Archive for March, 2008

I’ve recommended that as a professional worker you should maintain memberships in trade associations and certifications in your career field and I recently attended a meeting for a professional association recently and I was struck by a few things that made me wonder.

The first thing that struck me as I entered this room was that out of the 50 or so people in the room approximately 45 were gray haired old white men. The remaining 5 were broken down by a person from India, one from China, two from Mexico and one from the Middle East.

It wasn’t the first time I encountered such a ratio in a professional trade setting. Actually, if you ever seem marketing material from either the Board of Directors or Executive Management group of most Fortune 500 companies, more likely you’ll see photos of about 90% white grey haired old white men. I’ve written extensively about the boomer population here, here, and here but I’m really beginning to wonder where all the future engineers, doctors, CEO’s and Board of Directors will come from because industry clearly hasn’t been investing in diversification & educating younger masses otherwise these meetings wouldn’t all be filled with grey haired old white men.

If you pay close attention, you’ll see it almost everywhere you go from John McCain (politics), Pat Buchanan, to newscasters on TV (Wolf Blitzer, Cokie Roberts, George Will). My doctors are all in their late 60’s too! Every time I fly, the pilot is usually a grey haired man as well.

I’m no sociologist so someone out there please tell me what the future holds for the US economy, finance, captital and our aging population; What happens after?

I received a letter from my mortgage company this weekend that my interest rate has been lowered! About three years ago, I refinanced my 7 pct fixed rate mortgage for a 3/1 ARM. My initial rate when I took out the loan was 3.25 pct then moved up to 5.25 and has now dropped to 4.75 pct and will be locked in at that rate for the whole year.

Why would you want to ever pay off a mortgage like this? Think about it carefully, a 4.75 pct rate with inflation inarguably growing at a rate of at least 4 pct, you’re effectively paying 0.75 pct for a home mortgage! Add to it the fact that you can write some of the interest off on your taxes and you’re basically borrowing money for free!

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I am aware that the interest rate can shoot up but that’s all part of money management and investment strategy; You keep cash reserves to handle the swings up and profit on the swings down.

If you love personal finance and investing then I think you are beginning to realize why I have an entire category dedicated to the Fed and why I have a countdown at the corner of my blog as to when the next Federal Open Market Committee (FOMC) will be held and minutes released.   Every little thing the Fed does has a HUGE impact on your investing & money management strategy.

There is a bright side to the housing mess and the Fed’s panic: Prosperity for those that manage their money well and after all, that’s what its all about.

The airline industry is in total turmoil and the recent announcements of Southwest, American and soon Delta grounding their fleets for inadequate maintenance is frightening. I perfectly understand the pressures of trying to compete for greater profitability so here are some tips that might help you out:

While traveling around the world, it would be nice if you reserved two seats on your plane for the following two people:

  • An on board travel agent
  • The passenger

The two will meet at some point and can discuss booking or re-arranging: ground transportation, hotel/lodging, tourist activities, airfare and other services. You won’t do this for free because you’ll charge a flat fee of say $100 to provide this assistance to your passenger. Perhaps you can work out a deal with partners to make this a subsidized services but in no way should it be “free” where everyone on the plane will want to grab the agent.

Instead of selling $5 drinks or box lunches or cheap $2 headsets to a few people, sell some quality services to a few people.  It feels kind of embarrassing to be in a plane with flight attendants peddling these wares.   It reminds me of those trips to Mexico where a guy comes up to your car with a box of gums trying to sell you some for a few pesos.

Instead of charging $25 for an extra bag, why don’t you offer porter services at each location you offer through a subscription plan. In case you didn’t notice, subscriptions are the big thing these days: Netflix, iPod, iTunes, etc.

Speaking of iTunes, for the love of god, can you please provide internet access on your airplanes! Of course, having this might mitigate having a travel agent on board but maybe not.

In the future, the first airline to move from big city hubs to smaller airport, point to point service via small jets will win my business almost guaranteed. I loathe wasting hours on end waiting to get cleared through TSA at the big city airports and in general the ridiculous parking fees, traffic, congestion, and overall mayhem and chaos at big city airports make them a living dinosaur that will make them extinct by something better in the near future.

I have many more ideas but these will come with a fee and hopefully my business……

If you recall from the 80’s and Soviet style government, you might remember all the stories about standing in line for hours to get a loaf of bread or pair of shoes in the U.S.S.R before the wall came tumbling down.   The brilliant scheme of communism resulted in  grand rationing of even the most basic goods and services.

Flash forward 20 years later and the rationing seems to have shifted to rationing in the United States.   Although the rationing I speak of isn’t exactly the same thing, the net result is the same.  As I travel around the world I am completely dumbstruck at how the TSA is unable to run as an effective and efficient organization.  At virtually every airport, there are long lines to get screened through security.   Long lines, government bureaucracy, inefficient all keywords reminiscent of those found in the soviet union?

It doesn’t stop at government run enterprises either.  I can name a few things off the top of my head that are so out of whack that “rationing” is the most appropriate word for it and here’s a brief list:  Healthcare, Energy, Food,  Education.

While supply isn’t necessarily constraint in our environment it is “rationed” through cost and availability for most people.  The root cause of “rationing” of course is artificial inflation but that’s a story for another post.

It is ironic that as the collapse of the soviet union ushered in a new era of world wide capitalism whose primary net result appears to be the creation of a “rationing” effect across the world for basic necessities.

This Page Intentionally Blank.  No post today.

The recent rally is nothing to get excited about.   The G-7 is currently contemplating massive intervention in the currency market to keep the dollar from tearing into a thousand pieces as it heads off the cliff.   It’ll take a great deal of coordination to keep the currency market happy.   Here’s a recent article from Bloomberg outlining the current problems.

March 24 (Bloomberg) — For the first time in 13 years, people who trade currencies say confidence in the markets to determine exchange rates is dwindling.

The slump has accelerated since February, raising concern that international investors will avoid U.S. financial assets, making it harder for the Treasury to fund a growing budget deficit. Net sales of U.S. stocks and bonds by private foreign investors totaled $38.2 billion in January, the most since September, the Treasury Department said March 17.

Don’t get caught with your pants down.  It ain’t pretty!

I’ve met with a couple of financial advisers and they’ve both now told me something similar although a reader, Alex, had suggested otherwise but I guess it depends on your individual situation regarding non-deductible IRA.   If you currently have a mix of tax deferred accounts such as 401k and an IRA as well as a Roth IRA and are currently phased out of the Roth because of income limits then it is NOT possible to do the following:

Create separate non-deductible IRA accounts, contribute funds, and then roll these over to a Roth in 2010.  There are a few web sites that suggest that you can do this but according to the “experts” I consulted it is not possible to do this without some major caveats.

There is a work around by which IF you have NO other IRA accounts then you could do the above or if you are willing to transfer all your deferred IRA funds into an existing 401k then roll those over to a Roth in 2010 it might be possible but the hassle and possible mis steps isn’t worth the trouble.

I’m planning on consulting a CPA for a final review but the two experts I met are fairly knowledgeable with tax law so I’m not planning  on exploring the non-deductible IRA further.

As much as I rant against the Fed and the occasional central banker, I must say that the alternative to not having central bankers would likely result in a world much worse off.   Considering that charity and tithing have existed for thousands of years yet human civilization remained relatively poor, ignorant and stale you really have to wonder what the world would be like without modern banking and financing.

It doesn’t take long to figure out what that world would be like if you simply travel internationally and visit non industrial countries.   Having traveled to five continents over the past few years and worked or played in a dozen different countries you begin to realize how bleak things would be in a world without central bankers.

Why does a democratic country like India live mostly in abject poverty?  The country has democracy right so why don’t they vote themselves better leadership to greater prosperity?   The country has a large labor force right so why don’t they build themselves an industrial empire?  The country has vast resources so why don’t they have McMansions in every lot?  India graduates more MBA’s with higher expertise than a typical American university but why no enlightened growing middle class?

When you begin to think about all the reasons a country should be successful and isn’t you’ll typically find the problem lies with “money” as the main issue.    Some will argue that it’s education but it’s only education as it pertains to financing and banking.  Let’s be clear about the issue, when we talk about “money” we typically are referring to worthless paper printed with some government’s logo/stamp on it from a printing press or in our modern world computerize journal entries.

I know someone will point out the current sub-prime mess that resulted from loose monetary policy issued by central bankers here and there but the real problem  was out of control greed and lax regulatory oversight.

So Ben Bernake wherever you are tonight, don’t take it so hard the world doesn’t like you right now because the world would be a much worse place without you and your associates around the world.  Have a good day.

I received a few e-mails and comments on my first post on why HDTV will fail mostly agreeing with the problems HDTV has and although I did leave a few items out I’ve now discovered some new issues as well that I figured I might as well add to the list.

After purchasing my HD camcorder, I discovered that my Mac Powerbook will import the video but will not natively play or support the camcorders .mts file format. I have to convert the video from .mts to .mov format to play them on a mac-mini attached to an HDTV. This is a cumbersome extra step that I did not intend on having to deal with when I purchased this camera and I still can’t get the camcorder to play directly on my HDTV via HDMI cable. My best guess is that the camcorder records on 1920 x 1080 and my TV supports maximum of 1366 x 768 so I’m guessing I’ll need a new HDTV that supports 1920 x 1080 through HDMI interface.

A reader, Brandon, pointed out problems with aspect ratio that also bother me considerably as some content is broadcast on 4:3 format while other is 16:9. I ‘ve personally attempted to move all my home video recordings to 16:9 format as often as possible but it’s still a nightmare when viewing TV. Can we please force everyone to use 16:9 from now on?

I’m not beginning to think that this whole move to HDTV is simply a push to get consumers to spend. Think about all the things you’ll need to buy to “enjoy” HDTV – BluRay Player, satellite/cable box that supports HD signals (extra fee), new cabling, new receivers with HDMI interfaces, and on and on and if you don’t buy a new HDTV then you’ll need a converter boxes for your old TV.

I’m guesstimating that I’ve probably already spent $3000 on HDTV related expenses: TVs, Camcorder, cables, etcetera and I still don’t have everything I need for it and while the visual experience is great when everything works it’s been horrible getting there and a nightmare when it doesn’t work.

I’ve never paid a late fee on a credit card and with some fees now moving upwards of $35 t $50 it’s a good thing I don’t let that cash out of my bank account.  So how is it done?   I essentially charge all my purchases and expenses with a credit card.   I pay my satellite bill, cell phones, electric bill, gas, groceries, etc all on my credit card.

The mechanics of the system are as follows:

Each bill has a certain time of the month that it is paid for example:

Satellite Bill – Due every 15th of the month – $130

Electric Bill – Due every 25th of the month – $150

As you can see,  there is  a 10 day window of when my satellite bill will charge my credit card vs when my electric company will charge my credit card and note that most credit card companies offer a 25 day grace period of interest free charging.

So the way to avoid paying a late fee is to simply send the credit card company a check every week for the amount of money you’re expected to pay on all your expenses for the month divided the four week period.   So if my groceries are costing $300/month, with cell phone $100/month, electric $150/month, satellite $130/month = $680/month.

Essentially you can send your credit card company $170 each week and by the end of the month when your credit card bill comes due it is already been paid.   The key when initially starting this process up is to maximize the interest free grace period of 25 days but eventually you’ll get into a cycle of paying x amount every week.

By paying each week there is no way you’ll ever be hit with a late fee because you’re paying at least 25% of your total expenses at least 4 times each month.

If this system is too complicated then you can simply take your balance of say $3000 and calculate the minimum monthly payment of say 2% = $60/month then simply program your online bank (or write weekly check) of $15 to XYZ Bank every week or just send them $50 every week and you’ll be fine unless of course you have a $30,000 balance 😉 and are in an arbitrage gambit.

This system mitigates all the dirty credit card tricks of changing your due date, changing minimum amount due and similar games.