Posted by admin on March 11, 2010
Personal finance from around the web:
- A 46-year-old Pittsburgh woman is suing Bank of America for mistakenly repossessing her home and confiscating her prized pet parrot. The woman's mortgage was up to date, but she says it took her a week to recover her beloved bird and six weeks to get BofA to clean up the mess it left. As foreclosures rise, mistakes like this become more frequent, experts say. [ABC News]
- Everybody knows how important it is to diversify your investments. But don't stop there: Put some thought into diversifying your income. [Five Cent Nickel]
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Posted by admin on March 10, 2010
Personal finance from around the Web:
- Who on television is a surprisingly prolific dispenser of wise personal finance advice? You won't, ahem, view her on the investing channels — it's Whoopi Goldberg. [WalletPop]
- LifeLock, the identity-theft-protection company whose CEO has famously publicized his social security number in its advertising, is paying a whopping $12 million to settle deceptive-advertising accusations made by the Federal Trade Commission. The FTC alleged "scare tactics" and "false claims" by LifeLock. [CreditBloggers]
- Chances are your real estate isn't worth what it used to be. But there are other ways to milk some money out of your property. Try these tips on tax write-offs. [Wise Bread]
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Posted by admin on March 9, 2010
Personal finance from around the Web:
- College financial aid letters are heading to a mailbox near you. Here's how to decode them. [The College Solution]
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Posted by admin on March 8, 2010
One of the key questions faced by investors today, a year after the markets were at their worst, is how safe it is to go back in the water. Given that bonds have turned out to be a better bet than stocks over the past 20 years — and given the steep decline and perhaps shaky rebound in the equity markets — is it time to reassess the primacy of stocks in our portfolios? Will we be better off with the security and steadiness of bonds?
A great answer to that question came last week from Charles Schwab chief investment strategist Liz Ann Sonders. Presenting her outlook on the economy and the markets to a group in New York City, Sonders spotlighted what appears to be a powerful contrarian indicator — that is, measure of how the investing herd is zigging in the market, giving a wise and brave investor a roadmap of where to zag.
The contrarian indicator in this case is a monthly asset allocation survey run by the American Association of Individual Investors, a nonprofit focused on investor education. Since November 1987, AAII has been asking its members for snapshots of how their own investments are distributed — how much of their wealth is in stocks (and stock funds), bonds (and bond funds) and cash (or cash equivalents, such as money-market funds).
In that historical record are some fascinating tidbits. Looking back in the archives (accessible with an AAII membership priced at $29 a year), Sonders found that the time at which investors devoted the the highest share of their portfolio to stocks was in early 2000, when AAII respondents had more than three-quarters of their money in stock.
You remember what else happened around then, right? The S&P 500 Index shot past 1,500 — only to begin a two-and-a-half-year slide down to 800. The Nasdaq's slide from its giddy, early-2000 heights was even more devastating.
When did cash hit its peak allocation in the AAII survey? That would be last March, Sonders learned, when people had 45% of their wealth in the green stuff.
Has cash proved to be a good place to have your money since then? No, it hasn't. The the average money-market yield over the past year, according to Lipper, has been less than one-tenth of one percentage point. In contrast, the exchange-traded fund based on the Barclays Capital Aggregate Bond Index returned 8% over the past twelve months. The total return of the S&P was 37%.
So when did bonds reach their high-water mark in the AAII survey? Last summer, when fixed-income investments amounted to 25% of portfolios.
Hmm. And what do allocations look like right now? As far as bonds go, there's little change.
Notice, Sonders said last week, that the current allocation to fixed-income, at 24%, is still very near the category peak hit last summer. "I think this has implications," she said.
Moreover, said Sonders, following the previous two times in recent financial history when bonds outperformed stocks over a two-decade period, the next five years "hugely" favored stocks over bonds.
Will the AAII continue its predictive streak as a contrarian indicator? We'll find out in a few years.
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Personal finance from around the Web:
- College students are spending too much time drinking and having sex. The solution? A grade-inflation tax on colleges. [Center for College Affordability and Productivity]
- Senator Chris Dodd will propose this week that the Fed should assume regulatory control over big banks ($100 billion in assets or more). [Daily Beast via Financial Times]
- Happy 10th Anniversary JetBlue! Today only, you can book a $10 flight to any of the first 10 cities the airline offered service to from JFK when it launched back in 2000. [Baltimore Sun]
- Amid all of the Oscar hype, how much is that statue actually worth? Based on current gold values, a melted-down Academy Award is worth around $500. [WalletPop]
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Posted by admin on March 5, 2010
Personal finance from around the Web:
- The Chilean and Haitian earthquakes provided a powerful reminder of the devastation a tremor can cause. So why are 88% of insured homes in California not covered with an earthquake policy? Because the policies are really expensive. [Los Angeles Times]
- Which states have jobs right now? Wyoming, Colorado and Louisiana, according to one analysis. But stay away from Michigan, Ohio and Missouri, where employment prospects are still bleak. Check out job growth prospects for all 50 states here. [The Daily Beast]
- Banks have been building branches like crazy for the past few years, but they're finally starting to slow the pace. This year, the total number of retail branches in the United States will decline for the first time since at least 2002. [The Wall Street Journal]
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Will Congress blow a once-in-a-generation chance to help Americans get better financial advice? It looks increasingly likely.
One of the biggest problems people have when they receive financial advice is that they don't always know where a financial professional's motivation and self-interest really lie. When you show up at a new-car dealership, it's pretty obvious what a salesman wants: If it's a Ford lot, he wants to sell you a Ford. But you know that going in, so you can filter what he says with proper skepticism.
The world of stocks, bonds and other financial products, however, is a lot more mysterious. Some professionals are obligated to put your interests above theirs, meeting what's called a "fiduciary" standard. (Think of them as human versions of Consumer Reports, advising you to buy the best possible car at the best possible price.) Others are required only to pass a litmus test known as "suitability," leaving them room to sell you financial products that are a great deal for them, but might not be the best for you. (Think of them as car salesmen steering you toward the model that reaps them the biggest commission but has the worst repair record on the lot.) Still others wear both hats: At certain times when they work with you, they have to meet fiduciary standards, but at other times their recommendations just have to be suitable. You might not even know how they're being paid: Maybe it's a fee you pay them, or maybe they earn a commission from the company whose product they're selling you. Or maybe they make money both ways.
Is that confusing? Of course it is. A RAND Corporation study released by the Securities and Exchange Commission two years ago contains plentiful evidence that even well-educated investors have no idea what financial professionals' obligations are, or where their self-interest lies. For example:
- Ninety-six percent of surveyed investors understood that brokers receive commissions on a client's purchases or trades. But only 34% believed that “financial advisers” or “financial consultants” receive such commissions. Problem is, brokers, advisers and consultants are often the same thing: A “financial consultant” is simply a broker with a new business card.
- Fifty-eight percent of investors thought that brokers were legally obligated to disclose any conflicts of interest. For the most part, they aren't.
- The legal distinction between "fiduciary duty" and "suitability" in the investment world has been around for 70 years, but the American public, after all this time, still has no clue what the terms mean. "Even though we made attempts to explain fiduciary duty and suitability in plain language," explained woeful RAND researchers, "focus-group participants struggled to understand the differences…."
So what does this have to do with Congress? Everything. The financial-protection legislation that's been kicking around Washington contains measures that may change how financial professionals dispense financial advice. But in recent days, reports have circulated that vigorous pro-consumer measures in this area that were proposed last fall are being weakened in back-room negotiations. Most relevantly, the trade journal InvestmentNews and other sources have reported that the Senate Banking Committee, headed by Chris Dodd (D-Conn.), is backing away from a prior proposal to impose the strict, best-interest-of-clients fiduciary standard on brokers who give investment advice. Instead, apparently, the committee will propose that the SEC conduct an 18-month study of regulations for financial advisers and then report back with possible measures.
Supporters of the fiduciary standard hate that scenario. "That’s certainly not good for the consumer," says Bob Glovsky, chairman of the CFP Board of Standards, an organization that certifies financial planners and which has teamed with two other industry groups, the FPA and NAPFA, to lobby Congress on the subject of financial planning services. There's already plenty of evidence — including the 204-page RAND study — that consumers would benefit from a fiduciary rule imposed on brokers, he says. "We know the consumer is confused," says Glovsky. Replacing the mandate with a study, he says, is "really just punting it down the road."
Unfortunately, Congress is looking awfully weak in the knees when it comes to protecting the public's personal finances. Other reports indicate, for example, that Dodd and the Senate Banking Committee are thinking about making the proposed Consumer Financial Protection Agency not an independent watchdog, as originally envisioned, but an office inside the Federal Reserve — an institution which over the past few years proved to be spectacularly terrible at protecting individuals from financial-industry excesses. Let's hope that, before Americans' resolve to shore up financial protection fades away, Congress doesn't lose its nerve.
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Why it's a buy: With proper care, a good mechanical watch — the kind that needs to be wound — lasts virtually forever. (Not so the typical quartz.) Buy used, and you can save 20% or more off the retail price. Plus, the d
ownturn has pushed prices on secondhand watches about 20% lower than they were at the end of 2008, according to Antiquorum, an auction house. The pre-owned watches at right– a 1990s Rolex, a 1950s Longines, and a 1940s Hamilton — are now selling for $1,000 to $2,000 apiece, a few hundred dollars less than before the recession.
The strategy: Buy from a respected maker, such as Rolex or Longines, and you'll probably be able to sell it for as much as or more than you paid for it, says John DiDonato, owner of Farfo.com, a vintage-watch retailer. To ensure that it holds its value, get it cleaned and oiled every three to five years.
Protect yourself: To avoid getting stuck with a fake, buy only from authorized dealers listed on the brands' Web sites or secondhand shops that offer warranties and returns (see nawcc.org).
Posted by admin on March 4, 2010
Personal finance from around the web:
- Meanwhile, Chase is also sending out new cardmember agreements stating that "your account may be in default if any of the following applies: . . . we obtain information that causes us to believe that you may be unwilling or unable to pay your debts to us or to others on time." That may not be the dreaded "universal default," but it's still pretty grim for the cardholder.[Credit Slips]
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Posted by admin on March 3, 2010
Personal finance from around the Web:
- Banks 1, Consumers 0? Many in Washington are crying foul after this morning's buzz about a bipartisan compromise in the Senate Committee on Banking which would nix a proposed independent consumer finance agency by incorporating it into the Fed. [Bloomberg]
- Social Security saviors: your wife, sister-in-law and daughter could all be keeping this payout alive for the next generation. [Economix]
- From pancakes and sausages to a Bahamanian cruise: You can get a lot of free stuff for showing up on your birthday, or by joining a company mailing list. [Generation X Finance]
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