Picking up Nickels

Tuesday, September 30, 2008

Wow, even the CNBC anchors are angry about the financial crisis

Hmm, maybe the news media isn't so objective after all. ;) I was watching CNBC last night and was surprised at the vocal (and sometimes angry) position that normally reserved anchor Mark Haines has taken on the current financial crisis.

During a segment with Hovnanian Enterprises CEO Ara Hovnanian last night, Haines was dripping sarcasm when Hovnanian suggested that the government should step in and help stabilize house prices (see video):

Gee, a man who runs a house building company thinks Uncle Sam should help stabilize house prices.


Not long after, Haines went on the offensive against Trend Macrolytics CIO Don Luskin, a GOP cheerleader (and McCain campaign advisor) who can typically be counted on for the kind of smug and condescending sound bites that make television producers drool. Once Luskin started taking shots at some of the provisions that Democrats wanted to add to the $700 billion rescue plan, Haines lost it (see video):

you are arguing against a straw man! That's number one. Now number two, number two, didn't the market just render its verdict on no bill?


As an investor, I am angry about the greed and stupidity that got us into this mess. I'm also angry that our elected officials are using this crisis as a platform for their foolish partisan politics. I guess that I can understand the anger that Haines must be feeling, but I was surprised to see it displayed on the air. Perhaps the stress of the long hours that CNBC employees are working these days and watching their General Electric (GE) stock options tumble are making them as anxious as the rest of us?


Saturday, September 27, 2008

How the U.S. Government can help banks raise capital

With a $700 billion financial bailout plan currently being hammered out in Washington, I've been thinking about other ways that banks could tap into new sources of capital. I have an idea that some may find outlandish (if not downright Un-American), but what if financial institutions and the U.S. Federal Government actually encouraged U.S. citizens to save? I realize that this is a novel concept, but please bear with me for a moment.

What if a bank in need of capital could quickly attract a huge amount of deposits from people like you and me by offering something like FDIC-insured five year certificates of deposit (CDs) with market-leading rates? Goldman Sachs was willing to offer Warren Buffet a sweetheart deal for preferred stock with a 10% dividend in exchange for a $5 billion infusion. So why not offer attractive deals like this to anyone with some available cash they're looking to put to work?

A bank in need of cash could do something like the following:

  • Offer a 5 year FDIC-insured CD at 7% APY. Make it attractive for the customer to leave their cash in this CD for the entire term by imposing an early withdrawal penalty equal to one year of interest.
  • Control costs by offering incentives like a 25 basis point rate increase for customers that fund these CDs electronically and/or online.
  • Advertise the hell out of this deal in television, print, and online media.
  • Offer this promotion with a fixed end date to encourage prompt investment.

Further, the Federal Government could assist by making savings more tax-favorable:

  • Create a provision for a Roth-like savings account (RSA), where all interest income is tax free. Anyone eligible to open an account at a U.S. bank could contribute up to a maximum of $10,000 per calendar year to a RSA regardless of income. The funds in an RSA could be withdrawn by an individual without penalty at any time for any purpose.
  • Give interest from non-RSA savings the same tax treatment as dividend payments to the shareholders of a company, capping the tax at the 15 percent rate for most individual taxpayers instead of treating it as regular income.


Wednesday, September 17, 2008

Picking up three million nickels

Odd story out of Brevard County, FL this morning of a fatal accident where a United States Treasury truck transporting $185,000 worth of nickels rear-ended another semi on Route I-95 (link).

Workers are blowing the nickels off the roadway in an effort to reopen the roadway. Brown said anyone who might stop to collect nickels -- even one nickel -- would face federal charges since the nickels belong to the Treasury Department


Yikes, I guess I won't be picking up any of those nickels after all...


Monday, September 15, 2008

September 2008 Financial Asset Roundup

Here are my current financial assets as of the market close on September 12th, 2008:

Asset August 2008 September 2008 Change
Checking 230 295 65
Money Market 21,463 21,306 -157
Savings Bonds 14,802 14,851 49
Treasury Bills 0 0 0
CDs 104,724 105,183 459
Brokerage 113,924 106,937 -6,987
401k 93,654 87,639 -6,015
Roth IRA 30,588 28,964 -1,624
SEP IRA 179,530 172,301 -7,229
529 Savings 37,657 36,951 -706
Credit Card 0% Balance Transfers 0 0 0
Total Assets $596,572 $574,427 -$22,145 (3.71%)



The S&P 500 index has been testing the July lows (down 4.11% since my last update) and could be heading quite a bit lower based on the goings on with Lehman Brothers, Merrill Lynch, and AIG:

(chart courtesy of msn.com)

Oil prices continued to fall to below $96 per barrel this morning on news that hurricane Ike did less damage than expected to the Gulf Coast oil infrastructure. Could $75 oil be possible by the end of the year?

Moneywise, the only thing on my radar screen is what to do with the proceeds from the E-LOAN 5.75% APY 2 year CD I opened two years ago. If the FOMC holds rates steady when they meet tomorrow, we'll hopefully see the 5%+ CD offerings continuing for a while. Hard to say what they'll do though, since I think we've still got a way to go with the mess in the financial markets and additional rate cuts could be on the way. At any rate, it's certainly hard to believe that you could get 6% APY CDs at Penfed one year ago.

Thursday, September 11, 2008

9/11 Tribute

Never forget.



Tuesday, September 02, 2008

My annual HMO premium increase smackdown is here

I haven't covered my ever increasing health insurance costs in a couple of years, but it's been on my mind lately since I just downgraded my HMO plan for the third time since 2001 to lock in a 6% increase in premiums instead of the 12% I was facing by keeping my coverage at the same levels.

In exchange for the lower premiums, I'm basically looking at higher co-pays when we require medical attention (office visit $20->$25, ER $75->$100, CT/MRI/PET scans $50->$75). That doesn't seem like a huge sacrifice though, since this option will save us several hundred dollars over the next 12 months as long as we continue to stay relatively healthy.

Now for the numbers. Since 2001, my health care premiums have increased 89% (including three plan downgrades). This HMO Premium History graph shows the grim details:



It goes without saying that I have been concerned about the large annual increases in our health care costs for several years now, but the situation is really starting to become worrisome as our monthly health care premiums will be nearly equal to our monthly mortgage payment. I've looked into alternatives (High Deductible Health Plan (HDHP) with Health Savings Account (HSA) anyone?), but have been unimpressed with what is out there today. Even worse, the proposed health care "reform" proposed by the Obama and McCain campaigns appear to be nothing more than a band-aid approach that do little to address the underlying issue.

At this point, I'm just going to hang in there for another year and hope that I have more options available to me next year. Time will tell...