What's the most you've spent on fireworks for one Fourth of July?
With a little under a week to go, my household has spent just a smidge over a hundred bucks on multicolored pyrotechnics and assorted versions of Dismemberment in a Tube.
And of that hundred bucks, a hefty chunk was for a 24-piece set of Excalibur shells. I can admit it: My inner Beavis always wanted to do some of these...
Anyway, this is the most I can remember spending in quite a while ... probably back to my high-school days. Which is ironic, because I feel about as unpatriotic and generally politically discouraged these days as I ever have.
Given the state of things economically, I'm also curious: Wonder how the fireworks stands will be making out this year...
I was never a particularly big fan of James Scurlock's documentary movie Maxed Out. It was worth watching, I suppose. But in my opinion it veered too far into the realm of banker-bashing, and hardly set foot in the land of consumer responsibility (or lack thereof).
In my quickie Maxed Out movie review, I ended with: "Netflix can have this one back tomorrow ... without so much as a second viewing on my part." While it's been a couple of years since that writing (almost to the day, actually), I'm pretty sure I held to that declaration, and never watched Maxed Out again.
So when I was walking through Barnes & Noble a few weeks ago, I almost bypassed the CD audiobook copy of Maxed Out languishing in the bargain bin. Its cost was under $7; that, plus the fact that I've lately been looking for a few audiobook to liven my commute, convinced me to overlook my "not-so-impressed" impressions of the movie and fork over for the audiobook version.
In a nutshell: The audiobook is way better. (Heck, I've almost completed my second listen.)
It's still not a great work of nonfiction. As one Amazon reviewer wrote:
While the book was somewhat entertaining, overall his anti-capitalist message and patronizing attitude were unbearable. This book is recommended only to those who live to blame others for their mistakes and misfortunes.
Yeah, I got some of that, too. And it chaps me.
But my interpretations of the audiobook's more-detailed stories came in much more equitably than they did for the movie — that here, Scurlock presented and placed responsibility for our nation's credit dependence at least moderately on the consumers who'd signed on the bottom line. Now, perhaps I was hearing what I wanted to hear: that when you look hard enough, there's plenty of blame to go around.
But after two readings, my distinct impression is still that the book/audiobook version of Maxed Out is a not only a much more detailed write-up than its widescreen sibling, but a more balanced offering as well. I'm glad for that.
Where I might give Maxed Out (the movie) three stars on a ten-star scale, I'd likely give Maxed Out (the audiobook) seven stars.
So if you're like me, and are always on the lookout for discounted (and entertaining!) audiobooks, Maxed Out might be worth the $7 or $10 you can now pick it up for. I was pleasantly surprised!
Whilst I'm on this Excel kick, let's move on to another useful math function: the COUNTIF function.
With COUNTIF, Excel can search a range of data and count the number of times it finds a specific datapoint or condition. The function's arguments are constructed like so:
In the function, the "range" designates the cell range Excel will be searching. The "criteria" designates the specific datapoint for which Excel is to search and count occurrences.
In the simple table at left, we see a listing of fictional sales transactions and items. Suppose we wanted Excel to count the number of sales of our Zonger product. The COUNTIF function is what we'd use to make it happen!
Since Column C contains the names of the sold items, the range "C5:C15" will constitute the "range" argument in the COUNTIF function. We'll use Cell F5 as our "criteria" argument (see picture below). In it, we've typed the name of the product whose sales we wish to count.
In this case, we'll put the COUNTIF function in Cell F6. It appears as:
=COUNTIF(C5:C15,F5)
And a finished spreadsheet (albeit aesthetically blah) might look like this:
As we see, Excel has correctly determined that we sold three Zongers in this invoice batch.
Users who wish to download the above spreadsheet, with its sample usage of the COUNTIF function, can grab it here.
A reader emailed me Tuesday to tell me that she had used my "How to Make a Check Register in Excel" tutorial for a project in a class she's taking. She thanked me for making the tutorial available ("You're welcome!") ... then asked if I could help her with one of the project's requirements — one that had her stumped.
The requirement that puzzled her? She had to use Excel's SUMIF function somewhere in her check-register spreadsheet.
After a few minutes of thought, I suggested that she add a column for Transaction Type (CKCD, CASH, CHK, DEP) if she hadn't done so already. She could then use the SUMIF formula in a cell somewhere to total up, say, all the deposits (type DEP) in the register. "Could be useful to someone," I wrote.
That was also approximately when I thought to myself: Hey! Why not do a how-to blog post for the SUMIF function?
So, those of you who are bored to tears by my Excel how-to posts can stop here and go do something exciting, like grabbing a rubber-band gun and thwapping the politicians on CSPAN. They deserve it; trust me.
Using Excel's SUMIF Function
Most folks know that in Excel, the SUM function is used to add up (sum) a group of numbers. The SUMIF function goes beyond that: It sums a group of numbers, yes, but it sums only those numbers which fit some user-designated criteria.
For instance, consider the following chart:
We could execute the SUM formula on Column D, the Sales column, like so:
=SUM(D5:D12)
This would give us the total sales amount for all transactions. However, what if we simply want to know how much employee 180 sold? That's where the SUMIF function comes in!
The SUMIF function has three arguments...
... where:
"Criteria_range" is the range of cells which contain the criteria we're searching through;
"Criteria" is the specific criteria/condition we wish to match; and
"Sum_range" is the range of cells in which selected numbers will be summed.
So, in our case above, we wish to sum up the sales of employee 180. We'll put our SUMIF function in Cell C19. A finished version might look like so:
Our "criteria_range" is C5:C12 (the range of employee numbers). Our "criteria" is Cell C17, where we've input the employee number whose total sales we wish to calculate. And our "sum_range" is D5:D12, the range of sales figures.
With this info plugged into our SUMIF function in Cell C19, Excel tells us that employee 180 booked $50 of revenue. (And some quick gradeschool math tells us Excel is correct!)
Another of the investment personas whose work I like to read is John Hussman, Ph.D., president of the Hussman Investment Trust and manager of Hussman Funds.
As I was reading one of Mr. Hussman's recent weekly commentaries (linked below), it occurred to me that the couple of paragraphs I was reading (also below) could exactly sum up my own concerns with the, uh, recent "deep sigh of relief" which it appears the world is currently expressing.
Stock markets up; commodities prices up; interest rates up; risk-averse investments down. All these are things you'd expect to see from investors when a formerly free-falling economy has managed to grab some sort of foothold.
And here's the section which expresses my own thoughts far better than I could ever do myself:
Meanwhile, the debate about the inflationary implications of the bailout continues – again, this bailout is not really a defense of the global financial system, as much as it is a defense of bank bondholders against any loss whatsoever, quickly orchestrated and sold to a confused public as the only option, when it is nothing of the sort.
...Presently, however, the debate about the long-term economic fallout from this defense of bank bondholders is anything but academic. I recognize that I have been on a virtual rant about it in recent months, but the reason is that it is literally the most important fiscal and bureaucratic event that we are likely to observe in our lifetimes, and is very possibly the precursor to enormous future economic difficulties. You simply cannot have an economy lend out trillions of dollars in bad debt, and then make the lenders whole with public funds (while still facing a massive second wave of probable mortgage defaults) without destructive repercussions. There is very little chance, in my view, that the current downturn is over. [Emphasis mine.] We have enjoyed a nice reprieve – if over a trillion dollars in redistribution could not accomplish even a reprieve, it would be a surprise. It's clear that investors are hopeful that we can simply return to rich valuations, debt-financed economic expansion, and abnormal profit margins based on excessive leverage. From my perspective, this hope is as thin as those that we observed at the peak of the internet bubble, the housing bubble, and the profit margin peak of 2007.
Yes. That's EXACTLY the way I'm seeing things. Not that it matters, of course, because I'm no macroeconomic genius.
Oh, how I love the financial press and their stock pumpage extravaganzas. Take, for example, this snippet from Barrons:
On the long side, [Company X] now seems suited mainly for one group -- bold investors who hope to eventually double their money but can afford to lose it all if their wager goes awry. The good news for [Company X] fans: Despite the misery that the car maker is experiencing and might endure for another 12 to 18 months, such a wager ultimately should pay off.
And more:
BUT THE THICK GLOOM obscures improvements already evident and the prospect that [Company X]'s turnaround will accelerate over the next two to three years, even if the U.S. cyclical downturn dims the outlook for the next 12 months.
The shares could rise to at least 30 and maybe as much as 45 once those big cost reductions drop to the bottom line in 2010. And if the stars align perfectly -- the economy enjoys a second-half uptick and the housing market and consumer confidence turn for the better sooner than expected -- the stock's rebound could be quicker. Even a small improvement in sentiment could bring a disproportionate rise in the stock.
Here's my question: Why are Americans so damn scared of reality? Why must EVERYTHING be presented with a glossy fictional star-studded wrapper?
And oh yeah: Can I have my hour back, please?
I'm sure I'm not the only financial blogger who tuned in (okay, tuned in AND also DVR'd) to ABC's primetime special Un-Broke this past Friday evening. I'd seen a few previews of the show, and listened to Mellody Hobson's run-down of it on Good Morning America.
The idea of using Hollywood types to promo "becoming un-broke" seemed moderately interesting to me initially ... but only moderately. Personal experience has taught me that anything so over-produced as would be required for display on American primetime TV programming is more likely than not to be utter crap.
Really: As a "broke as hell" American, I'm supposed to start my financial turnaround because I watched an hour-long plethora of overblown skits produced by the same network that brings me such life-changing as The Bachelorette and Here Come the Newlyweds?
Really, Ms. Hobson? I was supposed to buy in to that?
You cannot be serious.
Look: I like Samuel L. Jackson ("Mmmm, that IS a tasty burger."). He seems like a cool, commanding-presence sort of guy. If he were sitting at a plain wooden table, alone, speaking directly into a TV camera about what money means to him, what he's learned about it in his life, I'd listen. Intently. Jackson's personality is intense; he has a great "Now you listen to me!" pull, and I'm drawn to that. I'd listen to his thoughts on money, and you probably would, too, just because he'd likely kick both our asses if we didn't.
I WANT TRUTH. Though he's no investment advisor, I would actually WANT to hear Samuel L. Jackson speak TRUTHFULLY about money. I DON'T want to see him act out the part of a broke author who uses his on-camera opportunity to scold America into some sort of joyous financial turnaround. We have enough soap-operaish antics in our living rooms as it is.
And Christian Slater. He's okay, really. Well, he's okay as long as he's acting in TV shows and movies which DON'T involve him teaming up with Rosario Dawson and pretending to teach others about investments and 401(k) plans. (And being forced to show his abs to get even that far. Pathetic.)
And the Jonas Brothers tutoring us on stock-market indexes?
THE JONAS BROTHERS?
Are you freakin' kidding me?
If this is the sort of pandering mess that America needs to have smooshed in its face just to get it to even START to pay attention to how universally broke we really and truly are, then kids, we're in serious hurt. This country's best days are already behind it.
Well behind it.
To be fair, I was likely not the target audience for Un-Broke.. But was anyone impressed with this show AT ALL?
And when you heard the show was coming, did you even think you would be?
As I mentioned in May, for the month of June our household will be doing its spending on (mostly) a cash-only basis.
There are a couple of reasons for this. Firstly, I want to see if our spending on variable expenses (groceries, dining, household items, etc.) really does decrease. And if this spending does decrease — I can't imagine that it won't, by the way — then I want to see how much of a difference it makes.
Here's a sampling of the items I'll be comparing against. The following are monthly averages from the latest three-month period (March, April, and May 2009):
Second, with the upcoming "Credit Card Bill of Rights" changes being made in the financial industry, it will not surprise me to see Citibank, Chase, et. al. initiate a raft of annual and miscellaneous fees on those of us who use our cards for convenience and cash rewards only, and who never carry a revolving balance.
If these fees do appear, then Lisa and I will give serious thought to living on a cash and/or debit-card basis. I figure June will be a nice "practice run" for this scenario.
Cash Spending: The Exceptions
After some consideration, I've determined that there will be a few exceptions to our cash-only rule:
Online Shopping No, I'm not going to send paper checks to Amazon for my book purchases. I tend to buy a book or three each month. In June, any book purchases will be made with either debit or credit card. (I really hate the idea of using debit cards online, but I'll make an exception for Amazon.)
Gas Though gas-station owners might be ecstatic to see us paying with cash (or so I've heard), they'll not be the beneficiaries of our cash-centric spending in June. It'll be debit/credit cards here as well. Why? Because whether we spend cash or credit for gas, the amount spent will not change: We always pay at the pump; we always fill up; we never make convenience purchases at the counter.
Thus "cash vs. plastic" makes no real difference to us.
Auto-Billed Items We have several monthly items which are auto-billed to one or more of our credit cards. Six-month auto-insurance premiums (happen to be due in June) are one; online-game and learning programs for our daughter are another. I'm not changing the payment plans for these services.
Business Expenses Still using credit cards here. (Pretty much because these are all auto-billed expenses — hosting, domains, and such.)
One Reason to Hate Cash
I've already rediscovered one reason I'd much rather use cards than cash:
Loose freakin' change.
I hate it. I mean, I'd forgotten how much I dislike walking around with change in my pockets. Don't ask me why this is; it's just something that (1) as a kid, I was cool with, but (2) an adult, bugs the crap out of me. (And you know those dimes and quarters are gonna end up clanging around in the washer and dryer, right?)
In any case, here goes "cash only" at the IYM homestead!
The offer hit my email inbox today. Unfortunately, since I'm already an ING DIRECT Electric Orange account owner, I can't take advantage of it.
But if you're not yet an Electric Orange user, well, you might want to start now. There could be a free $50 in it for you!
Here's a summary of their promotional email:
In order to qualify for the $50 bonus, you must open your ING Direct Electric Orange account by June 20, 2009.
When opening the account, use Reference Code EM274. (Apparently this code varies across ING's mailing list, as other bloggers report receiving different reference codes.)
Use your Electric Orange debit MasterCard to make at least 3 signature-based transactions within the first 45 days.
On Day 50, ING will post a $50 bonus to your Electric Orange account.
If I weren't already a happy EO user, this bonus would probably get me to jump in the paperless-checking account water. Fifty bucks is fifty bucks, after all.
Those of you who are aren't totally familiar with ING's Electric Orange checking accounts might wish to read my Electric Orange review as well.
It's amazing how those of us who try to handle our money intelligently — try to do things the right way — end up getting tsk-tsked for the plight of those who are now squarely behind the eight-ball of life (financially-speaking).
If you, like me, are one of the privileged few who somehow manage to pay zero interest on your credit-card spending each month, you need to know that you are a cold, heartless bastard who is enjoying those zero-interest, 30-day loans on the bruised backs of the poor and downtrodden.
Here's how Michelle Singletary, in the above article, lays it out:
You probably never considered that the credit pushers made your access to "free" money possible by gouging the less fortunate with hideous penalty fees and wicked double-digit interest rates. Effectively, the most financially vulnerable consumers have subsidized the low interest rates and rewards programs that the more financially secure enjoy.
Well, Michelle, I actually have considered that. Several times, in fact. And you know what?
I never really cared.
You see, I carried credit-card balances for quite a long time, too. For ten years I paid my share of interest on said balances. Then I did something crazy: I got smart. I took responsibility for our future. I worked harder, learned more, and finally paid the cards off in December, 2004. (Whilst dropping from a dual-income household to a "single-income household w/kid," I might add.)
Hideous penalty fees?
Wicked double-digit interest rates?
Yes, both are integral parts of the card companies' playbooks.
However, if you're paying them — or if you're continually faced with those blasted bank overdraft charges — well, Life is trying send you a message. And that message is:
You're doing it wrong.
As Larry Winget notes in You're Broke Because You Want to Be, where you are in your life right now is the sum total of the choices you've made up to this point.
"Your life is a reflection of the choices you have made," he writes. "If you want a better life, then make better choices. When you do, you'll find that taking credit for your successes feels a lot better than blaming others for your failures."
Make good choices; get good results.
Make poor choices; get poor results.
"I didn't have the money to pay my car insurance bill," the common tale goes, "and when the bill went late my card company saw it and jacked my interest rate up to 45 percent! What was I supposed to do?"
Uhh ... work more? (I did, and still do.)
Sell stuff. (Done a little of this, too.)
And move forward with the understanding that if you won't do these things, the world won't be forgiving. Reality will be only too happy to wail on you again.
Because that is how it works.
As Phil McGraw wrote in Life Strategies (see my related "Life Laws" page), "Many people fail to grasp that, when you choose the behavior, you choose the consequences."
I Know: Let's Change Some Laws!
Note that I'm not at all against the changes which are about to smack the credit-card industry. On the contrary: They're long overdue.
For instance: Throwing credit lines at college kids who don't have jobs is something that should've been snuffed out a long time ago.
And requiring cards to give 45 days' notice before raising a customer's rate? Seems reasonable to me.
But over the years, I've also developed quite a respect for the ability of banks to create their own reality via rules changes. They're masters at finding profits over here to make up for the profits they gave up over there. (Darned if the Federal Reserve doesn't help 'em do it, too. What — you think dropping rates to the floor was done with the public service in mind?)
Will these new laws cut into banks' bottom lines? Yup, I betcha they will.
Will the banks then dig and scrounge and find profits somewhere else? Also yup.
After giving it fair consideration, I'm now assigning better than 50/50 odds that the cash-back rewards and 30-days-no-interest credit which my wife and I enjoy as "convenience users" of Visa and Mastercard will be in serious jeopardy in the coming months. Ms. Singletary is probably correct when she writes:
Now that Congress has sent Obama a bill intended to rein in unfair credit card practices, it won't be long before the industry responds with new or old ways to make up for lost revenue.
At the very least, I'm expecting to see annual fees be initiated on the cards we carry now.
And them giving the proverbial boot to cash-back programs wouldn't surprise me, either.
Now, depending on how much those annual fees (or other newly-created arbitrary charges) are, we may or may not continue using plastic as our primary means of payment.
Note to Chase and Citibank: We CAN Do Cash
For the month of June, Lisa and I will be shelving the credit cards and going back to the way our grandparents did it: Cash and checks. (I suspect the cashiers at Sam's Club and Target will think we've gone batty.)
I like to think of this as something of a practice run for what may be coming down the pike. Also, it'll be interesting to me to see if our grocery and household-item spending declines at all simply by virtue of us using cash at the checkout desk.
But I would like to address this to Ms. Singletary: I'm not going to apologize for being a "convenience user" of credit cards. Nor will I apologize for taking advantage of balance-transfer arbitrage to make myself a few bucks over the years.
I understand that nothing in life is free. Whatever you've been given, someone, somewhere is paying for it. That goes for lunches, t-shirts, magazine subscriptions.
And credit.
This doesn't mean the system is evil. It doesn't mean the world is evil.
The world is just the world.
Learn the rules. Play the game. Minimize losses. Don't be a victim.
You'd think that, having opened my ING Direct Electric Orange checking account way back in early 2007, I'd know what ING's ATM daily withdrawal limit is by now.
Well, their ATM limit is $1,000 per day. But I didn't know that until yesterday.
No, I didn't find out the hard way. And no, I wasn't trying to withdraw $700 or $800 or anything, only to find my efforts electronically rebuffed by ING.
Rather, my need for ATM cash is so negligible, and our use of credit cards and electronic bill-pay services so pervasive, that I had absolutely zero need to know ING's withdrawal limits until here lately. Since we have a couple of local-institution bank accounts in addition to our EO checking account, it's easier for us to get ATM cash from those accounts than it would be for us to pull it from Electric Orange. There are way more free ATMs around here for the local banks than there are for ING Direct and its Allpoint network.
Here's the related snippet from Electric Orange's terms and conditions:
3. ACCOUNT TRANSFER LIMITATIONS. You are not limited in the number of transfers that you may make into or out of your account(s). However, there are limits on the dollar amount of withdrawal transaction(s).
Any one “Free Bill Pay” transaction or “Send Paper Checks” transaction (including expedited checks) cannot exceed $99,999.99. Total Card purchases (including cash back amounts) and cash advances made using an EO Card are limited to $25,000 per day. This does not include withdrawals from an ATM. Withdrawals from an ATM made using an EO Card are limited to $1,000 per day. “Send Electric Checks” (person-to-person transfers) transactions are limited to $5,000 per day.
So those of you who are wanting to use your EO checking account to send $7,500 bets to your local bookie via Electric Check ... well, you might want to rethink that.
Smack in the middle of the May 2009 issue of Money magazine is an article entitled "How the Crisis Is Changing You." It's authored by Dan Kadlee. The gist, as you could likely guess, is that this recession will have a lasting (beneficial!) impact on the U.S. consumer.
Some argue that when the economy recovers, our new embrace of thrift, nesting, and altruism will end along with our fears of Armageddon. Certainly, Americans will borrow and spend again. But it won't be the same as in the pre-crisis era.
And similar thoughts are offered in a recent New York Times article:
Fearful of job losses and anxious over housing and stock declines, Americans are squirreling away more of their paychecks than they were before the recession. In the last year, the savings rate — the percentage of after-tax income that people do not spend — has risen to above 4 percent, from virtually zero.
This happens in nearly every recession, and the effect is usually fleeting. Once the economy recovers, Americans revert to more spending and less saving. Over the last 30 years, the savings rate has fluctuated from over 14 percent in the 1970s to negative 2.7 percent in 2005, meaning Americans were spending more than they made.
This time is expected to be different, because the forces that enabled and even egged on consumers to save less and spend more — easy credit and skyrocketing asset values — could be permanently altered by the financial crisis that spun the economy into recession.
As the kids would say: Orly?
I say: Just give it time, boys. Over the last thirty years or so, the American consumer has repeatedly shown himself to be, on the whole, a mindless spending machine who pays little regard to the usual "What if?" situations in life.
So long as the "bad incidents" like this recession and that of 2000-2001 (neither of which have been all that "bad" by historical standards) roll along only once in a while, then Silly Spending Steve is all good.
In an exclusive nationwide survey conducted for this magazine earlier this year by Marketing & Research Resources, nine of 10 respondents said they have changed the way they manage their money as a result of the economic crisis; seven of 10 said their priorities are shifting as well; and a whopping 94% said the recession will have a lasting impact on the way they handle their finances.
Sorry, but I don't buy it. It's gonna take something way bigger than what we've seen so far to bring about a truly "lasting" impact. By "lasting," I mean longer than a few years.
I seem to recall hearing all this same "But we've changed!" schlock right after September 11, 2001, too. And look how long that lasted. A handful of years, tops.
Remember? Within four or five years a large segment of us were right back at it, buying McMansions with upper-six-digit price tags and parlaying the newfound "instant equity" into HELOCs (Hi, Corazzis!) and plasma TVs and weekend RVs and Caribbean vacations.
Thanks to an extravaganza of gubmint stimulus and debt-market manipulations, I have little doubt that we'll be back in our customary role as cheap-debt junkies soon enough. The only thing that'll change my view is that if the economic situation worsens from here — as in, the bottom falls out at some point.
Nothing I've seen in the last year or so would lead me to believe that we've achieved such an outcome this time.
But Just Maybe...
Could a larger meltdown occur going forward? Sure. I wouldn't rule anything out. Actually, the fact that so many people (like Dave Ramsey) insist that another Great-Depression-like event "can't happen" because of all the economic "safety valves" we've put in place ... well, that sort of talk circulated about the "unsinkable" Titanic, too.
Too bad nobody told the iceberg.
History does have a way of crushing hubris under its boot.
Whether the uber-consumer mentality will be a victim of this recession remains to be seen. As of today, if this is all the pain we get, I really doubt it.
Thirty years of "Debt is your friend!" spending won't go away so easy.
Chrysler won't repay bailout money: An administration official confirms that a $4 billion bridge loan and $3.2 billion in bankruptcy financing won't be paid back by Chrysler following bankruptcy.
That's fan-freakin'-tastic.
In other news, a high-ranking official from my household confirms that we will NEVER purchase a Chrysler product so long as we live. Further, we will do everything in our power to dissuade others from purchasing Chrysler products.
Yeah, yeah, I know: It's not like we couldn't see this coming. But the fact that taxpayer dollars are incessantly treated like this ("Thanks for the bucks, suckaz!") causes my blood pressure to redline.
Now we wait on GM. They'll follow much the same tract, I betcha.
How much money, you ask? Well, enough for me to feel (for lack of a more precise term) moderately "secure" about it. More than two dollars. Less then two thousand.
Where do I keep it?
Uhhh ... hidden. (And no, it's NOT under our mattress.)
Am I a crazy, "end times are a-comin'" nutjob?
Not usually.
Rather, I'm a realist. I like to be prepared for various contingencies.
You Just Never Know
Yes, I'm quite familiar with FDIC insurance. I'm glad it's there. After what happened to my grandparents' generation in the 1930s, FDIC insurance serves a vital purpose. It's there to stabilize the financial system; i.e., to prevent bank runs. Pure and simple.
In the article above, author Gerri Willis notes:
And remember, if you think your bank might be in trouble, don't panic. As long as your bank is a member of the FDIC, your money is protected up to certain limits. Through the end of this year, individual accounts are fully protected up to $250,000, and the same goes for all retirement accounts, including IRAs.
If you're over the limit, spread out your money at different institutions, or consider joining a credit union. Credit unions are just as safe as banks. Instead of the FDIC guarantee, you have the National Credit Union Association to back up your accounts.
One of the worst moves you could make is pulling your money out of a regulated institution and holding the cash yourself.
I'm good with all that. You'll note that I haven't yanked ALL my money out of any of my banks; rather, I just keep a little chunk very close to home. It wouldn't take an all-out financial-system meltdown for that "little chunk" to come in handy, after all.
Suppose banks DID end up being temporarily closed for some reason. Hey — at this point, I'm willing to take NO possible outcomes off the table. Not next week. Not next year. In such a case, I'd be somewhat relieved to have a cash stash readily available. (Key word: "somewhat")
ATM network failure? Sure. Could happen. Terrorist attack, maybe? Computer virus gets a running start from Europe, perhaps? Neither one seems so outlandish to me.
Or maybe the scenario's even worse: Maybe the pizza guy shows up at my door ... and I can't find my wallet.
Yup. Again, "mattress cash" would be handy. Bank failures are nasty, but ticked-off pizza guys?
Whew. Good luck to ya.
In any case, it simply seems to me to be a good idea to keep some cash handy at the ol' homestead.
ATM's are a divine invention, certainly. But foolproof?
Again I theorize: Anything so heavily promoted by Wall Street as 401(k)s — and with such limited investment choices as most plans have — is pretty much bound to mediocrity ... or worse yet, outright failure.
Just a note to readers: You understand that the $13.4 billion in "loans" to GM (or $144 per every U.S. taxable return) is little more than theft, yes? That the "senior loan position" and protections supposedly assigned to that $13.4 billion of taxpayer cash was nothing more than "But our stance might change later..." misdirection?
The U.S. Treasury, which has provided $13.4 billion in emergency funding to keep GM operating since the start of the year, has indicated that it could also convert those taxpayer-backed loans into GM stock, the sources told Reuters.
That's from this Reuters news article. To my feeble brain, it means all other GM debtholders (I'm sure Goldman Sachs, AIG, the UAW, foreign interests, and all the rest are in this group) would receive preferential treatment that's far, far ahead of the U.S. taxpayer in a BK filing or "guided" restructuring.
Because the U.S. taxpayer's pockets are endless, of course.
And also because he's too dumb to follow the bouncing ball and, at some point, grab a pitchfork.
Until it's too late, that is.
(FWIW, my views on the automaker bailouts were expressed here.)
Though It Makes Me Wonder...
What do you suppose would've happened if, early this year, every U.S. tax-paying entity were to have received a separate bill from the IRS for $7,509? That's roughly the amount required to pay for the TARP program — $7.5k per every taxable U.S. return.
After all the phone calls to Congress from constituents who expressed their displeasure with the bill, and after those Congressfolk ignored said phone calls and emails and passed the bill with a "Well, we know best!" blowoff, how do you think that IRS bill-in-the-mail would've been received by Joe Q. Taxpayer?
Not so happily, methinks.
But I suspect that's what it'd take for people to understand that our future is being roundly looted at every turn.
Back in October of last year, I slapped together a spreadsheet and chart which depicted the hypothetical investment carnage suffered by Diligent Investor — a guy who invested $1k per month (plus all dividends) into SPY (an S&P 500 index-tracking vehicle) from October of 1998 to early October of 2008. The post, entitled 10 Years of SPY Dollar-Cost Averaging, garnered a fair bit of blogosphere linkage and reader/email comment.
Back then, the chart looked like so:
Here we are, roughly five months later. Investors clamoring for solace are now even more empty-handed. Or empty-walleted, as the case may be.
Our hero, Diligent Investor, has now been pumping cash into his brokerage account for 126 months. On an out-of-pocket basis, he's invested $126k.
As of the end of March, his investment is now worth $93,252. That's a loss of $32,747. Percentage-wise, he's down 26 percent.
Now, if you're like me (and the IRS) and are interested in the real costs of this investment, you'll count all reinvested dividends as part of your cost basis (as the chart above does).
In that instance, Mr. Investor's cost basis is actually $138,563. Remember: He could've taken those dividends and spent them on hookers and blow, but instead he chose to reinvest them in the S&P 500 fund. They are, therefore, part of his cost.
His loss is now an artery-bursting $45,310. On a percentage basis, his account has shed almost 33 percent of its value. (It was even worse at the end of February, mind you. Then he was down $51,750.)
In just seventeen months, he's gone from a $34k gain (in October of 2007) to a $45k loss. And that's with March's impressive market run-up. (In the face of yucky news, I might add.)
Please note that I've not included transaction costs in the above examples. If Mr. Investor has free lifetime trades or some such plan, he's saved some money here. On the other hand, if he's been paying, say, $15 for each purchase of SPY, he's down another $1,890 (126 months * $15).
So what can I say?
First off, hookers and blow would've been more fun. Well, minus the physical risks and/or jail time — both of which, I suppose, would be considered as part of his "cost basis."
Second: The mainstream financial finger-waggers love to posit that dollar-cost averaging works because it allows you to "buy more shares at the lows." As we're seeing now, such "wisdom" is highly scenario-sensitive: It works great as long as those "generational lows" were late in someone else's generation, or really early in yours.
After all, our hero Diligent Investor was seen "buying more shares" at the "generational lows" of 2002 and 2003. That's worked out well, hasn't it?
Good thing that "new highs" are probably just a handful o' years away. Right?
I dunno. Let's ask Japan, whose main market index was trading around 10k in 1985 ... and is trading at ~9k now.
Third: I hope Diligent Investor's retirement horizon is well into the future. His current break-even sale price for his SPY investment is at $118.86 per share, which would require a rise of 40+ percent from current levels of roughly $84/share.
I'm now trying my hand at video tutorials: This first edition details how to "autofill" formulas in Excel — and save yourself heaps of time if you're not already familiar with this technique!
(There's a higher-quality version here. And go ahead and laugh at my pathetic vid-making skills. I still had fun doing it!)
During an early-evening visit to our corner grocery store a few evenings ago, I snapped this pic:
Anybody care to guess what that bright orange stamp says?
If you said, "FOOD STAMPABLE" you were correct.
That's right, Oklahomans: This Easter season, feel free to use your food-stamp ("Access Oklahoma") card to buy a crappy plastic basket full of crappy plastic grass, a crappy plastic doll, and a few packages of crappy colored sugar crappiness.
Pretty neat, given that a record-high 450,057 Oklahomans were enrolled in the food stamp program as of March.
Should be enough to cause any maker of crappy plastic Easter baskets to become downright giddy at the thought of this untapped market segment.
Because I'm the curious sort, I surfed to the Oklahoma Department of Human Services website to see what sort of guidelines applied to food-stamp use. Here's a snippet from the FAQ page:
A person may buy only eligible foods with their food stamp benefits. Eligible foods include plants and seeds that can be used to grow food. You cannot buy the following items with food stamp benefits:
Paper goods Cleaning products Household items Personal care items like toothpaste Alcoholic beverages Tobacco products Vitamins or medicine Foods prepared to be eaten in the store Hot food prepared in the store to be “carried out” and eaten
Hmmm. Nothing in there about Easter baskets.
I don't know about you, but I have a big problem with my state allowing their oh-so-gracious $3.40/day (thanks for that recent bump, Stimulus Fairies!) of public food assistance to be used to buy fringe "food" items like Easter baskets.
Who knew the Easter bunny needed public assistance?
Whilst I'm on this Excel kick, let's move on to another useful math function: the COUNTIF function.
