Archive for December, 2007

Happy 2008 Everyone!

I was expecting to spend around $7500 to $8000 on x-mas gifts this year but I seriously came up short and the sole reason was bad retailers. Let me tell you where I think retailers got it all wrong and what I was unable to buy this year:

First, the unpurchased x-mas gifts:

  • I have yet to purchase a stainless steel fridge for my wife because no one seems to have the model we want in stock anywhere. This is $1500 unspent.
  • I have yet to purchase a 52″ LCD TV because the models I liked were not in stock. This is $2500+ of unspent money.
  • I was unable to buy a third Nintendo DS system for someone but luckily got two by ordering online a few weeks earlier.  Another $150 unspent.
  • I didn’t find the 32″ LCD w/built in DVD player that I wanted so I settled for another set. The difference was about $100 unspent on a retailer.

Aside from not having inventory, the real problem however were the retailers stupid “feeding frenzy” games. I don’t know which marketing idiot was the first to decide that the best thing to do for the consumer was to create a stampede and feeding frenzy into their store(s) and try to pack as many people in but this is totally dumb.   I know the logic goes something like this, “If we pack’em in early, they’ll spend all their money here before it runs out” but that assumption is all wrong.  I have plenty of money to spend and was totally turned off by the feeding frenzy at your retail shop so I’m waiting for the frenzy to end so I can get some service!

During several shopping stops, I could over hear people saying things like, “this is why I did most of my shopping online” or “I’m not doing this again next year” at various shops.  Lack of inventory, lack of parking, crowded isles, and long check out lines are ridiculous.

One thing retailers need to fix, in my opinion, is too many choices for budget conscious consumers.   For example, while there was very limited availability of mid-tier and high end LCD TVs there were plenty of low end LCD TVs.  In fact, there were TOO many choices with brands like Emprex, Polaroid, Olevia, Sanyo and a bunch of others I don’t quite remember.  Overstocked on low end TVs and understocked on mid-tier and high-tier products was remains of the day.

Retailers, please pick three models from one or two manufacturers: low budget, mid budget, high budget and stock PLENTY of these models in your store.   There are too many LCD TV players and I can tell you what’s going to happen in a year or two: most of the low tier will close shop and go out of business.  The mid-tiers will consolidate and the high tier will stay high tier.

We’ve seen this over and over again in the consumer electronics. Remember Gateway? Emachines? Hewlett Packard?  All those are gone and/or consolidated and TVs won’t be any different.

Each passing year, I find myself ordering more and more products online and the cost per ticket item is increasing from $50 items to $700 items.  I save the hassle of driving from shop to shop, avoid stressful parking situation, avoid long lines and wasted time.

The one shop that was the exception to most of this fiasco (at least for me) was Costco.   The only retailer that seems to know anything about  great products, excellent service and quality is Costco.  I’m getting to the point where I’ll simply shop at Costco at the store or online without even thinking about it or bothering to do comparison shopping.   Costco may not be the cheapest but they do offer the greatest value in my opinion.  This seems to be something that Wal-mart with their “low prices” mentality can’t seem to fathom.

Unfortunately, the lack of a new LCD TV has kept me from buying that Mac-mini I’ve been wanting to hook up to my new TV and I haven’t bothered to go to the store to pick up the 24″ iMac until I go to the store to buy the mini.

This year I received a few movies as gifts this holiday season and while I’m grateful for the gifts I did make a few observations:

1. I received two copies of the same movie, I’ll eventually pass one on to someone else but it lead me to think why I was given the media to begin with since there are better ways to give the gift of music and movie.

2. I received an iTunes gift card which will essentially allow me to purchase whatever music I want to purchase in a convenient downloadable format.

It seems to make most sense to simply download the music, movies and shows that you want than to fiddle with any type of media. I now have two bookshelves overflowing with CDs, DVDs, and Wii games and I shutter to think how adding BluRay or HD-DVDs will clutter up my space even more.

I haven’t purchased a CD in years though and most of my music I purchase from iTunes and hold it on my laptops or my iPods.  It was the initial purchase of an iPod that led to my recent purchase of my Apple Powerbook and I’ll likely be purchasing either a Mac-mini or AppleTV box to house my video media soon.   I’ll likely buy a Mac-Mini and rip all my DVDs to it and eliminate the media clutter.

I seriously doubt HD-DVD or BluRay media will matter much in the future – who needs all the clutter?

To everyone that celebrates Christmas today, MERRY CHRISTMAS!

To anyone that doesn’t celebrate Christmas today, MERRY CHRISTMAS!

And to all a good night…….

I don’t shop too frequently at retail shops since I do most of my shopping either online or at Costco but this past week I visited many retail outlets to buy some x-mas gifts for family and I noted something new when paying.

In the past, the little card swipe device would prompt you to select Credit or Debit after you swiped your card or in some cases BEFORE you swiped your card.  Now, whenever I swiped my card, I was immediately prompted to enter my pin number.   I looked up at the clerk confused wondering why it was prompting me for a pin on a credit card and the clerk advised me to hit “Cancel” and select “Credit” at the next screen.  This happened at various retail outlets (Circuit City, ToysRus, etc) the exact same way.

There has been a battle for years over signature debit vs. pin debit vs. credit card charges and the fees vary greatly for retailers and banks.  If I understand the issue correctly, pin based debit purchases charge retailers as little as $0.12 where a credit or signature debit purchase would cost a retailer as much as 3% of the purchase.

Clearly, retailers have a monetary incentive to push consumers into using pin based debit and perhaps this is the reaction to all those cutesy mastercard and visa commercials portraying non-card users as losers.  Retailers are now defaulting to pin-based transactions on their card swipe terminals as you check out and it’s really annoying for me because hell would need to freeze over before I would ever conduct a pin-based debit transaction at a retailer.

On a side note, the retail experience continues to deteriorate rather badly.  I was in the market for two LCD TVs this year and I visited at least 6 stores trying to find the model I wanted.   After hours of fruitless searches, I settled for a single LCD TV and will wait until after the holidays for the second larger LCD I was looking for this holiday season.   I was also disappointed at not being able to find Nintendo DS at any of the dozen shops I visited either.   Luckily, I was able to purchase two Nintendo DS’s a couple of weeks ago online and those were safely delivered.   Apple iPod Nanos were plentiful but I was also unable to find quite a few other gifts: Stainles Steel Refrigerator with steel handles, a few Wii game titles, a few DS game titles, a few jewelry items, etc.

I’m working on a separate post titled, “Do Retailers Have It All Wrong?” to discuss a few issues I had with this year’s holiday shopping season.

Did you know the IRS allows you to keep up to $500,000 in profit tax-free on the appreciation on your home? We may be in the market for a high end home soon and it got me thinking into the tax implications of owning a home. I came up with a couple of scenarios to help illustrate a point.

Scenario 1: Buying a $100,000 home and plan to keep it for 20 years at which point, sell for profit and retire to small condo or overseas.

Assumptions: Home will appreciate 4% (average) over the next 20 years. You are married. (Limit for tax free profit for singles is $250k)

Profit: Doing some Future Value calculations, we discover that a $100,000 home will be worth approximately $603,156 in 20 years assuming 4% appreciation. Since the original purchase price was $100,000 then the profit must be ($603,156-$100,000) = $503,156.00.

Tax Liability: Taxes would be owed on $3,156.00

Scenario 2: Buying a $500,000 home and plan to keep it for 20 years at which point, sell for profit and retire to small condo (or overseas).

Assumptions: Home will appreciate 4% (average) over the next 20 years. You are married.

Profit: Doing FV calculations, we discover that a $500,000 home will be worth $3,015,780 in 20 years assuming 4% annual appreciation. The profit on this home investment ($3,015,782 – $500,000) = $2,515,782. Since 500k is tax free, the tax liability is on $2,015,782.

This level of profit would automatically put you in the highest tax bracket. It is impossible to know what the tax rates will be 20 years from now but at the current rate of 35%, you’d owe $705,523 in taxes. It gets much worse if you die and you get hit with estate taxes (currently at 45%) which means you’d owe $1,132,101.00!

It’s fairly easy to see why so many people gripe about estate taxes. Essentially, the children that would inherit this home would be hard pressed to come up with 700k to 1.1 million in cash to pay taxes on this home. Keep in mind that this was originally a 500k home purchased and kept for 20 years; it isn’t a 3 million dollar home right now!

People buying homes on the east coast and west coast are going to get royally screwed in 20 years or so and it won’t be too amazing to see people extract the equity in their homes and blow the cash. Who the hell would want to pay all that money in taxes?

It would seem to me that the best thing to do is to extract as much home equity, take the cash, buy tax free bonds, write off the loan interest on your taxes and never sell your home or pay off your mortgage.

The spam has gotten so bad on my blog that I’m now forced to start blocking a huge range of addresses.   What is irritating is that spam never actually makes it to the point where people read it (or spammers benefit) but I do have a great deal to clean up.

I did some research and much of my spam is coming from Chicago via a company called FDC  Here is the WHOIS record:

OrgName:    FDC, LLC 
OrgID:      FDCSE
Address:    141 West Jackson Blvd, Suite 1135
City:       Chicago
StateProv:  IL
PostalCode: 60604
Country:    US

ReferralServer: rwhois://

NetRange: - 
NetHandle:  NET-67-159-0-0-1
Parent:     NET-67-0-0-0-0
NetType:    Direct Allocation
RegDate:    2004-10-12
Updated:    2006-12-27

OrgAbuseHandle: ABUSE438-ARIN
OrgAbuseName:   ABUSE department 
OrgAbusePhone:  +1-312-913-9304
OrgAbuseEmail:  *****

OrgNOCHandle: NOC1402-ARIN
OrgNOCName:   Network Operations Center 
OrgNOCPhone:  +1-312-913-9304
OrgNOCEmail:  *******

OrgTechHandle: PKR5-ARIN
OrgTechName:   Kral, Petr 
OrgTechPhone:  +1-630-729-0228
OrgTechEmail:  *****

If you’re in Chicago and can’t reach this blog then I’m sorry but I waste too much time cleaning up your spam Chicago.

In case your curious how to block spammers to your blog, there is a file called .htaccess which resides in the web directory of your site.   Editing this file with the following lines will block specific IP addresses:

order allow,deny

deny from  (this will block the entire 67.59.x.x range)

allow from all

That’s pretty much it.  This will block everything coming in from those IPs and in my case, spam.

Alright, I said I liquidated all my positions and I did but it was simply too tempting to let $500 slip by and not pick it up.  With options expiry this Friday, I decided to do one more ETF Covered Call this year to rake in $500.00.  If I get called on Friday, I’ll earn another $250 and if I don’t I’ll ride it out with the volitility.

I picked up 500 shares of SSO (double leveraged S&P 500) and sold slightly out of money calls for about $475.00.   This represents about 1.2% return in under 4 days so we’ll see what happens on Friday.

I still believe in a big market dip soon and I have been so swamped at work with so many project due over the next 30 days that I simply haven’t been able to focus like a laser on my investments for a couple of weeks now.   I took a breather a few days ago, saw a quick opportunity to rake in a little cash and I took it.

I’ll post a follow up on Friday after market close.

This is amazing.  ECB injecting $500 billion into the banking system to ease the credit crunch.  Great, but who’s going to lend money with all the toxic waste STILL out there?  How does this address the fundamental problem?   The ECB just borrowed Ben’s helicopter but no one is picking up the dollar bills.

Dec. 18 (Bloomberg) — The cost to borrow in euros through the end of the year plunged after the European Central Bank added an unprecedented $500 billion to the banking system as part of a global effort to ease gridlock in the credit market.

The amount banks charge each other for two-week loans in euros dropped a record 50 basis points to 4.45 percent, the European Banking Federation said today. The rate had soared 83 basis points in the past two weeks as banks anticipated a squeeze on credit through year-end.

“These are strong-arm tactics intended to show the market they’re seriously committed to breaking the deadlock,” said Marc Ostwald, a fixed-income strategist at Insinger De Beaufort SA in London. “The ECB is helping to bankroll banks out of a problem that they themselves created.”

Read more here.

I’ve got it figured out and Bernake is a genius! The solution to the mortgage problem was staring us right in the face all along. With the Fed’s new charter, we’ll be out of this banking mess in no time.

All you have to do is simply place enormous bets on options on any index and everyone will profit enormously. How will it work?

Well, the Fed’s new charter is to create enormous volatility in the markets (stocks, bonds, currencies, you name it)!

The Fed will accomplish this through a new system of announcements. On one day, the Fed will announce that they’ll cut interest rates by 50 basis points at their next FOMC meeting which will send the markets soaring but then on the actual FOMC day, they’ll announce a 50 basis point increase in the Feds fund rate which will send stocks spiraling down.

In either event, it doesn’t matter whether you bought/sold options long/short because the money train express will go round and round and you can get on or off when ever your want. It’s like a red/black only roulette wheel. You place a bet on red, if it doesn’t hit, just double down and keep doubling down until you hit it big because eventually the marble will land on red.

The Fed will mix it up so as not to make the next event too predictable. The Fed will partner with other central banks from around the world to jolt the markets when necessary to mix it up a bit.

Who needs home equity when leveraged options are the path to financial freedom!

Seriously chaps, this is why I’m moving to US Treasuries, this market has gone as mad as a March hare.