My Savvy Investor's Blog

Convert Savings Bonds

emoeal — Sat, 31 Oct 2009 04:16:03 +0000

Here is a something I found useful from our Dept. of the U. S. Treasury.

We can now convert our paper series EE and I Savings Bonds into electronic form. This very useful because I no longer have to worry about the whereabouts and securing my paper bonds any longer. This very important to me since most of them are currently paying six percent or better in interest. This is a much better investment than holding my cash in a CD at two percent annually as most banks currently advertise. However, inflation and a weak dollar are still posing a break even challenge to my bond portfolio. Another great thing about this is once my bonds mature or I request to cash them out I can electronically have the cash forwarded to my bank I’ve preregistered with the Treasury. Is that cool or what! Now here is what you have to do to convert your paper bonds.

First, you need to open a Treasury Direct account with the Bureau of the Public Debt which can be found online http://www.publicdebt.treas.gov/.

Second, after you’ve registered with the site, you will receive all of your security credentials that will be sent to you via snail mail. Afterward you will be ready to login and face yet another level of government bureaucracy…er…I mean security. You must request to convert your paper bonds to their electronic form. After, a few days, you may be granted the privilege of doing so, and your adventure begins in earnest from this point forward.

Once you’ve been approved to convert your paper bonds, you’ll simply follow the instructions given on the site as to how to enter and create the manifest to be used when sending your paper bonds to the Treasury for conversion. This is a simple, and ultimately convenient process that I recommend to anyone do who has paper bonds lying around.

Stimulus Plan Angst

emoeal — Fri, 13 Feb 2009 07:23:01 +0000

OK, the first TARP funds were released by the Treasury around October 28th of 2008. That day the Dow saw a huge range in volatility. By the end of the day the Dow had moved 950 points, closing up for the day. Now contrast that with the previous day’s move of 555 points in anticipation the Treasury was going to spring something on the market related to helping big banks get out of the mess that they had gotten themselves into mostly due to securitization of assets that have evaporated in value. From my observation, I noticed the markets responded positively for exactly one week before the slide down resumed to a new low of 7552 by the end of November 2008.
Deja vu, we are now awaiting the passage of a stimulus plan from the Government of the United States, which is designed to create 3+ million jobs and pour billions of additional funds into the financial markets. How this will work is just as unclear to most of us as was the reasoning behind the TARP. At last count there are two Republicans and one Independent Senator who have signed off on this package. The President has asked for the Congress to have the bill in its final form on his desk before the President’s Day holiday. Apparently there will be a vote on Valentine’s Day by the Congress approving this measure.
Now, what does this mean for the market? If history is any indicator of the future, then I would advise caution because this bill may not propel our economy onto the fast track as claimed by the administration. It seems our government elite are looking for a quick fix to a problem that has ballooned for more than a decade. My analysis leads me to believe that we should see a similar move in the markets similar to the TARP’s release. The markets will respond positively, but yet reservedly, before this bill is signed into law by the president. Afterward’s, there will be a cautious period as investors begin to ponder whether this stimulus plan will bring about the changes necessary for economic growth to the scale as touted by this administration.
So just be prepared for anywhere from a couple of days to a couple of weeks for this plan to meet its fate with the marketplace. Currently, there is still a lot of mystery surrounding exactly how this plan will stimulate the economy. There’s a lot of uncertainty surrounding the credibility of our newly appointed Treasury Secretary. These factors as well as others may spell trouble to the market’s stability going forward. Here’s wishing your portfolio a speedy recovery!

Dumped!

emoeal — Mon, 09 Feb 2009 13:30:50 +0000

I received an email from ODL Securities informing me that after conducting a strategic business review they will no longer “accept and/or service customers from the USA…” I find this in-line with the problems many financial institutions are having at this time in this stressed financial environment. But what struck me as most interesting was that they chose to forward my account to FXCM. How can they arbitrarily pick another FX broker to assign my account too? Has anyone else experienced this type of “arrangement” from their broker?

It Starts With Family

emoeal — Fri, 24 Oct 2008 22:11:02 +0000

From my understanding and review of the education data, it is said that formal education increases the potential for you to earn a higher income over your lifetime than is possible without it. I recently read an article in the Wall Street Journal (Oct 21, pg. A13) which quoted Jay Smink, director of the National Dropout Prevention Center at Clemson University as saying the difference in lifetime salary for a dropout and a high school graduate is about $300,000. This article further explains that with increasing high school dropout rates across the nation, that the negative impact is having a damaging effect on the "country’s strength and prosperity." What’s interesting about the article is that it never focuses on the problem; but on the victims. I think the real problem is often ignored in favor of simply throwing "money" and "volunteers" at symptoms. What could possibly be the real problem?

Usually symptoms are indications that some underlining problem needs addressing. For example, the symptoms I get may be accompanied with headache, physical pains in my stomach, and a inability to focus on the task at hand. What’s the problem? Could it be I’m suffering from a deadly disease? Could it be I’m fearful of giving a public speech? Or maybe it’s because I suffer from ADHD and forgot to take my meds! No! It’s none of these! It’s because I’m HUNGRY! My last meal was six hours ago, and I need to uptake some nourishment in order to finish typing this blog entry! But so often than not the simplest of solutions elude us.

Take for example the excuses given for kids dropping out of high school… maybe because they feel it’s a waste of time, they can see other dropouts making money on the streets, they need daycare for their children, they need meals from the government, they need to work part time because of family situations…the list goes on and on, but what they really need is guidance. Not guidance from local and city government officials and their neat midnight basketball programs, they don’t need targeted counseling and exposure to people they will never relate too. What they need is old fashion parenting who will convey the correct understanding of their civic duties to society. The duty of teaching by example, personal commitment, courtesy, honesty, and truthfulness. They need parents who can give them what no one else can…paternal love and encouragement. Oh yes, the problem is found in houses that are not homes, and the lack of solid family structures coupled with governmental and social systems not addressing the real problem in an effort to assume the roles of both caretaker and family for these unfortunate victims-our children.

So what can be done to right these wrongs? Well, again it seems to me that if people who feel as I do about the state of the decline of the family that we should began to support and endorse family building activities. This means condoning the use of big business marketing to our kids with their ideas which are usually inconsistence with good moral judgement and social conduct. This means not giving in to the gay marriage argument, and corrupting future generations. This means being clear on crime and punishment so as to deter and not germinate criminals. This means spending quality time with our family and nurturing the younger members of society with solid principles such as teaching the value of a dollar, and the rewards of hard work and honesty in every aspect of life. I believe if we would start to do these things, we can save our society by preserving our values and morals to ensure sustainable strength for future generations.

The Money Tool

emoeal — Sun, 31 Aug 2008 21:19:16 +0000

You wouldn’t think of using a 2000 psi pressure washer to rinse off your dishes, would you? And hopefully you wouldn’t use a shotgun to kill a fly that has been buzzing around your living room. The point to both of these extreme examples, is that each of these scenarios require using the right tool for the job!

When it come to the discussion of money, some of us may think of it as something that is hard to control and difficult to understand. Alas, no! Money is just as easy to understand as riding a bike! This time I’m exploring what money is and how to use it to achieve your goals.

What is money? I’ve discovered that money is a means for exchanging products or services for a price. Money has taken many different forms and has had many different representations over time in various cultures, but in the big scheme of things money was invented as a means of quantifying the transfer of things or services of value. In other words, before money took off, bartering was the primary means for exchanging property. If you had something I wanted; hopefully I had something you wanted as well, and we would trade. This simple business transaction had nothing to do with competition or the making of a profit. It was simply a straightforward method of commerce. Now we use money and assign various values to it and use it to buy and sell what we desire. So essentially, it has handicapped the bartering system because now only one party in the transaction has to possess anything tangible, and the use of money makes this a one-sided transaction. Of course this is my humble view of what money is all about, and you may see it differently. But, it is important to understand how we got to the point we are today with the use of money. Like it or not, money is what we use to get what we need and want in todays society. So it’s imperative that we understand its use and applications.

How do we use money to achieve our goals? Well, it’s simple in the respect we must earn money to use money. Then, we are able to use money in the marketplace to obtain what we desire. Some use their money in frivolous ways and others are more miserly in how they spend their money. Do you realize the value of our money today is only backed by the perception that it’s valuable! We no longer back it with a tangible resource such as gold. So, our country’s monetary value is only as good as others are willing to accept it.

In any case I think it is up to each individual to get educated on how money works and how to get it to work for you. Otherwise, you will work for money – and it will be a tough taskmaster!

Deal?

emoeal — Mon, 30 Jun 2008 11:05:00 +0000

If you’ve watched NBC’s game show, Deal or no Deal, then you know how people get sucked into believing they can beat the bank. Personally, I think if the banker offered me $20K within the first 30 minutes of the show, I would take it. Where else can you make that kind of money so quickly?

Now what about the prices of stocks these days? Some well know corporations are suffering pathetic stock prices these days. Is it a good time to buy when they are "dirt cheap" or should you say, "No deal!"

Something we have to always remember is the old adage that if something looks too good to be true, then it probably is! Remember if the stock is so cheap that you’re amazed the company is still in business; then you should be – because it may not be for long!

A company whose stock has let’s say has lost over 50% of it’s value over the last year may be signaling bad times are ahead! You see, a stock that has lost that much value over a short period of time and is struggling to maintain its presence in the marketplace is probably a sinking ship. The only reprieve it may hope for is a buyout or a merger with another company because of excessive debt. If a company is mired in debt and you buy its stock then you gamble on the possibility that the company has value elsewhere. But beware! An extremely good life jacket may not help overcome a severe storm.

Safety in Numbers

emoeal — Fri, 23 May 2008 08:06:01 +0000

By my observations, the S&P is down 4% YTD, the DOW is down 3.3% YTD, and the NASDAQ techs is down 6%. So investing here could be a bummer. Savings accounts are paying less than 1.5% and the best 1yr. CD may net you 3%. So where is the best place to have your money working for you these days?

Well, for me, the best place to have my money invested is in U.S. government bonds. Read all about them at http://www.treasurydirect.gov/tdhome.htm. I invested in the new Ibond eight years ago because I thought they were an excellent vehicle to earn a moderate return on my cash, and with a inflation kicker to boot! The way Ibonds works is simple. I bought them at face value, which means I bought them for the amount actually imprinted on them. They can be purchased in denominations from $50 up to $5,000. They earn a fixed rate of interest for up to 30 years, and they earn what is called a semiannual inflation rate as well. The semiannual inflation rate is set twice a year by the federal reserve which offsets their lower fixed rate. The combination of these rates is called the overall composite rate each Ibond yields every six months. Currently, the federal reserve is paying a 4.84% inflation rate. This is great because my fixed rate on some of my bonds is 3.6% which will yield me a composite earning of approx. 8.5%! But all is not as it seems today. I’m able to get this kind of return because of purchases I made eight years ago; today I wouldn’t recommend buying Ibonds. You see, the Ibonds of today are paying a fixed rate of 0%. So purchasing an Ibond at today’s terms only nets you a semiannual inflation rate. What this means is the Ibond itself pays nothing save for the face value plus the semiannual inflation rate. Desperate times calls for desperate measures by our federal reserve.

I find this very interesting since the federal reserve is admitting that it will not be able to pay a fixed rate of interest on your money at all. This very disturbing considering even the worst of banking institutions pays you between .45 to .75% annually on your regular savings! What it also means is that inflation is expected to reach close to 5% this year. So to answer the question of where is the best place to have your money working for you? Looking around, things look pretty tough.

Credit Report Review

emoeal — Thu, 03 Apr 2008 19:52:45 +0000

Did you know that a business that accepts your debit or credit card electronically can not print out your entire account number on the receipt?
Do you know who is routinely checking your credit report other than you?
Do you know if your employer can obtain your credit report without your permission?

If you were unsure of the answer to any or all of my questions, then it may be time for a credit report review!

The four questions I would like to answer about your credit report are: 1. What are the rules regarding the management of your credit information? 2. How do you obtain your credit report? 3. What is the meaning of the information you obtain from the credit reporting agencies? 4. And what impact does your credit score have on your creditworthiness?

First, it’s important to review your credit report at least on an annual basis. The Fair and Accurate Credit Transactions Act (FACT Act) has made it possible for consumers to receive their credit report free of charge. The FACT Act amends the earlier Fair Credit Reporting Act which outlines all the rules regarding credit reporting agencies, consumer responsibilities, and business involvement as mandated by the Federal Trade Commission. Both of these important documents can be read by going to www.ftc.gov.

Second, the only place to obtain a truly free credit report is by going to www.annualcreditreport.com. This the official site of the credit reporting agencies for getting your free report. However, I do recommend paying the $5 or $6 to purchase your credit score, but this is optional. This site will take you to each of the individual reporting agency (TransUnion, Equifax, and Experian) sites. Pay attention to the instructions for returning to the annualcreditreport site, otherwise you will be charged for your report. It’s a no brainer, and you should take advantage to periodically reviewing your credit history. This one simple action could help prevent you from becoming a victim of identity theft, and maybe help you identify fraud activity early.

Third, after reviewing your credit report, what does it all mean? Well, hopefully you will be able to confirm all of the information contained in your report and know how you’re doing overall. The credit score is usefully only in giving you a ballpark idea of where you rank on a scale of creditworthiness. Each reporting agency uses a different formula for computing this number so it anybody’s guess which one is more accurate than the other. However, I usually go to the source from where the credit score was born. You will hear the term FICO, which is a reference to the inventor of the credit score, which stands for the Fair Issac Corporation. I use their service (www.myFico.com) to get a more realistic score as compared to the agencies. But be careful of all the other credit alert services, and credit tracking offerings, they can be costly. But if you need that sort of thing, then it’s available.

Fourth, the impact of having a good credit score is very measurable. If your credit score is low to average, then you will pay the highest interest rates on loans, and you will be offered some of the worst credit terms. Conversely, if you have an above average to high credit score, you can be assured of getting favorable interest rates, and receiving better credit terms.

Lastly, there are many ways to improve your credit score, namely by just paying on time all agreed upon terms you’ve accepted in the first place. I don’t have any specific tips to help you improve your score, or of how to dispute information contained in your credit report. Each reporting agency has outlined the procedures for challenging information on your report, and how to improve your score. However, you can’t began to do any of these things until after you’ve reviewed your report! So start by getting your credit report and credit score today!

Escrow or “Esgrowing”

emoeal — Sat, 08 Mar 2008 22:21:12 +0000

Have you received a letter from your mortgage lender declaring you will have an escrow shortage this year? What does this mean? What should you do? Could this have an impact to your monthly mortgage payments? Let’s explore these three issues in more detail.

First, let’s tackle what escrow is and why we have escrow shortages. In layman’s terms, escrow is additional money paid along with your mortgage payment which is set aside for insurance and property tax payments. Most residential mortgages are designed this way, because most lenders want to ensure payment of your property taxes and property insurance without depending on the borrower when these important payments are due. Shortages are usually calculated at the beginning of each year that you own the home. The shortage is calculated based upon expected property taxes and property insurance rate increases for the current year. So what should you do?

Usually, you are presented with two options as to how to pay the shortage. One of two options may be to send in a separate payment in full to cover the projected shortage.

The second option may be to accept an increase to your monthly mortgage payments with the shortage payment spread out over the year. If you choose this option, what impact does this have on your mortgage payments?

Initially, it may seem foolish to accept an increase to your monthly payment, after all, you’re paying interest already. So why pay interest on taxes and insurance by dragging this out over the whole year! Well….not so fast.

Accepting an increase to your mortgage payment to cover escrow shortages is really about the lender offering you convenience. Your monthly mortgage payments will increase, but the original terms of your loan will not change. In other words, the extra money in your mortgage payment is going directly to escrow. So, you can choose the method of payment which fits your circumstances.

However, I believe the best option is to not have escrow tied to your mortgage at all. If you had this money in a safe investment account, and had it working for you until the time it is needed to pay your property taxes and insurance, then you would come out ahead. Guess what the bank is doing with your shortage payment when you choose option one?

Dialing for Savings

emoeal — Wed, 27 Feb 2008 06:12:02 +0000

My cable TV provider wants as much money as they can milk from me. Many localities allow cable TV providers to charge anything they want for access to services above their basic tier. Above the basic tier, cable TV providers customize channel selections and sell these "premium" tiers to maximize their profits.

However, in most cases you and I can negotiate with the cable TV provider for better prices in spite of what is advertised. Take my example, I called my cable TV provider offering to drop their services unless they offered me a lower rate. The customer service person was very understanding and had a slew of options available to keep my business, even to the point of offering to waive the installation fee after making any changes.

What prompted me to call in the first place, was after speaking with a national satellite TV provider who promised me the world. Their price initially would have saved me $144 yearly over what my cable TV provider charges. However, there are three caveats to going with the satellite TV provider: I would have to sign up and be bound by an 18 month contract, I would have to lease additional satellite receivers after the first for $60 a year. And lastly, the price I was being quoted today would increase by $10 after the first year of service. Something else that was important to me was INTERNET service. The price quoted for Internet service was $27 per month. However, with my cable TV provider I currently get 6MB of bandwidth, whereas if I switched to th satellite provider I would be getting less than 1MB of bandwidth. Granted, I suspect the 6MB is shared by everyone in my neighborhood, nevertheless, it is quite a bit better rate than the satellite TV offering (depending on how many people are in my neighborhood!)

I chose to stick with my cable TV provider because they offered to change my cable TV tier to a "custom" tier, and continue to provide Internet access for the same rate. I ended up saving $216 a year. I got what I wanted. However, I did give up some TV channels, but not the channels I specifically told the customer service representative I wouldn’t budge on to get the deal. The results? I don’t have a contract, I keep this new rate going forward as well as my Internet access.

Why is this a good time to review the services you receive and negotiate better deals? It’s the economy, that’s why. The economy is soft right now, and you and I as consumers are in the best position because companies want to stay in business. And they can’t stay in business during difficult times if they don’t tailor their service offerings to match the economic condition of the consumer. What am I going to do with the extra money I saved by after making a 20 minute phone call? I’m going to put it to work!