2008 4-Week T-Bill Rate Update

It has been a long time since I updated 4-week T-bill rates late time (almost a year). The main reason for this once my favorite investment tool being totally abandoned is that, well, there isn’t much to buy right now. The bills are still being offered every week, but the rates has been terribly low as shown in the following plot. Especially since the collapse of Lehman Brothers, the rate tumbled to close to zero as flying to quality stirred up demands for safe heaven and pushed rate even lower.

As I mentioned early when I talked about how to keep our money safe, there are better options out there to let my money grow a little faster than investing in Treasury bills (safety is our goal, but not the only one).

If you are interested in buying T-bills, check out the complete process on how to get started. You can also  use this T-bill rate calculator to calculate your returns, including your equivalent yield based on your state income tax level.

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A Quick Look at Lanzhou, China

As our stay in Lanzhou comes to an end, I’d like to share with you what Lanzhou looks like if you have never been here before.

Lanzhou is the capital city of Gansu province, located in the northwest of China. The city is surrounded by several mountains such as Wuquan Mountain (where the above picture was taken), Baita Mountain, and Lan Mountain.

As the only major city in China with Yellow River running cross it, Lanzhou is taking advantage of it by setting up many parks and recration ares on the banks of the river. One of them is Waterwheel Park, which features giant waterwheels that can usually be seen along the Yellow River as part of the irrigation system.

One of Lanzhou’s famous foods is Lanzhou beef lamian noodle. The noodle got its name because it is made by pulling the dough by hands. How that can be done? I have no idea, but the noodle is delicious.

One of the unique artwares of Lanzhou is calabash with miniature carve. Beautiful, isn’t it? The listed price of those calabashes is RMB 600, or around $85, which is quite expensive for most Chinese. However, if you are a good bargainer, you can get it at a much lower price In China, you can tackle the price of almost everything.

Like many cities undergoing rapid modernization in China, Lanzhou is also facing the problem of pollution. Even in a good day, you can’t see too far in the city because of the smog. And the Yellow River that runs through the city is really a yellow river, not because of pollution but because of the mud that gets into the river

BTW, I noticed one thing that’s quite interesting when I was taking a cab. When the driver opened the trunk, I saw a big tank in there. Can you guess what it is? It’s a natural gas tank! It turns out that all taxies and buses in Lanzhou are running on natural gas instead of gasoline because the former is cheaper and more environmentally friendly than latter. But that’s not the case for private cars.

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ING Direct Lowered Orange Savings Account Rate to 2.75% APY

Well, it didn’t take long for banks to follow the Federal Reserve’s surprising rate cut yesterday to lower their own rates. As I mentioned early, the rate cut, from 2.00% to 1.50%, didn’t help to save the stock market as the Dow took another 2% hit yesterday, but one thing sure to happen is lowered interest rates we will get from commercial banks where we put our money at.

Now ING Direct becomes the first bank that I follow quite closely to reduce its Orange Savings Account rate to 2.75% APY from 3.00% APY. Rates for the Electric Orange Checking Account are also changed as follows:

• $0-49,999.99: 1.50% APY
• $50,000.00-$99,999.99: 3.05% APY
• $100,000.00 or more: 3.25% APY

You can expect more rate reductions from banks you use everyday in the coming days if not weeks. Seriously, if you want to lock in a good CD rate when it’s still available, the time to act is now.

Speaking of CDs, HSBC Direct just announced a new, 6-month CD that pays 4.00% APY. That’s a very attractive rate for locking up the money for only 6 months. The CD is FDIC insured, which is very important now, and requires a minimum of just $10. Check it out if you are interested.

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FICO Credit Scores 20% off Sale

myFICO is currently having a 20% off sale of all three credit scores from Equifax, Experian, and TransUnion. The normal price for FICO scores from all three credit bureaus is $47.85. During the promotion period, which ends October 22nd, you can get them at $38.28. If you are interested, use this link to place an order and promo code FALLFCC11 at check out to receive the 20% discount. Remember, you must purchase all three scores in order to receive the discount.

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Fed Lowered Interest Rate in an Attempt to Halt Stock Market Free-fall

One day after the Federal Reserve Chairman signaled that it’s ready to cut interest rate, the central bank, in a coordinated action with central banks around the world, lowered its benchmark rate by 50 basis points to 1.5%. The emergency rate reduction by the Fed came after the Dow Jones Industrial Average Index lost more than 1,400 points (or 13%) in five straight trading sessions. Elsewhere, the People’s Bank of China announced that it cut one-year bank loan rate from 7.20% to 6.93% and European Central Bank lowered its rate to 3.75%.

So far the government and the Fed have responded to the financial crisis aggressively with bailouts and rate cuts. However, it looks like all previous interventions failed to improve investor sentiment as the Dow closed at 5-year low yesterday. The housing market still shows no sign of bottoming out and the credit crisis seems to get worse. Can the latest intervention from the Fed save the stock market?

With all these uncertainties, one thing that will almost certainly happen is banks will lower their interest rates following the Fed’s rate cut. Maybe it’s time to lock in a good CD rate before it’s gone. You can find some good CD deals in my keep my money safe post.

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Stocks Saved the Worst for the Last, Closing at 5-Year Low

It looks like there’s just nothing can stop the stock market sell-off, not even the hint of a rate cut from the Fed (Bloomberg), which usually got investors excited in the past.

Stock indexes went up briefly at the opening on the news that the Fed Reserve announced that it will buy back short-term commercial papers from issuers. The move was aimed to let people start to lend, so people can borrow, again. However, the initial excitement quickly faded away as traders shifted their focus to the worsening global crisis. At the end of the day, all three major indexes posted deep losses. The Dow Jones fell 508.39 points, or 5.11%, to 9,447.11, the lowest level in more than 5 years. The benchmark has lost more than 1,400 points, or nearly 13% of its value in the past five trading sessions. Year-to-date, the Dow has dropped about 29%, the worst performance in 71 years (Bloomberg). Today’s 508.39-point loss also ranks the 6th on the top 10 largest drops list. Now 4 out the 10 biggest losses happened in less than one month The S&P 500 sank 60.66 points, or 5.74%, to 996.23, which is also a 5-year low, and The drop was the S&P 500’s biggest five-day percentage decline since the 1987 crash, and the NASDAQ tumbled 108.08 points, or 5.80%, to 1,754.88.

Of those stocks I own, Bank of America (BAC) plunged 26.34% after the bank, which recently acquired Countrywide Financial and Merrill Lynch, said the profit in latest quarter fell 68% and it will cut dividend by half to 32 cents per share (dividend distribution of BoA was the reason I bought the shares in the first place) to reserve capital and cover losses from the purchases. In addition, the bank also announced it will issue $10 billion common stocks.

There doesn’t seem to be an end in sight.

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Why Doesn’t My Credit Score Increase When I Pay My Bills on Time?

Following is a guest post from Manshu at OneMint. OneMint is a website created and managed by a finance MBA and provides resources on investing ideas, personal finance, credit cards, mutual funds and the broader macro economic environment.

There is a common misconception that just paying your bills on time will increase your credit score. While the reverse is true, which means, if you do not pay your bills on time, your credit score will decrease. Simply paying bills on time will increase your credit score till a certain point but after that you will be stuck.

Think of this as buying an air ticket. Safety is probably the most important factor and you expect that every airline has taken care of it. As a result when you select an airline, safety is almost never on your mind. So it is never a deciding factor, unless of course the airline has a poor safety record. Safety is a hygiene factor and not a determining factor.

Similarly your lenders expect you to pay on time and by doing so, you are merely doing what you are expected.

FICO says that 65% of the total population pays their bills on time and therefore unless you are doing badly on that count, most of the times it is not really a “determining” factor on whether you get credit or not.

Your credit score is made of five main components and while your Payment History comprises of 35% of this score, it is not enough to push you to the league of the people who get the best credit deals.

To really get at the top, you need to work on the four other aspects:

1. The amount of money that you are using on your card (30%)
2. Length of your credit history (15%)
3. New Credit (10%)
4. Other factors like the mix of credit etc. (10%)

I have found that a good way to increase your score is to keep a few credit cards that do not have any fee and then not use them so much. That way, your available revolving credit becomes much more and the percentage of it, that you use, also goes down adding up points on your credit score.

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Tasty Hot Pot

Have you ever tried hot pot before?

Hot pot is very popular in China and you can find it in many restaurants in China all season long, not just when the weather is cold. I know there are a few Chinese restaurants in New Jersey serve hot pot in the winter, but the taste is just so-so. Actually, tastes of foods in most Chinese restaurants are not genuine (obviously). So every time we are in China, while relaxing and visiting family members and friends, one main task for us is to enjoy real Chinese cuisine and one of our favorites is hot pot.

At this restaurant we went last week, each one has his/her own pot, instead of big pot in the center of the table. In this way, we can each choose our own flavor.

Before ordering the main entry, we first got a cup of green tea, which is very popular in China, and a small bowl of chicken soup. In China, nobody uses teabags (like those Lipton teabags). Instead, we prefer to have the actual leaves in the cup. As you can see, it’s one cup of tea, but full with tea leaves.

You can put almost everything cook-able in the hot pot. Raw meat (beef or lamb, but not pork), fish, shrimp, vegetables, tofu, anything you can think of. Here our choice is beef. The beef, either lean or with a little fat, is sliced very thin, so thin that only a few seconds after putting it in the pot and stirring a little bit with chopsticks (after the meat turned from red to white), it’s ready to be served. That’s why we call it shuàn (more like rinse), not actually cook.

In addition to beef, we also ordered a few kinds of vegetables. Unlike beef, you can’t just rinse vegetables in the hot pot. They have to bee thoroughly cooked. Usually, we just put dump them in the pot and wait them to be ready. At the same time, we can just rinse the meat

Now, my hot pot is boiling and it’s time to enjoy the food. My choice of the hot pot stew is numb and spicy (má là) with lot of chili oil. Usually, the soup base isn’t just water. Most of the time, it’s made from chicken or pig broth for better taste. My wife had a seafood hot pot.

Since hot pot requires the minimum amount of preparation and cooking, eating at restaurants specializing in hot pot is usually cheaper than other restaurants. The total cost for this four-person meal is just RMB 160, or about $25. Not expensive, but sure delicious and tasty

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Is Gold a Good Choice to Hedge against Inflation?

Early last month, I had a post on gold when the bullion recorded its biggest one-day increase ever in price. If you follow this blog long enough, then you know I have talked a lot about good. My investment in gold is not the metal itself, though I bought a couple of pieces of hardware. I invest in gold through a mutual fund, Tocqueville Gold Fund (TGLDX), which mainly invests in precious metal miners (a better choice to invest in gold without physically owning the metal is via gold ETFs such as SPDR Gold Shares (GLD)). When I first bought TGLDX, it was in 2002 when gold was somewhere around $300 an ounce. I never imagined gold could go over $1,000 back then (otherwise, I could have bought a few more gold coins ). The reason for me to have gold in my investments was, well, I need some exposure to the precious metal sector as a diversification.

I never bought gold because I want to hedge against inflation and I didn’t buy gold coins because I want to have them as an investment (I could have better returns if the money was invested in stocks). But there are many traders do use gold as a hedge, against inflation, falling U.S. dollar, geopolitical tensions, etc. And there are always demands for gold jewellery from countries like China and India.

After I posted then entry, long-time reader Tim gave his take on using gold as a hedge:

gold is in a bubble. there is no underlying fundamental that justifies the high price. just like in the early 80s, gold with precipitously drop like two tons of cement, and hopefully Guido didn’t cement your feet in when it does. we are no longer on the gold standard, yet people have this antiquated notion that gold is a hedge against inflation. well since the last bubble and precipitous drop, gold remained flat and declined, so how good is that hedge? that’s right, terrible.

moreover, gold is traded like stocks now, unless you actually buy gold bullion, which most people these days do not. since you don’t own the hard gold asset, it isn’t worth anything because you can’t trade it if the world goes belly up. the premise behind gold being inflationary precaution is because the antiquated notion that you can trade gold as currency. well, with investment shares, you don’t have the physical commodity. so tell me how you own gold? that’s right, you don’t.

even if you did physically own gold, it isn’t worth the bullion or share price, it is worth scrap price which is far less than market price. again, unless gold by weight is being valuated to exchange for goods and services, it isn’t worth the share trade price or even the true bullion price.

people were very happy when gold was dramatically rising past $1k/oz, i’m sure those people were sad when it precipitously fell towards $700/oz. again, diversification and look at the fundamentals. you can ride the wave now, but gold will go back down to $300-$500 eventually and there won’t be any warning when it does in the current euphoria over gold. again mitigate your risk on gold as well.

What do you think of gold? Is it a good choice to hedge against inflation? If not, what can be the choice?

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Ebates $10 Referral Bonus

Ebates is an online shopping portal that offers its members discounts and rebates when they shop through their websites. Early this year, they had a promotion which gave $10 signup bonus for each new member being referred by an existing member. I passed along that offer here at this blog and a few people took advantage of the promotion. Now the promotion is back again.

From now till October 31st, if you sign up with Ebates and make a qualified purchase, you will receive a $10 bonus. Interested? Use Contact page to send me an email to request a referral link, or simply use this link link to sign up, make a purchase and enjoy the $10 free money

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TradeKing Promotion: Get $50 Bonus in October

Just a quick announcement.

In August, TradeKing had National Friendship Day promotion and from what I can see, it was quite successful. Now TradeKing is again giving a $50 bonus in October. To receive the bonus, you MUST use this link to open a broker account, fund the account with at least $2,500 and make a trade between October 1st and October 31st. The minimum initial deposit is higher than the $1,000 TradeKing usually requires when opening an account, but the $50 bonus offer doesn’t come very often

Check out my TradeKing review to find out more about the brokerage including account opening process. If you are interested, just use this link to get an accout. No referral necessary.

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What Zecco Has Done to Improve Their Service: An Interview with Zecco Trading

It has been more than one year since I became a Zecco customer. Since then, I have used my Zecco account quite actively (especially with my play money) and shared my experience. Like many other Zecco customers, I like the idea of paying zero commission to buy stocks, but I had quite some frustrations with their service, the website and those quick policy changes in the early stage.

A couple of weeks ago, with the help from Loren Cheng, VP, Head of Product Management, I had the opportunity to have a written interview with Craig Prickett, VP of Marketing at Zecco Trading. With the interview, I was trying to find answers to questions I have for some time: where Zecco stands in the industry, how they addressed concerns regarding their customer service, and what improvements they have done and will do to give customers a better experience (I noticed some changes recently myself).

Did I get what I was looking for? Read the interview and find out yourself.

Sun: Zecco has been around for more than 2 years now, but there are still many people not familiar with the company. Could you please give us a brief introduction of Zecco and its products?

Craig: Sure. Like you said, we are a little over 2 years old. In fact, the company was “born” on the 4th of July 2006. It started with the belief that there are independent investors out there who are comfortable making their own decisions and who would rather see their money go toward their investment return instead of paying higher commissions. So far, it’s working: about 160,000 members have signed up with Zecco Trading, and they have opened around 100,000 trading accounts. We get a little over 1,000,000 site visits every month and growing. We provide online trading for equities, options, and mutual funds through Zecco Trading. We provide some research from companies like S&P and Motley Fool. We’ve recently added in education resources, particularly for those interested in learning about options trading. And we’ve got a comprehensive investor community for those investors interested in finding other “like minded” investors and opportunities to explore ideas.

Organizationally, Zecco.com is a financial portal of Zecco Holdings, Inc., which also provides access to Zecco Trading, Inc.’s trading service. Zecco Holdings, inc. is not a securities broker/dealer, all securities and investments are offered to self-directed investors by Zecco Trading, Inc. which is a member of FINRA /SIPC, and secured through VeriSign. In other words, we have a full-blown broker/dealer for handling the regulated investment side of the business, and we have a holding company that manages the non-regulated side of the business like the community. For those that want to know more about our company structure and organization, they can check it out at http://www.zecco.com/trading/TradingDisclosures.aspx

Sun: Since I started to follow Zecco Trading, I have noticed some back-and-forth on its policies. First there was a $2,500 account minimum, then it was reduced to $1,000, but later the limit was brought back per last year. These changes gave me a feeling that Zecco is not stable. What’s the reason for making these frequent changes?

Craig: Yep, Zecco Trading has had some pricing changes – both in the minimum equity balance as well as the number of no commission trades per month. As I’m sure you can appreciate, in addition to giving our customers an amazing deal where they can save money, Zecco Trading needs to make money. As a new business, it just took us a little while to get enough data to find the right balance.

Sun: I hate paying commissions to trade stocks, so Zecco Trading is the perfect place to buy stocks for me. However, the original monthly limit 40 free trades. What’s the reason to reduce the limit to 10?

Craig: I hear you, and I wish we could give away unlimited free trades. But basic economics drove the change. As I’m sure you know, there is a small cost the broker/dealer incurs from each trade order, and there are a series of other costs incurred just for the broker/dealer. While Zecco Trading makes good money on options trading, margin interest, and paid equity trades, the original limit was simply too high to be offset by these revenue streams and was not sustainable over the long term. We still think it’s the best deal available - who else give you 10 free trades per month with just $2,500 net equity?

Sun: From what I heard from Zecco users, most complaints are about Zecco Trading’s customer service (a recent SmartMoney survey didn’t give Zecco Trading a good mark on that). For example, I got this comment from a client last month “I have gone through the setup and funding process. I scheduled a transfer and they executed it early causing a NFS charge from my bank AND a 2$5 fee from them. My bank refunded the bank fee even though it wasn’t their fault. Zecco refuses to refund their $25 fee even though it is clear they pulled the money 2 days early. Also, instead of showing a -$25 balance, they posted a -$20,025 balance and issued a margin call on my account. I was then in the hole 20K+ before I even started trading. I guess this is how they fund 10 free trades a month.” And there are quite some confusions about opening an account, executing a trade, or withdrawing money from an account. From what I know these problems are not new. A lot of people have the feeling that you got what you paid for. Why are so many confusions? What has Zecco Trading done to address these issues?

Craig: There’s no doubt about it. Last year we had some growing pains in our service organization.

That said, I’m really happy with the way Zecco Trading responded. We made and are continuing to make significant investments in improving our service levels. At the beginning of the year we brought on new service center executive management, who added people and systems to begin the process of building out a world class service experience.

I can’t speak to the specifics of the example you mention, but I can tell you that our service levels have improved considerably from last year. For example, we’ve halved the average time Zecco Trading clients wait to speak to a service representative since just earlier this year; a client’s current average wait time is only 60 seconds. But, this is not a perfect process… there are times when it seems like a specific customer is under a dark cloud and no matter what we do that cloud won’t shake off. Anyone who has been in the service industry knows what I’m talking about. Our management and energy has been around improving overall service. Read our CEO blog for more information about our service changes- http://www.zecco.com/blogs/zeccoscoop/You-spoke-We-listened-Were-delivering.aspx

Specific to our Web site, this summer we’ve been placing a lot of focus on improving some key online experiences – for instance we enhanced our money transfer user interface – it’s very easy now. We are introducing a much cleaner online account opening experience later this month and we’ve got a new trading dashboard that made its debut earlier this month.

Sun: I myself contacted Zecco Trading a few times in the past for various problems that I had and every time I called, it bothered me a little that Zecco Trading didn’t even have a toll free number. Now I am glad to see that Zecco Trading has a toll free customer service number, but the web site is still not that user friendly compared to other brokers I am using. What other improvements has Zecco made? Does Zecco plan to upgrade the web site to improve user experience?

Craig: I’ve got to tell you, I love seeing our customers give us feedback and how we are able to take action. I’ve read customer comments where they say that it is a “night and day” difference between the Zecco of today vs. the Zecco of just a few months ago.

In addition to the changes that I mentioned earlier, we are currently engaged in a significant project to reengineer the backend architecture of our site – which in turn, will allow us to have greater flexibility in not just the user interface, but also delivering content and trading functionality in ways not seen before. A big element of the user experience is the speed at which the pages refresh. We’ve increased the speed of page loads by a factor of 3 this summer, and with our systems changes, we will see another dramatic improvement in the page refresh speed. We are pumped about what the site is going to be able to do next year – which is not that far off.

In terms of trading functionality, we’ve made huge strides already, and you’ll see another huge improvement early next year.

Sun: Finally, ZeccoShare. From what I know Zecco was one of the first to offer a community for its customers. Now, many, including Scottrade, TradeKing, and TD Ameritrade, have similar service. What’s the purpose of setting up an online community? Do you have any suggestions on how investors can benefit from it?

Craig: We love the entry of the investing industry into community. We firmly believe that it represents the next revolution of individual investing and the more it becomes mainstream, the more investors will benefit from it. The purpose of the community is to give investors the opportunity to exchange ideas, learn, and share with each other for the purpose of making more informed investment decisions and hopefully, making more money.

I think the best analogy is to observe investor behavior at trade shows or conferences. The action is not in the speeches or meetings; it’s in the hallways where investors exchange ideas and eavesdrop on conversations between passionate investors. I think of the online investment community as that hallway discussion on adrenaline.

While we’ve seen the larger brokerages dip their toes in community, they’re mostly dealing with early 90s modalities: message boards. There have always been problems with this old model of investing community. (1) you never knew if the guy you were talking to was a lousy investor and you really shouldn’t be listening to him, or worse (2) if he was just trying to pump up some thinly traded penny stock and dump it on you.

At Zecco, we’ve taken community light years ahead of that model by allowing users to create individual profiles, publish their REAL holdings, REAL trades and ACTUAL, VERIFIED performance. Now you know exactly what this guy is buying and selling, and exactly what his performance has been. So you now have transparency and credibility.

Plus we offer a range of additional tools that allow members to find other like-minded members. They can sort based on rate of return, holdings, investment objectives and so forth. For some investors, they like to start at the beginning, and indeed, the beginning investing forum is one of our most popular. Others may have a specific security or strategy in mind and begin to engage in conversation with other investors that have experience in their particular areas of interest. And like viewing consumer product comments on Amazon.com, many of our members lurk around and capture snippets of comments from various community members that may influence their buying decision.

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Dow Jones Posts Largest Point Drop Ever

While I was sleeping in China, something ugly, very ugly happened on the Wall Street and on the Capital Hill.

The first I noticed when I turned on my laptop this morning was headlines like this Dow posts record point drop as House rejects bailout. As a result, major indexes suffered huge losses. The Dow Jones sank 777.68 points, the largest point drop ever, or 6.98%, to 10,365.45, the S&P 500 lost 106.59 points, or 8.79%, to 1,106.42 and the NASDAQ declined 199.61 points, or 9.14%, to 1,983.73. Another piece of disturbing news is Citigroup agrees to buy the banking operation of Wachovia for $2.2 billion, preventing the bank to fail only two days after Washington Mutual was taken over by the FDIC. Now, the nation’s banking industry is dominated by Bank of America, JPMorgan Chase, and Citigroup, controlling 30% of the total deposits. Early on Wachovia was in talks to merge with Morgan Stanly. That’s not going to happen now.

I have updated the 10 largest drops of the Dow Jones list because today’s 777 points drop of the benchmark is the No. 1 loss point wise. Three of the top 10 spots were occupied by the losses of the Dwo in less than two weeks.

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Washington Mutual’s Failure Hurts Some Mutual Fund Investors

On September 25th, Washington Mutual (WM), the Seattle based loan and savings giant, was seized by the FDIC after depositors withdrew more than $16 billion from the bank in 10 days over concerns that the bank, unable to find a buyer quickly (the talks and rumors on potential buyers have been going on for a while), may not survive. The bank didn’t make it eventually. So far this year 14 banks have failed including WaMu, which is also the largest bank ever in history to go under with $310 billion in assets.

While savers can get their FDIC insured deposits back ($100,000 for single accounts and $200,000 for joint accounts, more details on how to protect against bank failure), investors who own WaMu stock won’t be as lucky because the stock is worthless now and the investments are not insured by anybody (check out whether my investments are safe if my broker fails for more). Even for those who don’t own the stock directly, they may still feel the pain if the mutual funds or ETFs they own in their 401(k), IRA, 529, or regular investment accounts invest heavily in WaMu. On September 26th, I received an email from Oakmark Funds regarding one of the impact of WaMu’s failure on one of their funds.

From Morningstar data, the top 20 funds with the largest share of WaMu are (% of the fund’s assets on WM):

• Oakmark Select (OAKLX): 4.85%
• Touchstone JSAM Institutional Lg Cp Val (CIJLX): 3.76%
• Touchstone JSAM Institutional Value (CIJVX): 3.46%
• Touchstone Large Cap Value (TLCAX): 3.37%
• Transamerica Partners Instl Val (DIVLX): 3.32%
• Transamerica Partners Value (DVVLX): 3.32%
• Oakmark Global Select (OAKWX): 2.78%
• Dreman Contrarian Large Cap Value (DRLVX): 2.69%
• DWS Dreman Concentrated Value (LOPEX): 2.65%
• Fidelity Select Home Finance (FSVLX): 2.55%
• DWS Dreman High Return Eq (KDHAX): 2.37%
• ING Large Cap Value (IVLAX): 2.24%
• Oppenheimer Quest Balanced (QVGIX): 2.19%
• AIM Financial Services (FSXSX): 2.00%
• Dreman Quantitative Large Cap Value (DRQLX): 1.92%
• Diamond Hill Financial Long-Short (BANCX): 1.78%
• Columbia Global Value (NGLBX): 1.65%
• Schwab Financial Services (SWFFX): 1.62%
• Monetta Mid-Cap Equity (MMCEX): 1.31%
• Rydex Banking (RYKIX): 1.29%

Fortunately, I don’t own any of the above funds in any account.

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Zecco Gives Unlimited Free Trades in October

Zecco recently announced that it will give its existing and new customers unlimited free trades in both stocks and options. The online discount broker has been offering the standard 10 commission-free trades every month for its members with at least $2,500 initial funding in their accounts since last year. This new program will, even though temporarily, remove the free trade limit for the month of October. According to their announcement, trading volume in September was the heaviest in the firm’s history (Zecco was launched in July 2006) and, apparently, caused difficulties in using their website. As an appreciation for their customers who stick with them through this period, the company decided to make this offer.

Zecco said their “system activity increase by over 450%” in September, which means that many people are taking advantage of the unprecedented market volatility to better position themselves. However, I didn’t unload any of my holdings this month except some bottom-fishing trades that got busted (such as Freddie Mac and Washington Mutual). Even with these trades, I didn’t do all of them with Zecco (you can see my trades with my Zecco play money). As for this offer, I probably won’t make much out of it either since I am on vacation in China right now and there’s 12-hour time difference. Even if I am available, I don’t know whether or not I will do anything differently just because I can trade as many times as possible without paying any fees. To me, 10 free trades per month is more than enough.

Anyway, details of this offer include:

• The no-commission stock and options trade offer applies to all Zecco Trading accounts in good standing.
• The offer applies to equity and options trades, including multi-legged options orders and all options contracts.
• Mutual fund trades are not eligible for the offer.
• There is no minimum equity balance requirement or minimum trade volume restriction.
• All account types are eligible, including IRA.
• The offer is effective for equity and option trades placed and executed 10/1/08 through 10/31/08. The standard free trading program and options pricing will resume 11/1/08.

If you are interested in getting a Zecco account, check out my Zecco review to find out how to open account.

BTW, I am going to post an interview with Zecco Trading next week which will give us some insider’s view on Zecco’s status and improvements they have made (I had quite some complains about their service in the past). The interview will have extra information that you won’t find anywhere else. So stay tuned

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• Zecco Promotion: Lowers Account Minimum, for now, but Keeps the News like a Secret

I Lost $250 on WaMu

Two weeks ago, I bought 125 shares of Washington Mutual (WM) at $2.00 apiece. Back then I was hoping that somebody (like JP Morgan Chase) would quickly buy the thrift to avoid a failure. WaMu stock even moved over $4.00 briefly last Friday when the bailout plan was first announced. I didn’t sell my shares when I could have made 100% profit and the largest loans and savings provider eventually failed as customers rushed to withdraw $16.7 billion from the bank since September 15th despite the bank has repeatedly said that it has enough capital. It’s funny that just three days ago, on September 22nd, WaMu announced that it increased the interest rate of its online savings account to 4.00% APY, the highest rate out there, in an apparent desperate move to stop the run on the bank. But their latest attempt also failed miserably.

Well, WaMu has been taken over by the FDIC and its deposit was acquired by Chase as expected. Though depositers are protected, shareholders are left with nothing.

And I lose $250 with my bet on WM

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Another Historical Moment

So I didn’t have the chance to watch the opening ceremony of the Olympic Games live this summer in Beijing, but I did have the opportunity to “witness” another historical moment when I am in China: the live broadcast of the launch of Shenzhou VII spacecraft last night (09:10 am EST).

This is China’s third manned space mission in five years, which also includes its first ever spacewalk. As an Chinese I am proud of what the country has achieved in its space program (China also launched its first lunar probe last year). At the same time, I am also disappointed that a country can put men into the space has failed to guarantee the safety of the food for ordinary people. That’s a shame.

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The Market is Plummeting? – No Worries

This is a guest post by Tanesha Morgan, writer for Personal Finance Analyst. Personal Finance Analyst is an online community of bloggers dedicated to taking the mystery out of money and helping you to live a happier, more successful life with the money you have.

Did you catch a glimpse of CNBC today? Yesterday? Any day over the past year? Then you have probably heard all gloom and doom reports about the plunging stocks market. It’s really enough to evoke panic. And it has… investor confidence is low… people are scared. But I am here to tell you… don’t worry. It is not as bad as it seems.

Actually a declining market presents the perfect opportunity to invest more money. It is like going to a mega sale at your favorite store. You can pick up all kinds of great stuff at a cheap price. Nobody gets worried when shopping at a super sale… people actually get excited about it. Well, we should also get excited when Wall Street has a super sale on stock.

We have all heard the concept of buy low and sell high. It is a really straight forward investing concept – and it works! However, when employing this strategy, there are some important things to keep in mind.

Stick with companies that have a long history of proven financial strength and growth. Kimberly Clark, Coke, ExxonMobil and General Mills are great examples. These are solid companies that have been around for awhile. Everybody knows their names and everybody uses their products. While Enron had a long history of strength, most people never knew or heard of Enron until 2000. And if the media had decided to focus on a different hot topic, many of us still would not have heard of Enron.

Don’t buy willy nilly. Do a little research and run some valuation analysis on the company. We have all heard of Merrill Lynch. But even their name recognition could not save them. Motley Fool offers a great valuation tool, Inside Value. There is a small fee, but you can try it out free for 30 days. (No, I am not getting a commission… it really is a good resource.)

Let your fears go. Realize that this is a good time to start investing, to continue investing and to invest more. In a previous life, I worked as financial planner. And amazingly, the most difficult part of the job was convincing people that investing in the stock market is a good thing… and one of the best ways to accumulate wealth. Most people were concerned that is was too risky.

Yes, there is a risk. But risk is not necessarily a bad thing. In order to reap reward, we have to accept some level of risk. And besides, we take risk all the time. We encounter all types of risk in every day life. Driving in a car, eating out, crossing the street… but those risks do not halt our lives.

Determine your risk tolerance. Invest within that tolerance… and let it go. Every 5 or 10 years or so as your life circumstances changes, you may need to reevaluate your risk. But in general, let it go. Oh yeah… and turn off CNBC… I would not want you to have a mini heart attack every time a ticker symbol scrolls across the bottom on the screen.

Doing nothing is the biggest risk you can take! Investing in the stock market, when done wisely, is always a smart choice. And investing today while prices are low is the smartest choice. I would not recommend strategies such as trying to time the market or day trading… but strategies such as buying low and holding long will never fail you.

Bear markets… market corrections should be thought of an opportunity, not a tragedy.

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A Long Day Yesterday

Greeting from China!

I spent most of the day yesterday on the planes. First I asked a friend to drop me off at a local New Jersey Transit train station near where we live so I can take the train to Newark International Airport. Actually, it was the first time I took a train to the airport, so I have no idea how hard it could be when I also had to carry two pieces of luggage (my wife took the kids with her already).

Well, it turned out taking a train to the airport is very easy, even it was in the morning rush hours. The train first took me to Newark Penn Station where I transferred to another train on a different track. After only one stop, I got off the train at the airport station to take the Airtrain, a monorail connecting all three terminals of the airport. Ten minutes later, I was already checking in my luggage. Living 50 miles from the airport, I thought driving was the only option. Not so (since I don’t travel much, it took me until know to find out). The total time from leaving my home to arriving at the airport was less than two hours. Not bad at all. If I travel alone next time, I will just opt to take the train to the airport, instead of having my wife driving me there.

Then there came the hard part of this trip: the 13-hour flight from Newark to Beijing and the distance is longer, 7,292 miles, not 6,000 miles as I thought. We go back to China about every two years, but I never paid attention to the distance before. And before the only direct flight to China we had was from JFK in New York, until Continental won the right to serve this route three years ago. I heard that Continental is also bidding to provide daily direct flight from Newark to Shanghai. If it wins, it will save us a lot of time.  Airliners are reducing domestic flights lately to save money (and charge extra fees for every checked in baggage), but they are not cutting back flights to China. With a large Chinese community in this area (maybe the largest in the nation?), direct flight to China is a lucrative business. The plane is always full!

While I was waiting to board, I took this picture of the plane which was going to take me to Beijing.

And on the plane, I shoot this picture of the flight map. Instead of going west, the plane went north, going through Canada, Greenland, Russia, and Mongolia, before landing at Beijing Capital International Airport at 2:05 pm on September 24, local time (there’s a 12-hour time difference between east cost and China). While the Olympics was gone (the Paralympics also ended last week), the signs are still everywhere.

Then after waiting another two hours at the airport, I was on a China Eastern Airlines plane to go to Lanzhou in the northwest of China to meet my wife and children. That’s another two-hour flight.

Things have changed a lot in China. I remember when I was a college student more than 20 years ago, I had to travel nearly 40 hours by train to go home, which was some 2,000 kilometers away, during the spring and summer breaks and it was lucky to just have a seat on the train. Travel by air was rare back then and most people (including me of course) couldn’t afford it. Now the one-way ticket to Lanzhou, about 750 miles from Beijing, is about RMB 1,800, or around $250. Still not that cheap, but many are now choosing planes and that’s why I bought a few shares of China Southern Airlines (ZNH) early this year

On the plane to Beijing, I was sitting next to an American couple. They told me this is their first time to China. They will stay in Beijing for a few days, then go to Tibet. I have never been to Tibet before. Maybe I should. Some days

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Going on Vacation

Yes, I am on vacation, for a month!

By the time this post hits the blog, I will be sitting in a Continental Airlines plane in Newark Airport waiting for taking off. My destination is Beijing, 6,000 miles away. It has been a long time since I was on vacation last time, more than two years, so I am excited to finally make the trip (the 12-hour flight isn’t that exciting though). In addition to Beijing, we will go to other cities including Shanghai to visit families and friends. When in Beijing, we will sure check out the Olympic venues. The games is over, but the sites are still worth a look

While the trip has been planed for some time, one thing we didn’t expect is what’s happening in China now: The contaminated milk! As the scandal unfolding, we decided to add one more item in our luggage, a can of formula. Our younger daughter didn’t drink any formula since she was 12 months old, but we have to be prepared just in case. It’s sad to see that the glories from staging the successful Olympic Games was so quickly taken over by the full blown scandal

Anyway, the posting will be light in the next few weeks. I have some guests posts scheduled when I am away, so there will still be fresh contents. And if I see anything interesting in China, I will post it here to share with everybody. So make sure you come back and check it out

See you in China!

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WaMu Online Savings Account Now 4.00% APY

Washington Mutual keeps their effort to lure new account, increasing their online savings account rate to 4.00% APY (as of now, their website hasn’t been updated yet). The latest rate change puts WaMu at the top of the interest rate table. To get the 4.00% APY, you need to open a WaMu Free Checking Account together with the savings account or linking to an existing Checking Account. Having both the savings and checking account can also eliminate the monthly service fee. More on the savings account can be found in my previous post.

Seriously, the 4.00% APY is hard to resist. Though WaMu’s stock has been hit pretty bad recently, the bank is a member of FDIC (you can use FDIC’s Find Bank to get WaMu’s FDIC certificate number), so I am really worried about the safety of the money (under the limit of course). I have mentioned a few times that I am considering a savings account with a better rate and my previous target was DollarSavingsDirect, whose rate is 3.75% APY. Now I need to think again what I want exactly.

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Keep My Money Safe and Let It Grow

Where do you keep your cash now?

In August 2007, when this crisis was still in the early stage, I talked about where to put cash in an uncertain market. One year later, the uncertainty remains and things are not getting better. The housing market, the stock market, and the overall economy. All struggling. In fact, risks have increased dramatically.  Three of the five largest investment banks have disappeared and the largest insurer has to be rescued by the government. One year ago, what happened today was just unthinkable.

The environment has changed a lot in one year. What seen as safe investments (such as money-market funds) are not as safe now as they used to be. With all the uncertainties around us, we want to safeguard our hard-earned money, which is the top priority, and let it grow at the same time. For that, we are not going to put our money under the mattress, which neither is safe nor can it grow. So what options do we have now?

Online Savings Accounts

This is, and has always been, our first choice for safety, liquidity, and returns for cash that we don’t want to invest. Though the number of banks that failed this year has increased a lot, we are not terribly worried about our banks and the majority who responded to my poll after the collapse of IndyMac shared the same view (more than 71% respondents said they are not concerned). As long as my banks are FDIC insured, which they all are, we are not going to lose a penny (within the limit of course), even if the bank fails (check out how to protect your money against bank failure).

While every FDIC insured online bank is safe (in the sense that the money won’t be lost), the returns are different. If you are like me who is always looking for higher returns, then check out these high-yield online savings/money-market accounts:

• EverBank Money Market Account (details here and here): 4.65% 3-month Bonus Rate, 3.51% on-going APY, 3.82% first-year APY, $1,500 minimum;
• DollarSavingsDirect Savings Account (details here): 3.75% APY, $1,000 minimum;
• FNBO Direct Online Savings Account (details here and here): 3.50% APY, $1 minimum;

In addition, there are also banks with less attractive rates, such as HSBC Direct (3.25% APY, details), E*Trade Financial (3.30% APY, details), IGoBanking (3.28% APY, details),  WT Direct (3.31% APY, details) and ING Direct (3.00% APY). Of course, always make sure the bank of your choice is a member of FDIC and don’t go over the insurance limit!

Certificates of Deposit

The second option is certificates of deposit (CD). However, for short-term CDs (less than 12 months), the rates are hardly any better than rates from online savings accounts, except those promoted as limited time offers, such as WaMu’s 5.00% APY 12-month CD promotion some time ago. In addition, CDs usually require much higher minimum, in addition to the fixed term. If you can go for a longer term, then there are attractive good deals out there. For example, ING Direct just has a promotion for 18-month CD for 4.50% APY. Other good 1-year CD products are:

• VirtualBank: 4.45% APY, $10,000 minimum;
• GMAC Bank: 4.35% APY, $500 minimum;
• E-Loan Bank: 4.35% APY, $100,000 minimum;
• AmTrust Direct: 4.30% APY, $1,000 minimum
• Umbrella Bank: 4.10% APY, $1,000 minimum;
• Capital One Bank: 4.00% APY, $5,000 minimum;

With CDs, you can lock in a good rate when it’s available, but that’s just one side of the story. It’s good to lock in the rate if you expect the interest rate to go down in the future. That may not be the case now. The Fed has kept its benchmark rate steady for quite sometime, but that could change if the inflation situation gets worse. If the interest rate starts to rise,  better deals may be yet to come.

Treasury Bills

One year ago, 4-Week Treasury Bill is still one option for short-term investments. But now … unless you want to get close to zero return for your money (the latest 4-week rate is a meager 0.304% APR). Government bonds are still the safest investments, but the return is probably the lowest.

Don’t Forget Investing

Do you see this market turbulence as an opportunity?

Though I didn’t make big investments during the market downturn, I did buy a few beaten down stocks when I thought the time was right. At the same time, I have maintained my regular mutual fund purchases. More importantly, I didn’t sell anything because I don’t think getting out of the stock market when it is down is the right thing to do if time is on my side. A couple of days ago, Jonathan at My Money Blog asked two questions when selling stocks. My answer is

I always ask myself “Do I need the money now?” when making a decision on selling a stock and the answer I have is “No” most of the time (the exception is when I need to raise money to buy other stocks). So I basically keep buying even though some stocks have suffered badly recently. I am not a fund manager, so I don’t need the performance number to please anybody.

I have patience

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Weekend Linkage - September 21, 2008

The Money Writers and beyond

Building Wealth in An Age of Thieves Investors were wiped out when Bear Sterns, Lehman Brothers, AIG, Fannie and Freddie failed. How to make investing safe with all the uncertainties out there.

Curb Your Shopping Habits: How to Recover from a Huge Impulse Buy How about get rid of impulse buy all together.

How the Market Crisis can Help your Retirement If you believe the downturn is an opportunity, yes, it will help your retirement in the long-term