Another Meeting, Another Decision: 25 or 50?

Since the Federal Reserve’s 75 basis points emergency rate cut on January 22nd, the Dow Jones Industrial Average has gained more than 500 points in 5 trading sessions ended yesterday. The rally was partly fueled by speculation that when policy makers conclude their 2-day meeting this afternoon, another 0.50% rate reduction will be handed out at 2:15 pm EST. When the Fed made the inter-meeting cut 8 days ago, the stage was set for more follow-up today. The only uncertainty is by how much, not if.

So what’s your guess? 25 or 50?

Though I would love to see the Fed grants investors’ wish with a 50 bps reduction to keep the rally going, my guess is that we may only get 25 this time. Lowering interest rate by 1.25% in 8 days would be too dramatic for the central bank which wants a stable, transparent policy. Besides, they certainly don’t want to give people the impression that they are pushing the panic button, especially when there was no coordinated action from the European Central Bank.

If we indeed only get 0.25%, the 500+ points gain could evaporate very quickly.

We’ll see what happens in 3 hours.

Edit: So investors got what they wanted from the Fed, but the stock market barely moved from the news. After briefly surged more than 200 points after the Fed’s 0.50% rate cut announcement, the Dow closed down 37 points. That was the level before the rate decision.

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25 or 0?

It’s the Fed rate decision time again.

However, unlike the last meeting in September when the predictions on what the central bank would do were focusing on how much, not if, this time it’s a little bit uncertain.

The August negative job report released in early September, which probably have played a key role in the 50-basis point rate cut decision, turned out to be a false alarm. The credit squeeze appeared easing, though big banks wrote down billions of dollars of assets tied to bad loans. And the economy grew a solid 3.9% last quarter despite the turmoil in the financial market in the summer. Consumers are still spending though the housing market slump continues and oil price reaches record high.

Then what we need right now is a policy that will prevent the economic environment from worsening, not cure when it already happened. Another 25-basis point reduction could offer an assurance that the Fed is determined to stay ahead of any potential economic weakness.

So 0 or 25? My guess is 0 this time. The surprising larger-than-expected cut from last month may need a little more time to walk through the economic chain and show how it affects the economy. Plus, I don’t want to see my bank’s savings rate drop again

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What an Anniversary Gift

The stock markets celebrated the 20th anniversary of Black Monday by sinking some 366 points of the Dow. Not exactly on the same scale percentage wise, but not too far away point wise from the worst one-day decline in the stock market history 20 years ago.

The 508 points drop of the Dow on October 19, 1987 was good enough to make the index lose nearly 23% of its value. Today, however, the 366 points only shed the benchmark by 2.64%.

Interestingly, when I checked my archive, I noticed that on the 19th anniversary of the crash (that was October 19, 2006), the Dow closed above 12,000 points the first time in its history. In one year, the Dow added 1,522 points, a nice gain over 13%.

But where are the markets going from here?

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Mattel Issued “Extraordinary Apology” for Damaging Reputation of Chinese Products

When something bad happened, it’s not unusual for the party who’s responsible to find a scapegoat to take the blame. The convenient scapegoat in Mattel’s massive toy recalls this summer is obviously the Chinese manufacturers. They are thousands of miles away and can’t defend themselves here in the US amid media frenzy of the safety of Chinese products, among the other issues between the two countries such as the trade imbalance and the value of Chinese currency.

There’s no excuse to sell substandard, unsafe goods, whether they are for domestic markets or exports, and there are problems with “Made in China” products as we all know. I feel sad every time news like this comes out. However, it’s just not right to immediately start finger-pointing before the facts are all in, then makes “extraordinary apology” when the damage is already done. It will take much longer time and more effort to rebuild the reputation than destroying it.

Let’s see what Thomas A. Debrowski, Mattel’s executive vice president for worldwide operations, has to say when he was in China (from AP, Reuters, USA Today, and New York Times).

“And Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the toys,” Debrowski said.

……

On Friday, Debrowski acknowledged that “vast majority of those products that were recalled were the result of a design flaw in Mattel’s design, not through a manufacturing flaw in China’s manufacturers.”

Lead-tainted toys accounted for only a small percentage of all toys recalled, he said, adding that: “We understand and appreciate deeply the issues that this has caused for the reputation of Chinese manufacturers.”

In a statement issued by the company, Mattel said its lead-related recalls were “overly inclusive, including toys that may not have had lead in paint in excess of the U.S. standards.

“The follow-up inspections also confirmed that part of the recalled toys complied with the U.S. standards,” the statement said.

This doesn’t make Mattel look good! According to a Time magazine story, Mattel recalled a total of 19.6 million toys world-wide. Of them, 17.4 millions were recalled for reasons not even related to lead paint and the toys were sold as far back as 2002. Yet, Mattel decided to mix the recall of toys due to design flaws together with the lead paint toys. From what I can see, they did that for an obvious reason: they can put the blame solely on Chinese manufactures.

And why does Mattel go back to China and apologize now? Li Changjiang, Chinese product safety chief, may have the answer:

“a large part of your annual profit … comes from your factories in China.”

That’s right, Mattel can’t afford to lose the factories in China and the revenues generated from toys made in China. As the Time article pointed out

Mattel needs China just as much as China needs Mattel, and it cannot afford to jeopardize its relationship with the country that produces 65% of its toys.

Then who should bear the ultimate responsibility of those lead-tainted toys? Material suppliers? Manufacturers? Product designers? Importers? (My friend Golbguru at Money, Matter, and More Musings also discussed this issue.) After the first recall, the boss of the Chinese factory which supplied those Mattel toys committed suicide. Could that life be saved if Mattel didn’t rush to blame the manufacture?

I just hope that after these “high profile” incidents, Chinese manufactures can make their products safe and reliable, not only for international consumers, but for the 1.3 billion people in China as well, so everybody can enjoy them, not simply because they are cheap.

After I posted this entry, another recall for products made in China was issued. This time, it’s the cribs under the Simplicity and Graco brands. The headline at CNN.com reads

My first reaction was “No, not again.” Then after I read the news, I had nothing but questions of the intention of CNN for using such a provoking title. From its own article,

Failures in the crib’s drop side are due to a combination of hardware and design flaws that allow consumers to unintentionally install the drop side upside down. This installation could weaken the hardware and cause the drop side to detach from the crib, creating a gap that could lead to the entrapment and suffocation of infants.

Does it even have anything to do with “Made in China”?

*Photo from TIME

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The Guessing Game: 0, 25, or 50?

I don’t remember exactly when was the last time a FOMC meeting has generated so much anticipation, but it has to be quite a while as the Federal funds rate, the outcome of such a meeting, has been held steady for more than a year since June of 2006. For the past 15 months, investors have been getting almost identical policy statement from the Fed when each and every meeting concluded. This time, things could be different.

From what I heard, the consensus seems to be that there will be a rate cut as arguments for an ease appear to be quite strong. Weak employment data, soft retail sales, mild inflation, slumping housing market, and rising oil price all point to a rate reduction. The only question is whether it’s a quarter of a point or a half.

However, before we get the announcement in less than 5 hours, everything we think could happen is just a guess. If it’s a guess, then is it possible that we get a surprise instead when the policy makers decide to leave the rate alone this time to let last month’s discount rate cut play out? Or they can just slash the discount rate again without touching the benchmark rate. Not a likely scenario but not impossible either. If that happens to be the case, it would be interesting to see how the Street reacts to the decision when investors realize their wish is not granted.

If we get what we wanted at 2:15 pm EST, the reduction itself which will be the first in four years, whether it’s 25 or 50 basis points, may not carry a significant message. What’s more important is what Ben Bernanke & company has to say in the statement, from which investors will try to find a clue on what the Fed will do next.

But now, all eyes are on the Fed.

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Volatile Market

When the Dow lost some 281 points last Friday to settle at the lowest close since May 1, I couldn’t imagine that it can make up all the losses in one session. Yet, it indeed happened as the index surged 286 points today, the largest one day gain in four years.

Looking at the past 13 trading days since the benchmark closed at all time high of 14,000 on July 19th, there are only three sessions when the Dow recorded less than 100 points movement, all on the upside. In fact, in two of the three sessions, the Dow added 92 points in each day, close to triple-digit change. At the same time, the CBOE Volatility Index (VIX) jumped from 15.06 to 22.60, an increase of 50% in market volatility. It’s amazing to see how investors sentiment changed so dramatically every day. Last Friday, everybody worried that the subprime crisis could spill over to other sectors and slow the economy and that led to the 281 points drop in the Dow. Today the speculation that the government will come to rescue sent the index 286 points higher (according to Bloomberg radio).

Tomorrow, with the Fed’s meeting on interest rate on agenda, the index could again swing 100+ points either way, though nobody expects any change in rate.

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“Proof That Girls Are Evil”

No, this is not my proof, but I thought it’s quite funny how it’s presented (if you haven’t seen it before).

When I hit the Stumble button on my broswer, I was shown the following image from this site:

Not that I agree with the conclusion, but I didn’t find any flaw in the procedure . Did you?

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How Much Would You Pay for a License Plate?

We have standard license plates on our cars with no extra costs.

However, in China, people (or maybe only wealthy people) are crazy about license plates with so called lucky numbers such as 6, 8, or 9 (US Mint even sells Lucky Money around Chinese New Year every year with dollar bills containing these lucky numbers), especially 6 and 8 together. For example, according to this article, a license plate with number AC 6688 was auctioned for RMB 80,000 last year (or a little more than $10K) and a 9999 plate auctioned in Hong Kong two years ago had a price tag of HK$990,000.

However, none of these came even close to a plate auctioned yesterday at a charitable event in UAE.

Gulfnews says a special plate with only a number 5 (what’s the speical meaning of 5?) on it fetched more than $6M in an event which will benefit “people with special needs and accident victims.” The previous record of most expensive license plate was a M1 plate sold in England last year for £331,500.

Of course, these plates were all autioned for special events.

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How Long Did The Dow Take to Add 1000 Points?

Last week the Dow Jones Industrial Average closed above 13,000 points for the first time on April 25, 2007. Since then, the index has been setting record highs every day. The last time the Dow reached a milestone was on October 20, 2006, when it broke the 12,000 mark. That’s only 6 months and 5 days. But, this is not the shortest time. The record, so far, belongs to the period from October 14, 1995 to February 13, 1996 when the Dow went from 6010 to 7022 in 4 months plus 1 day.

The following is a plot of the history of the Dow, starting from October 1, 1932 when it had a value of 300 points, the earliest data available from Yahoo Finance.

The Dow Jones index was born on July 3, 1884, and it took the index more than 88 years to reach its first 1000 on November 14, 1972. During the first 88 years of its history:

1. The original Dow Jones Industrial Average index, published on May 26, 1898, had an initial value of 40.94 and it included twelve components:

• American Cotton Oil (now part of Unilever)
• American Sugar (now Amstar Holdings)
• American Tobacco
• Chicago Gas (now Integrys Energy Group)
• Distilling and Cattle Feeding (now Millennium Chemicals)
• General Electric
• Laclede Gas (now The Laclede Group)
• National Lead (now NL Industries)
• Tennessee Coal & Iron (now part of U.S. Steel)
• North American
• U.S. Leather
• U.S. Rubber (now part of Michelin)

Any familiar names? I didn’t recognize any except GE.

2. The index closed at 28 on August 8, 1896, the lowest closing value ever.
3. The Dow lost 89.19% of its value during the great depression (total 340 points) from September 3, 1929 to July 8, 1932.

The Dow then took another 14 years to add another 1000 points. On January 8, 1987, the index closed at 2002. However, the index suffered its biggest loss, percentage wise, nine months later. On October 19, 1987, the Black Monday crash shed the Dow by 508 points, good for nearly 23% of its value at that time. Since then, the growth of the Dow accelerated. It took the index a little more than four years to almost triple its value from the close of 4003 on February 23, 1995 to 11014 reached on May 3, 1999. During this period, the index used an average of a little more eight months to add 1000 points. It also reshuffled its components on November 1, 1999 when Chevron, Goodyear Tire, Sears, and Union Carbide were replaced by Home Depot, Intel, Microsoft, and SBC Communications.

Then the financial markets went through some tough times, from the burst of the dot com bubble to the attacks on September 11, 2001, which led to the biggest loss in points on September 17, 2001 when 685 points, or more than 7%, were evaporated in a single day. By the end of that week, the Dow had fallen 1370 points, or 14.3%. The following recession took steam out of the financial markets and the Dow had to wait seven and a half years to see another milestone of 12000, reached on October 20, 2006. On April 8, 2004, the Dow changed its components again by replacing International Paper, AT&T, and Eastman Kodak by Pfizer, Verizon, and AIG.

Now, how long do you think will the Dow take to gain another 1000 points from here? I think we may just see that before the year end. My reason? I heard on the radio this morning from a commercial said that the Dow rarely had a losing record the year before the election, :)).

Sources: Yahoo Finance, Wikipedia, and History of Dow Jones

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Who’s Checking My Credit?

I know every time I apply for a credit card, buy a car, or open a bank account, I will receive a credit check from the lender. That’s understandable because the lenders need my credit history to assess my ability to pay the loan back. In these cases, I am the borrower and the banks and credit card companies want to make sure I won’t default. But who else is checking my credit?

An article on MSN Money, 5 People Who Check Your Credit, says my credit report may be pulled out by:

• Lenders
• Insurers
• Landlords
• Cell phone carriers
• Employers

I can see why the first four types of people want my credit, but why the employer-to-be? Does my bad credit mean I can’t fulfill my job duty? The MSN Money article reasons:

When you’re applying for a job, potential employers can pull your credit report as long as they notify you first. And, in fact, about 35% of them do, according to the Society for Human Resource Management. Why? Bad credit can be a signal of irresponsibility, or employers might be worried you’ll spend more time fretting about your financial woes than concentrating on the job.

I am sure I have other obligations that require much more time than the time I spend on “fretting about my financial woes.” Though I wasn’t asked by any employer for permission to check my credit history so far, this whole idea of “bad credit can be a signal of irresponsibility” doesn’t really make to much sense to me. In fact, it sounds like a kind of discrimination against people without a perfect credit.

So if you are asked to provide credit information after a job interview, what would you do? For me, well, I have to say it depends on the size of the pay check. If the job pays nicely, I probably don’t mind them have a look, though I don’t like it.

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π Day

Do you know today, March 14, is Pi Day? And 1:59 pm is commonly called Pie Minute?

According to Wikipedia, π, in Euclidean plane geometry, is defined “either as the ratio of a circle’s circumference to its diameter, or as the ratio of a circle’s area to the area of a square whose side is the radius”. Since π is an irrational number, the exact value of π has an infinite decimal expansion and does not repeat. The first 50 decimal places of π is

3.14159 26535 89793 23846 26433 83279 50288 41971 69399 37510

The following is a short history of how π was calculated from Wikipedia:

• The Egyptian scribe Ahmes wrote the oldest known text to give an approximate value for π, corresponding to a value of 256 divided by 81 or 3.160.
• As early as the 19th century BC, Babylonian mathematicians were using π = 25/8, which is within 0.53% of the exact value.
• An early approximation of pi is in the Bible, 1 King 7:23. The circumference is related to the diameter with a ratio of 30 to 10, which gives an estimate of 3 for pi.
• By finding perimeters of circumscribed and inscribed regular polygons, Archimedes found that π is between 3 + 10/71 and 3 + 1/7.
• The Chinese mathematician Liu Hui computed π to 3.141014 (good to three decimal places) in AD 263 and suggested that 3.14 was a good approximation.
• According to I Ching (635–713), the Arc of 1/4 circle is 10, the chord is 9 so π = v2/0.9×2 = 3.1426968052735445.
• The Indian mathematician and astronomer Aryabhata in the 5th century gave the approximation π = 62832/20000 = 3.1416, correct when rounded off to four decimal places.
• The Chinese mathematician and astronomer Zu Chongzhi computed π to be between 3.1415926 and 3.1415927 in the 5th century.
• In the 14th century, the Indian mathematician and astronomer Madhava of Sangamagrama found a rational approximation of π that was correct to 13 decimal places of accuracy.
• In 1424, the Persian Muslim mathematician and astronomer Ghyath ad-din Jamshid Kashani (1380–1429) correctly computed 2π to 9 sexagesimal (base 60) digits. This figure is equivalent to 16 decimal (base 10) digits as 2*π = 6.2831853071795865 which corresponds to π = 3.14159265358979325.

Now with the help of supercomputers, the latest record of calculating pi is held by Professor Yasumasa Kanada of the Information Technology Center at Tokyo University. In September 2002, Kanada and his team calculated 206.158 billion places of pi using a Hitachi supercomputer for 400 hours. In October 2005, the same team claimed they have calculated pi to 1.24 trillion places.

But do we really need so many digits? Wikipedia says if we use only 10 decimal places of π to compute the circumference of the Earth’s equator from its radius, the error is less than 0.2 millimeters.

And, what’s the memory record of π? According to Memory and Mental Calculation World Records,  the verified record belongs to Chao Lu of China who recited 67,850 digits of π in 2005 (Wow).

*Photo from www.ime.uerj.br.

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Bloody Day Today

For a day like today, there’s simply no escape.

With Dow off more than 260 points, the deepest drop since 2003, everywhere I look, all I see is red. When I checked my Scottrade account couple of minutes ago, I found my paper assets have shrunk nearly $8,000 already and that’s just stocks. The total loss could be well over $10K at the end of the day when I open up my Quicken and download all the data. It won’t be a pretty picture.

However, when I see decline at this magnitude, I usually don’t seek refuge (there’s nowhere to hide anyway). Instead, I try to buy a little more. In fact, I already ordered $200 of both DODGX and DODFX, and another $100 $200 of TGLDX this morning.

Today’s decline is largely due to the the sharp sell-off in China, where two major indexes both dropped more than 8%, the worst in almost a decade. And the plunge in Chinese stocks has sent shock waves across the globe, in both developing and developed markets. According to Bloomberg.com, major indexes in France, Germany and Britain all fell more than 2%, while in Asia, Hang Seng index dropped 1.8%, Nikkei fell 0.5%, and Singapore Straits Times index lost 2.3%.

One thing is for sure. Since there’s only one day left, this month’s net worth update won’t be the one that I will expect.

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One’s Trash is Other’s Gold

Bloomberg.com today has a story about a Chinese woman, Zhang Ying, and her company Nine Dragons Paper Holdings Ltd. The article says

Zhang is the world's richest self-made woman, ahead of U.S. chat show host Oprah Winfrey and EBay Inc. Chief Executive Officer Meg Whitman, according to Shanghai-based Hurun Report, which ranks wealthy people in China.

And you wonder how she gets there:

Zhang started collecting wastepaper in 1990 in Los Angeles and shipping it to China to make the cardboard needed by growing export industries. Her company, Nine Dragons Paper Holdings Ltd., is now China's biggest packaging maker. Nine Dragon's stock has risen fourfold since its March initial public offering, pushing Zhang's fortune to $4.7 billion.

Even now in China there are still many small collectors go from neighborhood to neighborhood and buy wastepaper, bottles, and empty soda cans at every cheap prices, due to the lack of recycling policy.

The opportunity is there, but not everybody can see it.

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Fool Me Once ……

A couple of days ago, I forwarded a story from MSN Money about how Capital One is trying to collect more fees by giving people low-limit credit cards so that they can easily overspent with cards. While Capital One's practice of helping people accumulating more debts should be condemned, the center figures in the story, the Kehns, actually bear the same share of responsibility of getting themselves into that situation. As Golbguru commented

I am not surprised Cap One tried to push more cards to the guys. What is dissappointing is to see these people take the bait.

Not just that they took the bait, but repeatedly. Come on, nobody forced you to take their card, Kehn. You volunteered yourself. Yet at the end, things went so bad for you and you had to get help from credit counseling agency (and you believe that?), but you did forget to complain

I owe these people that much damn money and they are willing to give me another credit card? This is nuts.

Yeah, they are nuts, so are you Kehn, if not even worse. This reminds me what people are saying: “Fool me once, shame on you. Fool me twice, shame on me.”

Wait, there is a better person to tell you that.

[googlevideo]-3387600182820331221[/googlevideo]

Original video from SpikedHumor.

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Hey USAToday, What’s This Title?

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Are We Better off Now? A Look at How Tax Cut Made Rich Richer and Poor Poorer

Yesterday, I read this interesting article on NY Times about how our personal income in 2004 (the year that the latest IRA data is available) compared to what we earned four years earlier in 2000. The title of the article, ’04 Income in U.S. Was Below 2000 Level, already decleared the conclusion of the comparison. However, the statistics compiled from IRS data offered more insights on how the tax cut favored the rich over the poor than the headline did.

I remember more than four years ago when the tax cut was a hot topic, politicians supporting the cut from every corner argued how on average a family could save $1000 on taxes if the initiative went through. While it is true on average, the distribution is by no means even. If for one rich household there is a poor family, the rich could save $1900 on taxes with the poor getting the short end of the stick of $100, and that still made the average tax savings per household at $1000. However, the cold fact is for one rich family, there are probably ten families earning minimum wages or less to offset, and that will make the difference even more significant than the face number suggested.

The following is what I summarized from the article.

Overall income & taxes in 2004 and 2000

• Total income reported on all tax returns is $7.044 trillion in 2004, down from more than $7.143 trillion in 2000.
• The average reported income is $53,974 in 2004, falling $1,641, or 3 percent, compared to 2000.
• Individual taxpayers paid $831.8 billion income taxes in 2004, down from $980.4 billion in 2000.

The pain of the poor

• The poorest 60 million Americans (48 million adults and 12 million dependent children) reported average incomes of less than $7 a day each. The official poverty line in 2004 was $27 a day for a single adult below retirement age and $42 a day for a household with one child.
• The bottom fifth taxpayers (about 26 million) made less than $11,166 each in 2004 and had an average income of $5,743, up $135 or 2.4 percent, from the year 2000. 

The gain of the rich

• The top one-tenth of 1 percent, about 130,500 taxpayers, reported average income of just under $4.9 million each in 2004.
• About 300,000 Americans in the very top households made significantly more combined pretax income than the poorest 120 million Americans earned in 2004.

How the tax cut made rich richer and poor poorer: From 1979 to 2004

• Overall, average incomes rose 27% from 1979 to 2004. But the gains were narrowly concentrated at the top and offset by losses for the bottom 60 percent of Americans, those making less than $38,761 in 2004.
• On average, the bottom 60 percent of Americans made less than 95 cents in 2004 for each dollar they reported in 1979.
• The fifth of Americans on the 60th to 80th rungs of the income ladder, averaged 2 cents more income in 2004 for each dollar they earned in 1979.
• The average income of the top 5 percent (those on the 95th to 99th rungs of the income ladder) rose by 53%, almost twice the average rate.
• The top 1 percent contributed to a third of the entire national increase in reported income and more than half of that went to the top tenth of 1 percent, whose one dollar in 1979 became $3.48 in 2004 after inflation adjustment.
• For those top tenth of 1 percent, each inflation-adjusted dollar they had after tax in 1979 they had $3.94 left after taxes in 2004.
• For the bottom 60 percent, while their pretax average incomes fell by a nickel on the dollar from 1979 to 2004, their after-tax incomes fell by a fraction of a penny less.

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Judge Said Paper Money Unfair to Blind People

For me, they are fine except there is no way to tell the denominations from the size. Yes, I really have to see to tell them apart. But what if I can't see?

Today, according to CNN, Judge James Robertson of the district court for the District of Columbia has ruled "that the U.S. Treasury Department is violating the law by failing to design and issue currency that is readily distinguishable to blind and visually impaired people." The judge also ordered the Treasury to "devise a method to tell bills apart" and "begin working on a solution within 30 days."

The case was brought up by the American Council of the Blind, which suggested some alternatives, including "embossing, holes punched in the paper or using different-sized bills for different denominations."

Actually, I think a better solution could be printing the Braille codes on the paper money so blind people can touch the code to tell the denomination. This method, however, may not work well when the note is worn out and dots disappear. But holes in the paper? It doesn't look good to me. And you really have to have different sizes to compare with to know which one is which, and that, I feel, may not be convenient to blind people.

Anyway, let's see what design the Treasury Department can come up with to satisfy everybody.

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• Around the PF Blogosphere: November 15, 2007

Do We really Know What We Worry About?

The cover story of this week's Time magazine asks "Why We Worry About The Wrong Things?" The printed magazine won't be available till tomorrow, but I got an electronic version of the story from my subscription service. The main point of the article is that we get scared by low probability events while ignoring common dangers in our daily life. The first segment of the article summarizes some of what we fear and what we ignore:

• We agonize over avian flu, but refuse to take vaccine for common flu which kills 36,000 Americans every year;
• We fear the mad cow disease, yet keep consuming foods with high cholesterol, which contributes to heart disease that kills 700,000 people annually;
• We avoid E. coli bacteria contaminated spinach, but fill our shopping carts with fat-sodden French fries and salt-crusted nachos;
• We install filters on our faucets, run air ionizers in our homes and lather ourselves with antibacterial soap; at the same time, 20% of all adults smoke; nearly 20% of drivers and more than 30% of backseat passengers don't use seat belts; two-thirds of us are overweight or obese.

So do we really know what we worry about?

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“Should I Pay for My Boyfriend’s Insurance?”

My boyfriend and I have lived together for 10 years (no kids), and we get along fine. Recently he found out I can add him to the health insurance I get from the company I work for part-time. He wants me to do this to save him money, but I don't want to. He owns our house and earns 10 times more than I do, and it's hard enough for me to feel independent without adding more entanglements. Am I wrong to say no?

This is a story in CNNMoney today. We have already seen a story before when another woman asked if she had to help pay her boyfriend's thirty-some-grand debt.

Of course, one distinct point of the woman in the story is that she depends on her boyfriend to give her shelter for the past 10 years. As the article said, "asking to be added to your health insurance policy strikes us as a reasonable request coming, as it does, from someone who's been providing you with a home."

Finally, the author of the article gave some advices for people who are "in bounds" and face the same dilemma of trying to be "independent" on one hand and relying their partner heavily on the other:

you're faced with two choices here: earn enough to be genuinely independent or accept the fact that you aren't. What you can't do, however, is take the position that your independence is compromised by the "entanglements" that benefit your partner (like the health insurance), but not by the ones that benefit you (like living rent-free).

If it was me, I don't think I can say No. After I had saved tens of thousands of rent money for 10 years, I don't really have the power to reject such a request, though it doesn't mean I have to do whatever my partner asked me to do simply because I relied so much on my partner. 

If you have this problem, what would be your answer? Yes or No?

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One Credit Card Company, Three Cards, Three Different BT Offers

I have four credit cards from Chase: PerfectCard, Rewards, Sony (from Bank one), and Amazon. Except the Amazon card, all the other three sent me balance transfer offers almost every month and I never hesitated to write myself a convenient check and deposit the money into my bank when the terms were right: 0% APR with a fee cap. So far the highest fee I paid was $75. Though the loan is totally free, $75 is an acceptable price to pay, even for only 6 months.

Yesterday, a BT offer letter from each of the three cards was again in my mailbox. This time the offers were not that appealing: 0.99% till May 1st, 2007. Still low, but not exactly I like. When I was just about to feed my shredder with the checks, I took a look at the fine print. Interestingly, I found the following:

Sony

"A transaction fee of 3% (minimum $5; maximum $75) of the amount of the check applies for each check in this offer."

Rewards

"A transaction fee of 3% (minimum $5; maximum $99) of the amount of the check applies for each check in this offer."

PerfectCard

"A transaction fee of 3% (minimum $5) of the amount of the check applies for each check in this offer."

Except the name of the card, the account number and limit, the three letters are identical, even the check numbers are in sequential order through a total of 15 checks. Yet, they still managed to make a slight difference on the fees for each card. I wonder how they determine what kind of rates/fees to offer. Randomly? It's not based on my payment or credit history for sure.

Then what is it?

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Hmm ……

and how many we have on this planet? Something like 6 billion? Besides, if I spend every penny I earned, would that still mean I am "rich"?

I wonder how they get this number.

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Managing My ING Account with Fidelity Fullview: Mission Impossible?

I have a Yodlee account for a while, but never linked any of my personal account with it. The reason is simple: I am not 100% confident to give all my account numbers, user IDs, and passwords to a company I had no relationship of any kind with, though they seems to be quite popular. Instead, I use Fidelity Fullview, a service that, ironically, is provided by Yodlee! I thought since Fidelity is a well-established company with good reputation, it may be a little bit easier to deal with should anything happen. I know this is not a strong argument, but that's the way how I use Yodlee, through a middle man I can trust.

Anyway, I had my INGDirect account, among other bank, brokerage, loan, credit card, and mutual fund accounts, set up at Fullview, and it was indeed very easy to use. With one click, I can see the latest transactions and balances of all the accounts, though I use the service only a couple of times the most in any month. The connection between my ING account and Fullview started to give me "Incorrect Login Information" since ING rolled out their latest features, including associating my account with a phrase and an image, and some other security questions. I guess I selected 3 that I thought I could easily come up with the answer if the question is presented. And that's exactly the problem: if the question is presented.

Though the connection has been down for a while, I didn't try to fix it until last night. Then I faced an even bigger challenge:

I have no idea which questions I have selected a couple of months ago and definitely don't have answers to all of them. After a couple of failed attempts, I eventually gave up. While I appreciate the measures financial institutions have taken to make sure their customer's accounts are secure, it could be quite a burden to remember not just passwords of dozens of accounts, but also multiple questions/answers associated with each account. If only my home computer is used to access my accounts, I probably won't be bothered by the security questions as the system remembered which computer I used during registration and that is not going to help me keep the answers in my mind. When one day I have to use another computer to access account, it could be long, long process if I am presented with 13 questions and forget which one to answer.

Is there any simple way to avoid the potential headache?

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What’s Your Highest Priority? House? Retirement? Or 529?

One of my friends had a baby last month. While enjoying the parenthood, the couple is also planning for their daughter's future: save for her college. He sent me, among several other guys, an email last weekend for suggestions on 529 plans. After I replied by telling him that I have both 529 accounts and ESA account for my daughter and contribute $100 to each account every month, one guy responded like this:

I am not a good planner. I didn't join 529 now. Maybe in the future. I believe a good lifestyle is first priority, like car and house. The second priority is our retirement. Then goes to kids' college. Of course, if you have enough money (I believe you do), you can contribute to all of them.

And his situation is: started working last year after getting his PhD, bought a new car and a minivan last year, has a two-and-half years old son and a new born, and is planning to buy a house early next year.

While there's noting wrong to live a good life with nice cars and a big house, should these top the priority list when it comes to planning for the future? And forget about taxable investments for a moment, how much can contributing a couple of hundreds to IRA/529 affect his plan of buying a big house? Finally, what makes him feel that after buying the big house he wants, he will have spare money to save for his sons education when the mortgage bill rolls in?

For a newly graduated, is there such a big conflict between saving for house downpayment and saving for his own retirement?

While his sons may get scholarships when they enter college, one thing is for sure: There is no such thing as retirement scholarship! 

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Out of Treat

Last night, I left work a little early than usual to take our daughter to a nearby mall for trick-or-treat, which was scheduled from 3:00 pm to 6:00 pm.

By the time we got there, it was 5:00 pm and some kids were already on their way out. Apparently, the party was almost over. Most of the stores, which did participate, had nothing but an orange note on their doors "Sorry, Out Of Treats," telling people don't even bother to come in and ask for treat, unless you want to buy their stuff. For a handful of stores that still had treats, the candies were probably the cheapest you could find and some just gave kids store-name-bearing stickers bearing, a nice way to make you remember them.

Disappointed? Yes, a little, though my daughter was just happy to be there.

The stores made money from us every day throughout the year, yet they seemed unwilling to spend a penny more on candies for the once-a-year three-hour event! And how much could some candies add to the cost? One hundred? Two hundred? or five hundred? From the time they took to empty their pockets, it was a big number for sure.

When we left the mall at 6:30, the candies in my daughter's pumpkin basket could barely cover the bottom. If the stores are willing to spend a little more on candies and make every kid happy, I am willing to spend more on their merchandises in return.

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Mishaps with Vanguard

Vanguard may be a great company for investing, but my experience with them on non-investing related issues wasn't that great at all. It all began with my Roth IRA transfer that I started the same time last month. Here's the timeline of the process (and it isn't over yet):

• September 30: Mailed Roth IRA transfer forms (my wife's and mine) to Vanguard.
• October 4: Got an email from Vanguard, saying my profile was ready to be viewed online. The email, however, didn't mention anything about my account number which is required to get online access. Besides, my wife didn't get the email.
• October 5 - 13: Nothing happened.
• October 14: Received fund prospects from Vanguard for the funds I own.
• October 16: Called Vanguard asking about account number and was told the confirmation letter should have been sent out on October 4, the day when the account was created. At the same time, Vanguard said never received my wife's application form.
• October 18: Called Vanguard for other issues and was told they actually received my wife's form.
• October 20: Called Vanguard and was told the transfer process was only started on October 13 and had to wait another four weeks to complete. No mail with my account number every arrived so obtained the number over the phone.
• October 24: Called to get my wife's account number and got online access. Sent checks to Scottrade due to delay at Vanguard.
• October 27: Confirmation of my wife's account arrived, but found error in the automatic investment plan (two funds to invest but listed only one).
• October 28: Called to ask for a confirmation letter for my account, but was told they can't simply generate a litter for me because the transfer has not completed yet and I have no funds in my account. My wife, however, did get a confirmation when there is nothing in her account either!

It seems that every time I called, I got a different CSR on the line with different answers and information and I don't know which information is correct. It's understandable that different people may have different views on questions and the answers they give may be different, but there should also be some general guidelines on policy related questions so that the answers won't be totally different. For example, the confirmation letter. From the one my wife received, it's simply a summary of what she put in the application form, no any investment activities involved. I think it should be automatically generated when I opened an account, just telling me what they have on file and let me check if there's any errors (there is indeed an error in my wife's file). However, when I asked for the letter, one told me it should be generated by the time the account was opened, while another told me I have to wait till the transfer is completed. 

Are they overwhelmed that they couldn't get a very simple case straight? 

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