Archive for April, 2010

I almost reached a breaking point a few weeks ago. I had multiple pointless projects at school due, multiple high consequence projects at work due and a multitude of activities with the family. I recently received a curt e-mail asking why I hadn’t volunteered at some school activity my kids are supposed to be participating in and the honest answer is that the same school has pinged us for MULTIPLE tasks at the same event.

In an era with high unemployment you would think there would be plenty of volunteers to do something but the same dually employed families are asked to do the volunteer work over and over again. So I’ve been busting my butt at school and at work and getting curt e-mails from my third and fourth non-paying jobs and keep reading about people living it up mortgage free in homes they couldn’t afford living off the government dime.

Seriously, I’m thinking of becoming a tea bagger…or whatever those tea people call themselves these days. Better yet, I might become a loafer and just live off the government dime myself. All I need to do is pay off my mortgage (which would be easy), quit my job and just hang out waiting for volunteers, tax payers and everyone else to take care of me and not have a worry in the world.

I’ve finally caught a bit of a break and am almost done with my second semester at MBA school and as I write this, I have serious doubts I will return in the fall. It simply isn’t worth it anymore since the program is fairly uninspiring, boring, pointless and trivial yet consumes so much of my time.

The consequences of all of the other bullshit though are going to hit like a Niagara water fall over the next few years when 80 million boomers become loafers and won’t or can’t work. I can hardly wait….

So these past few years have been filled with earthquakes, tsunamis, volcanic eruptions, and now meteors streaking through the sky and I just can’t help but wonder about that Mayan prediction that the fifth age of the sun will come to an end.   Seriously, the massive airline disruption has highlighted yet another band of critical failures in the infrastructure we’ve all come to expect and take for granted.

Really all we need now is a large electromagnetic pulse to wipe out chips in cars, trains and airplanes and we’d be instantly royally screwed.  Why not have a large x-ray burst do us in while we’re at it?  Supposedly airlines have lost over 1 billion dollars and are now seeking bailouts from governments which means taxpayers – some business model huh?

All anyone can do is have a little bit of preparation…only 974 days till Galactic Solstice…..

I just read this article today on Bloomberg.  The article reads,

“April 14 (Bloomberg) — The amount of diesel fuel bought using credit cards at U.S. truck stops increased in March to the highest level in more than a year, indicating the recovery is broadening beyond manufacturing.

“We’re climbing out of the hole,” Bob Costello, chief economist at the American Trucking Associations, said in an interview. “It is a moderate economic recovery and trucking is going to be like that as well.”

Back on March 9th I wrote this post indicating that I had seen a substantial tick of trucks moving across the interstate as I sit in my office and look out the window.  It’s not difficult to do, just pick a consistent hour on each day and count how many big rigs you see barrel down the freeway.  If the number goes up things are improving, if the number goes down then things are not improving -simple observation.

Unfortunately, the stock market has become totally detached from reality so I’m expecting a disaster in that arena but only time will tell.   I’ll be sure you remind you about it in a few months 😉

So I’m perusing the website and I happen to come across this interestingly entitled link, “FDIC Board of Directors Approves Extension of Transaction Account Guarantee Programand I think to myself, “my what’s all this about in our new full economic recovery!”

So I click on the link and read, “FDIC Chairman Sheila Bair said, “It’s necessary to extend the TAG program because the lingering effects of the financial crisis that emerged in 2008 in large systemically important banks have now spread to institutions of all sizes, particularly in regions suffering from ongoing economic weakness. Allowing the TAG program to expire in this environment could cause a number of community banks—already under stress—to experience deposit withdrawals from their large transaction accounts and would risk needless liquidity failures. This reflects the continuing legacy of too big to fail and the different liquidity pressures our community banks experience as a result.”

But wait, I thought the banking crisis was over?  I thought the economy was in full recovery since it is an election year it MUST be true!   Lingering effects?  Community banks insolvent?  I doubled checked to make sure this wasn’t an April Fools joke (although belated) but it wasn’t.   Could there still be the possibility of bank failures through 2011?  My oh my I am dismayed….

So I stopped by the mall to buy my daughter some Build A Bear clothing and take my usual observations of the density, volume and number of shoppers & shopping at the mall and was disappointed   The Apple Store was packed and the iPad was a big hit as everyone clustered around the iPad tables but the density of shoppers elsewhere was pretty low for a weekend.  The food court was abysmally empty during the lunch rush!

We stopped by to look at the iPad intending only to check them out but we all ended up playing with one for about 30 minutes and would have been there longer if I hadn’t told the kids we needed to make some other stops.    The iPad is pretty cool and I left there wanting one BUT I had already read about the numerous short comings of the device:  No Adobe Flash, 1st Generation (i.e. buggy), No camera, Apps restricted to Apple app store.   So I won’t be buying one anytime soon but I may buy a few for Christmas if we’re on second generation by then with a few enhancements if possible.  The device has a lot of potential but the lack of flash means I  won’t be able to trade stocks on it and that’s just too bad; my son lamented the fact that his Facebook flash games would not play.

After the mall we went over to a place called REI which sells outdoor/camping/sports equipment and that place was pretty packed.   I’m guessing that the new vacation strategy for many is going to be camping and visiting parks rather than air/hotel/car route.   I’m tempted to buy into these camping/outdoor company stocks but I may have missed the boat already.

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!

Well here’s an interesting story… I received my property tax appraisal document in the mail this week and thought it was interesting that my home value has been assessed 20k lower than last year.    I certainly don’t mind the lower valuation as it means I’ll be paying less in property taxes but while I received a lower valuation, I also received notice from the city that water & sewer rates would rise over 15 percent.

Worse than the 15% hike is the fact that the city has continuously cut back on picking up garbage.   At the rate the city is cutting services, we’ll have to soon resort to burning garbage in old drums like I remember people doing in my childhood neighborhood over 30 years ago!

Along those lines, I received a letter this week from Chase stating that one of my credit cards would be “upgraded” to the new Slate Chase card provided that I met their new credit worthy standards.   Sorry Chase but I have my own new “Ethical Worthy Standards” and you don’t make the cut.   I closed another Chase account this week and I am now down to one checking account and two credit cards – those will all be gone by June or July if I am able to meet my transfers and schedule for complete severing ties with all big banks.

Many people were talking about the consumer credit dropping in February and I’m not surprised:

U.S. consumer credit unexpectedly tumbled in February, reversing the prior month’s surprise increase, as households refrained from taking on new debt in favor of deleveraging.

February’s total consumer credit outstanding dropped $11.51 billion or at a 5.62 percent annual rate to $2.45 trillion, the Federal Reserve said on Wednesday.

I’m not surprised because banks are still cutting credit lines or imposing new standards on consumers so accounts will continue to drop off.  Additionally, some people (like me) continue to be disgusted with big banks and are purposely closing accounts.   By the time I’m done moving my money and closing accounts, I will have shut down over $100,000 worth of credit lines with big banks.   I am currently 40% of the way there and I’m replacing those credit lines with credit union credit lines and other debt instruments.   Someone has to take a stand and I’m doing my part…

Long before Obamacare passed and became law of the land, my employer, in an effort to control health care costs, implemented a program whereby employees would have a health adviser help the employee make informed (and presumably) better decisions about health and nutrition.   I signed up in order to receive lower health insurance premiums and every month I get a call from my health adviser checking up on me asking how nutritious my diet is as well as how many times I’m exercising.

I initially found the whole process helpful but now it feels like a call from a nagging mother asking me if I’ve eaten my vegetables during the month.   The plan is eventually supposed to expand to include spouses and children but now that Obamacare and unlimited free health insurance is in the works I can imagine that this whole health adviser scheme is about to come to an end.

So the new health care bill has some student loan reform thrown in and there are three notable items to review.  First, student loans will now be handled by the government.  Secondly, student loans will be forgiven after 10 years if you work in the public sector and 20 years if you live in the private sector.  Third, student loan repayment is capped at 10% of your income.  I’m not sure about the exact details but at first run it started me thinking into whether I should maximize my student loans and how to time them just right.

First, the student loans I have now are on a ridiculous low rate of 4% or 5% (don’t know exact number at the moment).   The new law caps maximum payment at 10% of your income so crunching some numbers……leads me to believe that it may be advantageous to borrow as much as possible, quit my job (retire early) and live like a king (free health care) working as a low level employee for some government agency.

Please note that this system only works if you have already paid off your mortgage and have a nice safety net (i.e. large amounts of cash reserves).   Here’s a scenario.

Let’s say I make 200k per year.  According to what I read, the maximum payback  on the student loans at this salary level would be 20k per year.   If the loan won’t be forgiven for 20  years then 20 x 20k = 400k.    That’s a whole lot of student loan money to borrow and not very feasible or realistic.   I imagine that I could probably borrow 120k comfortably so…..

But if I make 40k per year then the annual payback is 4k per year!   If the student loan will be forgiven after 20 years then 4k x 20 years = 80k.   In theory, the last 40k is free!

But wait there’s more!   Don’t assume that I would spend the entire 120k on actual education expenses.    I think I can bank about half of the 120k but to be conservative let’s say I can bank 50k.   I take 50k and invest it (preferably tax free or tax deferred bonds) and hopefully earn a rate of 7% or 8% (not impossible if we enter a period of government defaults or bond panic).  Presumably, I’ll lock in the loans at a consolidated low interest rate.

So 50k invested for 20 years at 7% in tax free/tax deferred bonds should yield 202k.   Student loan 80k @ 4% for 20 years = 177k.   The profit = 25k  plus a free 40k and a degree as a bonus.

Keep in mind that the incentive is now there for people to make as little money as possible.   If I make next to nothing then I’ll get free health care and various tax credits….I’m so giddy with excitement that I’m making it a point to study this further in detail as soon as I get more details!

I find myself using credit cards less and less now that even the simplest purchases at some retail outlets are requiring ID.  It is just a hassle to reach in and produce ID every single time I want to charge something.   Worse yet, because of the financial crisis, banks cut some of my credit lines and I opted to close the accounts altogether and not deal with them at all.    And now, the rewards programs for remaining cards continue to get worse since not too long ago I used to get 3% cash back, I’m now down to a paltry 1% on almost all cards.

Combine all of this with my great newly found disdain for large banks and I may soon eliminate credit cards from my payment method portfolio altogether.  What am I using now?   Ever since I opened a couple of credit union accounts nearby my office, I find myself going over and withdrawing a few hundred bucks of cash and paying in cash for almost everything.    The lone exception is gas station terminals and what I can’t figure out is why gas stations aren’t asking for ID?  After all, you could easily slide your drivers license into that same slot that you slide the credit card into so what gives?  Generally, I need to enter my zip code whenever I use a credit card at a gas station so why can’t I do that at a retail outlet?

I guess it’s just one of those paradoxes………