) because they focus on the cheap and not on making the extra buck.

“The dollar a frugalist saves is typical a 100% guaranteed savings. The dollar that a capitalist earns is likely brought on with increased risk, that over the long run, might turn into a loss.”

A prudent capitalist mitigates his risk, carefully chooses his investments and seeks higher returns but you are correct, their investment MIGHT turn into a loss but just like when you woke up this morning it could have been your last day on earth  – there are risks to everything.

2) “The capitalist buying new all the time can over-extend themselves…The capitalist consumes and consumes without heed of what it might be doing to the environment.”
I don’t recall ever writing anything about buying new all the time nor did I write anything about over extending yourself. I specifically wrote that a capitalist uses EXCESS CAPITAL (i.e. disposable income) to purchase whatever he/she wants without too much concern for the price or cost of an item.

“The capitalist consumes and consumes….” I don’t recall writing or advocating unlimited consumption nor did I write anything about willfully damaging the environment but society has a way of fixing issues like this via methods called boycotts, regulations, laws, and lawsuits.
3) “..Again, the capitalist over-extends himself, but justifies it by “helping the economy.””

Once again, never said anything about overextending yourself. Use EXCESS CAPITAL.
4) “This probably stems from the capitalists wasteful nature.

“Capitalist wasteful nature” – Are we using the same meaning for the word capitalist? A capitalist invests his/her capital to achieve superior returns – what is wasteful about this? I posted the definitions of Capitalist and Capitalism on my blog.

5) “Car buying -… He also realizes that a car is a depreciating investment and would prefer to put his money in more investments.

A car is NOT an investment unless you’re using it to generate income (are you a taxi driver or a car dealer?). See my post here, (sigh and shrug shoulders).

“Capitalist…are looking for a way in which they can make more money for themselves” GOD YES! You have it down!

6) Pennies – I agree on this point, but don’t see any advantage or disadvantage to either.

You don’t see the advantage to earning an extra penny vs. not spending a penny? (Sigh and shrug shoulders.)

7) Spent time – The frugalist will be happy about the better world he has left behind, having twice as much as the capitalist, and have no debt. The capitalist risks ending up like Casey Serin, unable to sleep at night because the investments didn’t work out as planned.

I can name five billionaires off the top of my head: Bill Gates, Warren Buffett, Sam Walton, George Soros, Paul Allen and NONE of them got ultra rich being frugalist. These guys ALL own giant mansions, high end cars, yachts, planes, etc. They are die hard capitalist – leaders to look up to. How many frugalist billionaires can you list? How about frugalist millionaires?

I recall reading as a kid in the Guiness World Book of Records about some little old lady that died with 18 million dollars of net worth. If memory serves, she got rich by living dirt poor and if I recall even let one of her kids die because she refused to pay for medicine. Is this the kind of hero you aspire to be?>

I know many think of Warren Buffet or Sam Walton as frugalist because they drove the same old car for x years or didn’t splurge on whatever but make no mistake they didn’t get there by pinching pennies they got there by investing capital to achieve superior returns.

I do not believe you can honestly be both a frugalist and a capitalist and pursue both without sacrificing vigor for one or the other.

Just came across this interesting news item regarding Iran’s decision to move from USD to Euros for foreign transactions. This can’t be good for the USD since it’s been on the ropes now for quite some time against the majors: GBP, EURO and YEN amongst others. If true, this would also impact the price of oil as all countries that now buy US Dollars to trade for oil will switch to Euros, thus reducing the inflow of money into the US.

US Treasuries may drop and Gold may shoot up.   It’s important to keep an eye on these events as they will certainly affect your portfolios 😉