I am old but not old enough to remember a financial period as bad as this one.  I do remember a time when interest rates were around 20% and both inflation and unemployment were high too.  But the news these days is so bad and reminding me of the Great Depression where for the first time we are losing faith in our financial institutions.

I have two places where I keep my money, Washington Mutual (WaMu) and GE Interest Plus.  Today’s news about WaMu is bleak.

The embattled thrift Washington Mutual say its health shouldn’t be judged by its stock price, and it isn’t going to go the way of Lehman Brothers…

Late Monday, the thrift clarified the reasoning behind a downgrade by ratings agency Standard & Poor’s, which cut WaMu’s credit rating to junk territory on Monday. The ratings service cited the thrift’s exposure to the mortgage securities market, downgrading it to BB-minus from BBB-minus. Yet, the ratings service did say the thrift has enough cash to get through 2010. The change in S&P’s ratings follows a similar downgrade by fellow ratings service Moody’s last week.

WaMu Defiant – Forbes.com

Today’s news about GE is pretty dismal also.

General Electric Co shares tumbled nearly 10 percent on Wednesday as investors became panicky about how its massive financial arm was faring in the wake of the troubles at top financial institutions…

GE’s 6 percent first-quarter profit drop, which stunned investors who had been looking for growth, came at another time of market turbulence following the near-collapse of Bear Stearns.

J.P. Morgan analyst Stephen Tusa in a note to clients said he now expects the conglomerate’s financial arm, which accounts for about half its profit, to see profits fall 5 to 10 percent in 2009.

GE shares tumble amid financial worries | Reuters

The news does not stop there.  Morgan Stanley, Goldman plummet as crisis mounts.

I am now faced with a big decision, do I move my money out of GE Interest Plus which is not FDIC insured?  Do I move my money out of WAMU which is FDIC insured but what does FDIC insured really mean?  If WAMU suddenly closes it doors how long will take to get my money?  What bank is “safe” during this financial crisis?

Categories: Finance
4 Comments »

As of Friday, September 5 I see these rates in my various bank accounts (last time I checked was on March 23, 2008 in my Maximizing Interest article).  I guess all my money should be in my WAMU Online Savings account.  The banks keep changing their rates though and not in the same direction!

In the end though if you have $10,000 in one account at 3% and another account at 3.69% the difference per month is $6 in interest.  It is not really a big enough amount to keep all these accounts open.  I think I am going to close Countrywide and ING Direct.

Investment Amount	Rate	Yield
Less than $15k	3.00	3.04
$15k – $49,999	3.15	3.20
$50k and more	3.30	3.35

Orange Savings – 3.00% APY
Electric Orange – 1.75% APY

Categories: Finance
No Comments »

Yesterday we received our Chase Freedom Visa cards which I ordered after reading this column, Chase Freedom Cash Visa: $50 Sign-up Bonus, Up To 3.75% Back On Top Spending Categories.  It basically gives 3% in your top three categories and 1% back on everything else.  If you wait to redeem at the $200 level you get a $50 bonus so it is like you are getting 3.75%/1.25% cash back.

When I went to Chase.com to check on this Visa card I found I had another Visa card.  I was going to close it but the representative told me it was a Chase Cash Plus Rewards Visa card which he said is better than my other card.  It gives 5% cash back for purchases at gas stations, groceries and drugstores and 1% cash back everywhere else.

Finally I have my American Express Blue Cash Card which gives back 1%/5% cash back for purchases at gas stations, groceries and drugstores and 0.5%/1.5% for other purchases.  The higher level of cash back comes after spending $6500 and there is no limit on the amount of rewards you can earn.

One strategy I could employ is this.

1. Use Chase Rewards Plus at gas stations, groceries and drugstores so you get 5% back.
2. Use Chase Freedom Visa at other places so you get 3% back on the top three categories.
3. Use American Express Blue Cash at Costco or for big purchases since the rewards are not limited.

Or I could just do what’s convenient.  Using the Chase Freedom Visa on my other top three categories will save me about $200 * .02% which equals $4 per month or $50 per year.  Is that worth the hassle of maintaining another card?  Maybe not.

In the end I’d rather use one card.  Maybe the best strategy depends on how much I have spent on American Express.  For the first $6500 on American Express (beginning of May):

1. Use Chase Rewards Plus at gas stations, groceries and drugstores (5% back) plus wherever else American Express is not accepted.
2. Use Chase Freedom Visa for automatic payments for utilities, telephone, cable to get 3% back.
3. Use American Express everywhere else.

After I have spent $6500 on American Express (around November):

1. Use Chase Freedom Visa where American Express is not accepted to get 3% back on the top three categories.
2. Use American Express everywhere else.

Fortunately Chase has automatic payment of bills.

Too bad Costco only accepts American Express which started me down this crazy path in the first place.  Crazy Costco!  At least Costco Gas counts as a gas station.  And to top it off it was recommended to me by my mortgage broker to use my old Visa every six months because I have the longest credit history on it.

Categories: Finance
No Comments »

I have been thinking that since one of the only people who consistently outperforms the S&P 500 is Warren Buffet I should invest in his holdings company.  However the price of a share in his company, BRK.A, is over $100,000.  But then I found out about his class B shares, BRK.B, that are priced to be 1/30th the price of BRK.A.  This USA Today column explains a bit more about these shares and why they think it outperforms other mutual funds.

Berkshire Hathaway is actually a holding company, not a mutual fund, and that makes an enormous difference.

The biggest difference: Buffett and his partner, Charlie Munger, typically own large stakes in the companies they invest in. In many cases, they are directors of those companies, which means they have a hand in running them. Mutual fund managers rarely hold a big enough chunk of any one company to cast deciding votes, and never become directors in companies they own.

That said, Buffett and Munger also have a refreshing view of their jobs. In the Berkshire Hathaway Owner’s Manual, which is available online at www.berkshirehathaway.com, the two lay out their view of Berkshire: “We do not view Berkshire shareholders as faceless members of an ever-shifting crowd, but rather as co-venturers who have entrusted their funds to us for what may well turn out to be the remainder of their lives.”

Also I found out about ShareBuilder where you can buy and sell increments of shares, though I think you have to buy them using an automatic investment plan.  If I join through my ING Direct account, I get $25.  Maybe I should try it?

Categories: Finance
1 Comment »

I read this book called The Lazy Person’s Guide to Investing about a year ago and have been trying to follow its strategies.  Funny thing is it is more work than my previous method of just buying Vanguard Total Stock Market Index.

Here are my notes from the book.

Couch Potato Portfolio – rebalance once a year

1. 50% Vanguard 500 Index (VFINX)
2. 50% Vanguard Total Bond Market Index Fund (VBMFX)

Basic No-Brainer Portfolio

1. 25% Vanguard 500 Index (VFINX)
2. 25% Vanguard Small-Cap Index (NAESX)
3. 25% Vanguard European Stock Index (VEURX)
4. 25% Vanguard Total Bond Market Index Fund (VBMFX)

Kiplinger’s Keep-It-Simple Version of the Laziest Portfolio

1. 25% Large-Cap Stock Funds – Vanguard 500 Index or the Vanguard Total Stock Market Index
2. 25% Foreign Stock Funds – Vanguard European Stock Market Index or Vanguard Total International Stock Market Index
3. 25% Small-Cap Stock Funds – Vanguard Small-Cap Index or Vanguard Small-Cap Value Index Fund
4. 25% Domestic Bond Funds – Vanguard Total Bond Market Index Fund or more conservative Vanguard Short-Term Bond Index Fund

Consider buying shares in Berkshire Hathaway, it is the only thing that seems to consistently beat the market (this was not in the book, it just mentioned what Warren Buffet does).

Ultimate Keep-It-Simple Portfolio for Dummies

1. 33% Vanguard Total Stock Market Index (VTSMX)
2. 33% Vanguard Total International Stock Market Index (VGTSX)
3. 33% Vanguard Intermediate-Term Tax Exempt Fund

Dilbert’s Fab-u-lous One-Page Personal Finance Book

1. Make a will.
2. Pay off your credit cards.
3. Get term life insurance if you have a family to support.
4. Fund your 401(k) to the maximum.
5. Fund your IRA to the maximum.
6. Buy a house if you want to live in a house and can afford it.
7. Put six months’ expenses in a money market account.
8. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund.  Buy the directly from the fund company and never touch them until retirement.
9. If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage fee based on your portfolio’s size.

Diblert’s Anti-Weasel Defense Portfolio

1. 70% Vanguard Total Stock Market Index (VTSMX)
2. 30% Vanguard Total Bond Market Index Fund (VBMFX)

Second Grader’s Starter Portfolio

1. 60% Vanguard Total Stock Market Index (VTSMX)
2. 30% Vanguard Total International Stock Market Index (VGTSX)
3. 10% Vanguard Total Bond Market Index Fund (VBMFX)

Frank Kim’s Portfolio

1. 66% Vanguard Total Stock Market Index (VTSMX)
2. 33% Vanguard Total International Stock Market Index (VGTSX)

I have nothing in bond funds since this is for my retirement.  We’ll see how we do.

You can read more in this recent article, ‘Lazy Portfolios’ 8 winners for a bear-recession by Paul Farrell.

Categories: Finance
3 Comments »

I have kind of always wanted to do what was done in this article, Computer stuff and power requirements ,i.e. buy something like a Kill A Watt and measure my household electrical usage.

This is my last electrical bill which came out to over $40. As you can see Pacific Gas and Electric’s rates go up the more electricity you use.

Some numbers to think about. A router uses 8 watts or 0.008 kW and it is always on. Since there are approximately 720 hours in a month, therefore a router uses approximately 6 kWh. That would cost $1.35, obviously not breaking the bank.

An LCD monitor uses typically 30 watts for about 12 hours a day. That is approximately 10 kWh. That would cost about $2.26 per month.

I think the laptops use less power as this article, How Much Power Does My Laptop Really Use?, seems to imply. But if we assume that is it the same as the monitor then that works out to about $2 for each. I usually have two laptops on at the same time, one personal, one for work.

I think I can estimate that my computer usage is costing in total about $10 per month or 25% of my electrical bill.

I am starting to wonder if maybe the fridge is using up another 25% or $10 per month. Here is an article about Refrigerator Power Consumption. The author claims that by replacing the old fridge with a more energy efficient new fridge that the fridge will pay itself off in energy savings in eight years. Of course the author is not counting the environmental cost of filling up a land fill with another perfectly usable refrigerator.

Categories: Environment, Finance
No Comments »

I read Paul Farrell’s book Lazy Guide to Investing and because of it instead of just investing in the Vanguard Total Stock Market Index I also added the Vanguard Small Cap Index and the Vanguard Total International Stock Index.  I am not sure why I allocated the way I did but it did not work out, the Small Caps dragged me down and now it seems I shouldn’t have it in my portfolio since I have the Total Stock Market already.

Anyway here is a recent article summarizing how the different Lazy Portfolios did in 2007, ‘Lazy Portfolios’ sparkle in ’07, but new year brings adjustments.

Categories: Finance
No Comments »

California law requires that the company that provides me home insurance must send me an offer for earthquake insurance. Now as you might know, I don’t believe in insurance. However it is unsettling, being an East Coast person, to think of an earthquake wiping out your home, your primary asset, your life savings, etc.

However the cost of earthquake insurance is almost three times the cost of home insurance. I guess every year that goes by I will celebrate the savings I made on earthquake insurance. And everyone I know does not have earthquake insurance.

Also we purchased our home in an area where the ground is more solid, somewhat alleviating the risk of damage from an earthquake. Technically we are not in a liquefaction hazard zone but in an area of moderate liquefaction potential. This map shows we are not in a hazard zone, our house is in the top right.

Categories: Finance
No Comments »

Sometimes people say I’m frugal. Sometimes they say “With the way you live, you’re ready for the missions field.” When my friend saw the first condominium I purchased she said “I admire your life style. Other married people would never live like this.”

What they’re all really saying is “You’re cheap.”

Recently I met a couple that was proud of their frugality. Up until then I had been pretty ashamed of my frugality but they showed me there is a lot of value in it. And this couple is generous with friends, just frugal with themselves.

Back in Boston my friend and I would talk about our cheapness. This friend would brag about how he could do a dinner party for ten on $10. I have to admit that I never noticed, I always enjoyed his dinner parties. Once I told him that I felt he was now cheaper than me and he was offended for days.

Categories: Finance, Friends
3 Comments »

Why don’t I believe in insurance? Because of Ned Flanders.

Maude: Neddy doesn’t believe in insurance. He considers it a form of gambling.

“Hurricane Neddy” episode

Seriously I do kind of agree with Ned Flanders. Insurance is a gamble and most of the time the house, in this case the insurance companies, win. I think the only time insurance is worth it is if not having it would affect your lifestyle. For example if I didn’t have medical insurance I may not seek medical treatment as often as I should. I think if I did not have auto insurance I may choose to drive less. However I don’t think having or not having house or life insurance would affect my lifestyle. Unfortunately in some states it’s law to have these kinds of insurance.

Categories: Finance, TV
5 Comments »