Find your Personality Type

Check out this interesting website: Typealyzer.com.    The site attempts to determine the blog authors personality using a psychological text analysis.  Here are some examples:

http://thefinancialengineer.blogspot.com/   was typed as ISTP, the mechanics.  The independent and problem-solving type. They are especially attuned to the demands of the moment are masters of responding to challenges that arise spontaneously. They prefer to think things out for themselves and often avoid inter-personal conflicts.

http://thefinancebuff.com/  was typed as ESTJ, the guardians.  The organizing and efficient type. They are especially attuned to setting goals and managing available resources to get the job done. Once they've made up their mind on something, it can be quite difficult to convince otherwise. They listen to hard facts and can have a hard time accepting new or innovative ways of doing things.

http://earlyretirementextreme.com/  Was typed as ESTP, the doers.  The active and play-ful type. They are especially attuned to people and things around them and often full of energy, talking, joking and engaging in physical out-door activities. 

click HERE to subscribe to The Financial Engineer

The UAW has already bought their Bailout

Bailing out the big 3 automakers is nothing more than kicking the can down the road and that road is headed over a cliff. 

Will the ruling party stand up and make the hard choice, the unpopular, but necessary decision to force these companies to declare bankruptcy?   Bankruptcy would allow these unwieldy, behemoths to restructure, reorganize, streamline and break the juggernaut of the unions. That is the key - No industry can survive paying an average of $73 per hour to low skilled labor.

The unions seem to be trying to stop time by refusing to adapt and change with new technology (robotics).  They are so consumed with preserving their old, outdated jobs that they are willing to kill the mothership, herself.  

Bankruptcy is not the end.  Many companies emerge stronger, leaner and more competitive. Frankly, there is not much chance of this happening since the unions own the president elect. Can you imagine the outcry if BHO doesn't give these folks everything they demand?

click HERE to subscribe to The Financial Engineer

Another 401(k) plan bites the dust in Argentina

Argentina’s government has announced their intention to expropriate $30 billion held by Argentine citizens in private pension funds (similar to 401(k) retirement savings accounts). The money is needed to refinance old bad debts so that they can borrow yet more money to keep the country afloat. The announcement rocked investor confidence in Argentina and sent the Buenos Aires stock market plunging.  More details can be found here.  

Expropriation refers to confiscation of private property with the stated purpose of establishing social equality. Argentina is quickly falling into economic socialism.  The country's rank plummeted from 19th-freest economy in the world (out of 156 countries) scored in 1998 to 108th out 162 countries by 2008 as calculated by the Index of Economic Freedom. 

This action by Argentina sounds eerily similar to the plan currently under consideration by our own US government.  

click HERE to subscribe to The Financial Engineer

Your 401(k) is at RISK

Just when you thought the situation with your 401(k) account couldn't get any worse, our new democrat-controlled government is preparing a plan to nationalize your personal, private 401k retirement account! 

The plan calls for the elimination of tax deferred 401(k) contributions.  No more 401ks. Instead, the federal government will pay every worker $600 per year (inflation adjusted each year) and require every worker to invest 5 percent of their after-tax pay into a new retirement account to be administered by the Social Security Administration. The money would be invested in a new class of government bond which would yield 3 percent per year, adjusted for inflation.

That would be a drastic reduction in the amount that I currently invest in my 401k.  I contribute the maximum amount of $15,500 per year and my company match gives me a couple thousand more to add to my personal retirement.  My 401k is a big part of my retirement plan.  I love the fact that it allows me to plan for my own retirement.  I never want to depend on social security or the government in any way.  

Why does the government want to take away that independence??  What's their motivation?

Money, of course.  By removing the tax deferral of 401k contributions, the dems can increase federal tax revenues by about $80 billion a year.  In addition, this plan would allow the government to take over the largest pool of private savings in the U.S.  And, as with the Social Security fund, the government could borrow and spend all the annual proceeds over and above any payout to retirees.

This ingenious plan will enable the government to redirect some $3 trillion which would provide the money to fund the massive expansion of government programs, subsidies and tax "cuts" promised by Barack Hussein Obama.

If all of this sounds inconceivable, then consider another democratic President, Lyndon Johnson, who promised not to raise taxes to fight the Viet Nam war, but rather he suggested borrowing money from the SS fund for ONE year. 

The federal government has borrowed this annual "surplus" every year since. And now SS is nearing a deficit with nothing but a bunch of government IOUs to pay the retirees.  Click here for more information and find out who is behind this "grand" scheme.

And here's another viewpoint from Investment News.

click HERE to subscribe to The Financial Engineer

Free Blu-ray Disc player with TD Ameritrade Deposit

TD Ameritrade sent me another “exclusive” offer for a Sharp AQUOS Blu-ray Disc player in exchange for a deposit of $50,000 into my TD Ameritrade account. For another $50,000, I can get one year of 3 DVDs at a time from Netflix.  

While these items are some pretty nice gifts, it just isn't attractive enough to get me motivated to tie up 50Gs for one year in a brokerage account.   The Blu-ray can be purchased for $240 or less with a little internet searching.  

And even more disconcerting is the possibility of your account falling below the minimum, in which case TD charges your account for the disc player.

Evidently these give away offers are effective.  Last June, TD Ameritrade offered a free Nuvi for a deposit of 50 grand.  Either that or they are grasping at ways to encourage investors to get back in the game.

click HERE to subscribe to The Financial Engineer

Bailout pays for Mango Towel Service

While the president-elect talks about yet another bailout/stimulus plan, we learn how Fannie Mae executives have chosen to spend over $6000 of their last $200 Billion of bailout money on a golf outing that included mango towel service and $1700 worth of buffet food and $555 for drinks.

Where's the outrage? 

As reported by the star telegram:  "I am outraged by this," said U.S. Rep. Jeb Hensarling, R-Dallas, who serves on the committee that oversees Fannie Mae.

And then the Quote of the day that had me LMAO:  

"They have 200 billion dollars of taxpayer money from the schoolteacher in Mesquite, the factory worker in Garland, the policeman in Dallas, and they’re running around golfing, getting mango towel service," Hensarling said. "I’m not even sure what mango towel service is, but I know the taxpayers of Dallas County and America shouldn’t have to be paying for it."

Have you ever experienced mango towel service??  

click HERE to subscribe to The Financial Engineer

Largest Market Crash following US election in History!

Buyers ran for the exits as declines lead advances 4 to 1.  It was the largest percentage drop following a presidential election in 112 years of data (shown below) according to Reuters.com.  In fact, we have to go all the way back to 1932, during the depression, to find numbers anywhere close to today's blowout.  

The US is having a fire sale on its corporations, yet a ton of foreign money sits on the sidelines.  The magnitude of today’s market direction speaks volumes about the lack of confidence the global business community now has in this country. 

Year   Dow    S&P    Nasdaq  President elect

2008  -5.05  -5.27   -5.53   Barack Hussein Obama

2004  +1.01  +1.12   +0.98   George W. Bush

2000  -0.41  -1.58   -5.39   No decision: G.W. Bush v Al Gore*

1996  +1.59  +1.46   +1.34   William Clinton

1992  -0.91  -0.67   +0.16   William Clinton

1988  -0.43  -0.66   -0.29   George H. W. Bush

1984  -0.88  -0.73   -0.32   Ronald Reagan

1980  +1.70  +1.77   +1.49   Ronald Reagan

1976  -0.99  -1.14   -1.12   James Carter

1972  -0.11  -0.55   -0.39   Richard Nixon

1968  +0.34  +0.16    ---    Richard Nixon

1964  -0.19  -0.05    ---    Lyndon Johnson

1960  +0.77  +0.44    ---    John Kennedy

1956  -0.85  -1.03    ---    Dwight Eisenhower

1952  +0.40  +0.28    ---    Dwight Eisenhower

1948  -3.85  -4.15    ---    Harry Truman

1944  -0.27   0.00    ---    Franklin Roosevelt

1940  -2.39  -3.14    ---    Franklin Roosevelt

1936  +2.26  +1.40    ---    Franklin Roosevelt

1932  -4.51  -2.67    ---    Franklin Roosevelt

1928  +1.20  +1.77    ---    Herbert Hoover

1924  +1.17   ---     ---    Calvin Coolidge

1920  -0.57   ---     ---    Warren Harding

1916  -0.35   ---     ---    Woodrow Wilson

1912  +1.83   ---     ---    Woodrow Wilson

1908  +2.38   ---     ---    William Taft

1904  +1.30   ---     ---    Theodore Roosevelt

1900  +3.33   ---     ---    William McKinley

1896  +4.54   ---     ---    William McKinley

* George W. Bush ultimately was determined the winner of the

2000 election.

Source: Reuters EcoWin

click HERE to subscribe to The Financial Engineer

The Market is always looking ahead

As we watch the carnage on Wall Street where investors are cashing out of the market, it appears nothing can stop this train wreck - not an economic stimulus plan (remember that tax rebate?) and now not even a $700 Billion cash infusion.

Why is nothing helping? Where is that quick fix?
Confidence in the markets has been damaged and as the market looks to the future - it doesn't like what it sees ahead: Higher capital gains tax rates, increased regulation and bigger government. In a nutshell - the move to socialism.

This progression has become clearer over the last two weeks as the election polls have been edging towards Barack Hussein Obama. BHO has promised to increase the capital gains tax and significantly grow government (federalizing health care, expanding the IRS, unprecedented increases in foreign aid, etc, etc). In a lame attempt to defend his tax increases, BHO plays the class warfare card by saying that this tax will not affect regular folks since their 401ks are not subject to the capital gains tax upon withdrawal and only the wealthy who own stocks will be punished.

Does BHO really believe that? Let's go back and review econ 101.

By raising the capital gains tax rate, investing in stocks becomes less attractive. This will cause investors to move money out of stocks and into fixed income investments. As they do this the stock market will decline in value which will in turn hurt the overall value of stock investments and mutual funds that BHO's "ordinary folks" have in their 401Ks, IRAs and other retirement funds.

A bailout will not change this; a tax rebate will not change this. Such tactics are nothing more than band-aids. The underlying issue driving the market downward is lack of confidence in tomorrow. Today's market has lost hope in tomorrow's market.

click HERE to subscribe to The Financial Engineer

Who's to blame for this financial crisis?

Follow the money. Where did it all go? Mortgage companies made easy cheap loans to people that should not have qualified for any loan because they could never repay them. In turn those folks used the money to buy houses and to hire contractors to build houses, which in turn stimulated the economy. The Gov't supported this - growth at all costs. It was affirmative action for housing - no one could be turned down for a loan.  

Seven years later the well ran dry. 

The subprime debacle has been the largest economic stimulus plan in history. 700 Billion and counting. And now the Dems say the gov't needs to do something for the poor homeowners. Haven't you done enough already?  

click HERE to subscribe to The Financial Engineer

The Storm that is Sarah Palin

Wow!  How did this news get to such monumental status?  Yes, it is exciting.  I am inspired – I want to move to Alaska and become a mayor.  LOL  I am also completely amazed at the storm this has stirred up.

Some observations:

• The media went after her aggressively because they were left standing flat-footed.  The press does not like surprises and Sarah Palin was a bolt from the blue to EVERYONE.  McCain wanted to steal the DNC convention thunder with a surprise announcement, and it worked but it also created this media attack attitude.  The press didn’t have any stories, nothing to report on her, because they had no clue.  They were left out and they hate that.

• I never dreamed  the Republican party would have a woman on the Presidential ticket.  Ever.  And she would not be there if it weren’t for John McCain.  He is certainly a maverick and a reformer of the party for taking that risk.

• Speaking of risk, Sarah Palin is taking a big risk - with a part of her life that many are uncomfortable risking - their families.  In this world, women are not seen as risk takers.  Some of her biggest critics are women.   They say she can’t do it – what they mean is they can’t do it.  This is way too risky for the average woman to even contemplate, meanwhile men seem to have little issue with it at all.

• The VP job will seem like a vacation to the Palin family compared to the Governorship of Alaska.

• Any time we are confronted with change, we do a little risk assessment.  I have to believe that she and her husband assessed the risk both to their family and the country and came to the conclusion that not running for VP posed an even greater risk to this country.  

click HERE to subscribe to The Financial Engineer

Risks and the Road to Early Retirement

We may not realize it, but we all make risk assessments everyday in almost everything we do.  For example, some folks will drive nothing but the safest car on the road, typically a Volvo with airbags in every direction, while others ride motorcycles without helmets. 

It’s no different with personal finance.  Some of us are very risk averse - shying away from stocks, investing in bonds, wanting to secure our futures with reliable investments.  While others love taking risks – day-trading stocks, shorting stocks, chasing returns.   Ideally, a smart investor finds a middle ground that will allow for some growth while still maintaining a strong core.

When I first started investing, I would often say that I was willing to take on more risk because I wanted to build a portfolio that would allow me to retire early.  I knew I had to invest in stocks to achieve that.  And I reasoned that if I failed, then I would simply continue to work like every other poor slob until my normal retirement! 

In those terms, it seemed like a no-brainer. Why not take discretionary income and invest it instead of spending it?  While my friends and co-workers bought bigger homes, lavish vacations and more toys, I enjoyed having a "higher goal".  Whenever I mentioned retiring early to them, they looked at me like I was speaking a foreign language.  For many, the concept had never occurred to them. And as they gave it some thought, you could see the painful realization in their faces that they will never be able to do such a thing. 

Many of us have similar goals in life.  We aim to graduate from high school, then college, then we want to land a good job.  What comes next is not so well-defined.  Some wish to climb the corporate ladder, others want their own business, while others seek challenging assignments.  For me, I never desired to ascend into corporate bureaucracy, I never wanted my boss’ job ( even though I did eventually get it).  I wanted interesting work, but even more, I wanted security.  Typical woman, eh?  My goal to retire early was driven by that need and the fact that I prefer to work for myself.   I like my job, but to this day, I would much rather spend time working on one of my personal projects than going in to work.  I craved that freedom and early retirement was the answer.

The real bonus is that now that I have the means to retire early, I also have new-found powers.  I can pick and choose my work assignments, I call more shots, I take off when I want to, I don’t worry about where my career is going, what the boss might say, what co-workers might think, I can walk out any day, any time.  I am in charge!  My job is so much more fun. 

click HERE to subscribe to The Financial Engineer

Google Chrome speeds past clunky Internet Explorer

I switched my internet browser from IE7 to Google’s new Chrome, today.  And, I found Chrome  to be just like advertised: sleek and fast.  I have read some complaints that only the tech geeks will change to Chrome.  I don’t really consider myself a computer techie and I don’t usually try out new software on the first day of a release.  

My decision to give a new browser a try centered around a problem with utilizing the latest version of Macromedia Flash with IE7.  Initially I though it was a firewall or antivirus issue, or maybe an ActiveX script issue, but after much trial and error  – IE still would not play flash.  I am sure there is a way to correct that problem somewhere out there, but I don’t care to spend another minute trying to figure it out.  I was about to download Firefox, when I learned that Chrome was available.   

What’s cool about Chrome?

• Speed – pages download much faster!
• Less clutter on the header and the footer only appears when you hover over a link.
• It has a bookmarks bar – you can drag your favorite site links right to the bar for easy access, similar to the home page icon.  For instance, I have my favorite weather site, sports team, netflix, etc., one click away all of the time.
• It has tabs, similar to IE7, with the added feature that when you open a new tab, several of your recently visited sites appear as thumbnails.
• And for those of you concerned about losing your bookmarks - all of my bookmarks transferred over from IE.

As for the nay-sayers, who think Chrome will flop, they may have discounted the strength of Google’s brand.  I would have never tried out a Microsoft product on the first day of release, yet I did not hesitate with Google.  And, of course the biggest factor – speed rules.  IE was getting so clunky and lethargic on my PC that I was considering upgrading the machine!  Instead, I switched to a new free browser, saved $1200 and left IE in the dust.

click HERE to subscribe to The Financial Engineer

Snakebit!

It seems such things happen when you least expect it. Fortunately, I was ready with basic first aid. My dog, a small terrier mix, got bit by a snake last week. I was cutting tree saplings/suckers out of an english ivy bed and the dog was in the ivy, also. He let out a yelp, jumped straight up about two feet, and then ran, eventually circling back to me. I could not find any wound on his legs or body, but 20 minutes later his snout and neck were swollen. He was in a lot of pain and lethargic. I could see a puncture wound in his muzzle and reddish/brown liquid oozing out.

I figure worse case it was a copperhead and best case just a bull snake. I have never seen a rattlesnake on this property. Since I could not identify the type of snake, it escaped in the ivy, I assumed the vet would not be able to give an anti-venom. I checked the internet for dog snake bites and found that vets do not typically give anti-venom for copperheads, anyway (because the mortality rate is low).

I gave him 25 mg of Benadryl with peanut butter ( 1 mg per lb body weight). That helped immediately, swelling did go down and his head perked up. He curled up next to me and we took a nap. He was significantly better a couple of hours later.

The next day the puncture wounds on his muzzle were much more visible and I noticed that he had a bruised sore spot inside of his upper lip. I took him to the vet and received a weeks worth of tablets of prednisolone, clindamycin (antibiotic) and neomycin ointment (topical treatment for the puncture wounds). The vet thought it was most likely a copperhead and a defensive strike (less venom) - since it didn't kill him! He also said he never gives anti-venom because it can cause reactions that are more harmful than good. The best treatment is Benadryl followed by antibiotics - good stuff to know.

In my internet research I came upon an informative list of things to do and not to do when a pet is snake bitten:

"Do's"
Remain calm. Do everything possible to keep your pet calm and quiet. Excitement and activity cause the venom to be circulated more rapidly through the victims system. Obviously, the calmer and quieter you are the calmer and quieter the victim also will be.

Call a veterinarian. Tell the vet what medications you have on hand: antibiotics, prednisone, Benadryl, etc.

Administer Benadryl. The proper dosage is 1mg/pound.

Clean the wound with an antibacterial solution. Be gentle, the bite site will be extremely painful.

Administer a broad-spectrum antibiotic. For a 20 lb dog, administer approximately 250mg of amoxicillin.

Loosen or remove the victim's collar. If the bite is the head or neck area, the extreme swelling (which occurs quickly) could cause strangulation from the collar.

Encourage the victim to take fluids.

Keep the victim warm if he/she appears to be in shock.

"Don'ts"
The "don'ts" listed below represent the most recent advice and thinking.

Don't apply ice. The most recent thinking on the use of ice for snakebites is that while ice will aid in controlling swelling, it also slows circulation of the body's chemical defenses to the affected area. Additionally, applied incorrectly, ice can further damage the already traumatized tissue.

Don't cut a "X" across the puncture wound and attempt to suck out the venom. The cut further damages the injured tissue. Additionally, while venom is not harmful if digested, its absorption via the membranes in the mouth may envenommate the person trying to suck the venom from the wound.

Don't apply a tourniquet unless you are experienced in the use of this highly risky procedure.

This list did help as I had considered applying ice to help reduce the swelling. And I was fortunate to have small 25 mg tablets of Benadryl on hand that could be cut up and fed to the dog with peanut butter. Even with the peanut butter, one of his favorites, I had to coax him into eating it. He would not take any water. Something he usually laps up after a little peanut butter.

Later in the evening, I gave him another ½ dose of Benadryl to help him with the pain and keep the swelling down over night. By morning, he was much better, swelling reduced, and he actually ate his cup of dog food. It’s amazing how resilient dogs are!

click HERE to subscribe to The Financial Engineer

Did your pay raise beat inflation?

In 2008 the average pay raise in the USA was 3.7%. That was 1.8% over the projected rate of inflation. So the effective pay rate increase was (3.7-1.8) = 1.9%. Unfortunately, those projections for inflation were low.

In reality, the actual inflation rate, year to date, is up 5.6% from its level a year ago. And that is the government’s calculation of the inflation number -which always seems lower than the effective rate.

Just out of curiosity I checked my budget expenses in MS Money and calculated my own inflationary rate for gas and food. For the year to date, I have spent a whopping 34% more on gas and another 30% more on groceries compared to last years expenses.

What can we expect for pay raises in 2009?

According to this Wall Street Journal article merit increases for next year are expected to average around 3.7%. Given these numbers, it seems there is no correlation between the average pay increase and inflation. The old cost of living adjustment, COLA, has long given way to performance only raises, which has conveniently ended any ties to inflation. A raise is only a raise when it exceeds the rate of inflation. Anything less and you are losing ground.

click HERE to subscribe to The Financial Engineer

My New Money Market Account is paying 4.76% APY!

Drawn by their pledge to beat the money market rates of the top 5% of competitive institutions and of course the 4.76% APY introductory rate, I opened an account with Everbank. I searched and read everything I could find about the bank until I felt comfortable sending the initial deposit. It's one thing to mail a check to Fidelity Funds or Vanguard, institutions that have been around forever, and quite another to send a check to a fairly new, unfamiliar entity, like Everbank.

Lots of questions come to mind; like why are they able to pay such high money market rates? Their website clearly states that they don’t engage in the subprime mortgage market, but what about other speculative markets? Where are they physically located? Are the deposits FDIC insured, etc. Obviously, the current financial crisis has made me more cautious and that is usually a good thing.

I completed the application on line, printed it out, signed and mailed it in with a check. The 4.76% APY rate is for the first three months and then the rate reduces to 3.51% APY, which is still a very competitive rate and beats my Vanguard prime money market rate. APY stands for annual percentage yield and includes the effects of intra-year compounding. Not to be confused with APR, which is the annual percentage return, and is the straight rate over one year with no compounding. Unless you plan to skim the interest rate payment out of your account each month, you will automatically have this payment added to your investment and enjoy the higher APY rate.

The Everbank pledge money market account looks to be a good parking spot for some of my emergency cash funds. I always keep a couple of years expenses in a steady, easily accessible cash account. Check writing privileges at Everbank (allowing 3 per month) should give me quick access to the cash. I would prefer to ladder some of this money in CDs, but money market rates are beating CD rates, right now, so I have not been buying any new Certificate of Deposits. Fortunately, Everbank has a very informative web page that lists all of their rates for their products - that should make it easier for me to keep an eye on any rate changes that may come along.

click HERE to subscribe to The Financial Engineer

Speed Mentoring - almost as fun as speed dating!

This past week I participated in a speed mentoring session at my place of employment. What's speed mentoring? Well, it's very similar to the format used for speed dating. There were about 40 of us that signed up to be mentees. We were divided into groups of eight and then five distinguished mentors from the company rotated around to each of the groups for 10 minutes of Q&A.

I signed up because 1) I thought it sounded interesting and maybe even fun, 2) the lure of a free lunch and 3) visibility or exposure to upper management is key to career advancement at this company. After all these years, I think I actually know how to play this career game! When I first hired in, I was naive and stubborn to think that hard work and first-rate engineering would do all the talking for me. LOL

The mentoring sessions were very quick paced and informative. Any question could be tossed out. Based on the questions that were posed, I would say that most people were interested in the direction of the company more so than they were in the direction of their individual career.

I started with questions about the technical career ladder. I wanted to know why it seemed more like a step ladder than the escalator that is the program management career ladder. The response was fairly typical - that the company is trying to balance these paths, so that they are more parallel. The mentor mentioned that at least nine people had made director level in the technical career path. No numbers were given for the program director level, but it is several magnitudes greater. The takeaway is that progress is being made. I wanted to keep pushing and ask if a metric had been established so that we could measure this progress, but I refrained. ;)

As the sessions progressed, the questions centered more on the company direction. I steered clear from those questions that illicit the usual company line. I wanted to dig a little deeper to get actual numbers or data that substantiated what the company is saying they are doing and what they are really doing behind the scenes. For instance, we hear a lot about more money being spent on internal research in an effort to bring in new business. My question is how serious is the company about this? How much more are they spending? 1%, 10%, 50%? The Director of Strategic Planning would only say that the budget for business development is more than last year! C'mon now, we're engineers, we want numbers, evidence, not just words.

One other observation from the experience stayed with me. It seems that many employees feel like they are in the dark about what is going on in the company. For instance, one mentor mentioned an intranet web address for finding more info on telecommuting policies. No one in the group was aware that the company even had a policy! Many times I have heard people say they didn't know this or that and they are frustrated that the information is not made available.

Is communication that much of problem between management and employees? When I look back, I recognize that communication is much better now than ever before. There are so many more ways to get the info out and the company is trying to speak to us. But alas, it's an endless pit. The more info that goes out, the more we crave. Sessions like this mentoring event go a long ways to getting the two sides together so that each becomes more comfortable talking with the other.

click HERE to subscribe to The Financial Engineer

Beatin’ the heat and saving money

Strangely enough, in the midst of this long dry stretch of hot weather, I have increased my thermostat setting for reasons of comfort not economics. It really is hot with each day exceeding 100 degrees and only “cooling off” in the evenings to the 80’s. How is it possible to reduce the A/C in times like this? Well, today while mowing my yard in sunny 103 degree weather, I wondered the same thing. How is that I have become so acclimated to these hot temperatures that it doesn’t bother me to spend 1 ½ hours mowing in the heat of the afternoon?

After some reflection over what is different now than in the past, I attribute this higher tolerance to walking my dog. Every day, no matter what the weather, I walk with my dog for at least 40 minutes and sometimes up to an hour. I occasionally miss a day or two in a row, so I am not fanatical about this, but even so the miles really do add up quickly. Would you believe that by the middle of this month I expect to complete two million steps for the year? That’s 1000 miles on foot.

How does this relate to personal finance. Well, first of all, I have increased my home thermostat by one degree. It was just too cool in the house – I would sometimes feel a chill! I don’t have the evidence to back this up, yet, but I have read that setting a thermostat one degree warmer in the summer will save 5% on the utility bill.

When discussing my walking routine with people, one of the comments or excuses that I hear most as to why they don’t walk is - weather. “It’s too hot, too windy, too cold, etc”. I always respond that that is one of the reasons I enjoy walking so much. I want to experience the outdoors, the breeze, the weather, the stars, the full moon and everything else about it. Its not like I am camping out there, its only for a short time and if the weather is bad, when you return you will have a new appreciation for your comfortable home environment.

click HERE to subscribe to The Financial Engineer

Property Tax Protests at record levels

During my recent visit to the County Tax appraiser, I asked if the number of protests were up this year. “Yes”, the appraiser responded, “we set a record.” I figured it was because of the economy and the housing crisis, but what surprised me was that he thought it was a result of tax consultants sending out flyers advertising they will protest for you in return for half the tax savings. He showed me a couple of the flyers and yes I had received one of them. I’ll admit it did make me re-think the situation and research my neighborhood valuations.

That’s when I found that my property was overvalued in comparison. It would have been easy to call the tax consultants and let them do the work, the hearing, etc. Then the appraiser said, “but they would do the same thing that you have done.” Ah, gee, thanks Mr. Appraiser.

Maybe the tax consultants would have gotten a little more, but by the time we split the tax savings, it wouldn’t have mattered. The appraiser then went on to say that some of the firms want a portion of your tax savings for the next five years!

I decided to protest my own property taxes not just to avoid splitting the money, but also for the experience. And, I was a little nervous going in. One of the first things the appraiser said was, “I see you called in earlier.” I think he could tell I was taken aback that my call had been recorded and he responded apologetically with, “it’s just a question.”

I had to laugh. Okay, so I am a little paranoid based on a few horror stories that I have heard from folks who couldn’t get their taxes adjusted at all and their meetings ended in harsh words and slammed doors.

When I mentioned that I had never been to a hearing, the appraiser kindly volunteered more information about how the hearing is conducted and also that a group of retired folks sit on the appraisal review board. He said it was a decent job with good pay and even suggested that I apply! IMO, I think that might be an unpleasant job, since I doubt if too many people are happy to be at a hearing protesting their taxes.

It reminded me of what my dad used to say about his auto parts business. He enjoyed everything to do with automobiles, but he said that when most folks come in they are not in a good mood because their car is in need of repair. He thought that it would be much more pleasant to be in a business where people are happy to come in to your store and spend their money on wants (toys) rather than needs (car parts).

click HERE to subscribe to The Financial Engineer

How I saved Money this week

I signed up for the 10% off coupon at both the Home Depot and Lowes moving web sites. Lowes e-mailed the coupon within 3 days, while I still have not received anything but junk e-mail for Home Depot. I initially thought that I would be able to print out the coupon immediately after signing up but it didn’t work that way. I sent an inquiring e-mail to Home Depot about the coupon and was told that it would take 4-5 business weeks!

I tend to frequent Home Depot more often than Lowes. That is not because I like it any better than Lowes, it’s just closer to home. So, during my last shopping trip, picking up 6x6 posts for my pergola, I asked the clerk if they accepted competitors coupons. And sure enough they do, so I pulled out the Lowes 10% off and got a nice little discount, which made my day!

click HERE to subscribe to The Financial Engineer

Meeting with the County Tax Appraiser

Going in to this, I really wasn’t too worried. I felt confident. I had a reasonable and logical argument. LOL.

I mailed in a protest of my property taxes on June 2nd. I then received a hearing notice set for July 16th. I called the county appraisers office and was surprised to hear that I would only get 5 minutes to talk about my case, then the appraiser would defend the county’s position for 5 minutes then the board would discuss it for another 15-20 and deliver a decision. The clerk encouraged me to come in ahead of time to settle this with an appraiser. I agreed.

At the appraisers office, I made my way to the fifth floor, signed in and waited in a line of 4 or 5 others. My appraiser, Jack, called me to his office. He looked all the part of a beaten down government worker with a dry sense of humor.

I began by comparing land values based on price per square foot. He would have no part of that. He said he couldn’t change the valuations and I would have to take it up with the board at my hearing. I complained that #1 - I didn’t want to make another trip and #2 - I was told he could make such judgments. He told me that all of the lots were set at one price and my lot was at a 30% higher premium because it has a creek running through it. What a shocker! This “creek” is actually a mosquito infested, beaver swamp and I am being charged extra for it? He said, “it’s all in how you look at it” This was going nowhere.

So, I switched tactics and showed him an estimate for repair on a retaining wall. He balked a little at first saying they don’t normally accept that kind of thing. I explained that the wall was critical to the home foundation. Since I had taken the trouble to get the estimate, he agreed to take the cost of the new wall off the market value of the house. He then asked me if I was going to come see him at the mission when he loses his job for doing this?

Believe it or not, I felt sorry for the guy.

Even so, I pressed on and showed him an estimate for the cost of replacing my roof. I told him what the insurance company had paid me and what it was going to cost me. He quickly agreed to slash that amount from the house value. He said that they would probably re-appraise the house later when the roof was replaced – so expect it to go up next year. Fine, I will take my chances on that.

All told, I was able to get my appraised house value decreased by $25,370. Based on my local tax rates, I figure I will save about $600/year. The county typically appraises every three years, so I will probably reel in about $1800 in savings from this little protest. Not bad for a few hours of my time.

click HERE to subscribe to The Financial Engineer

Selling a car on Craigslist

I finally came to the conclusion that I no longer wanted to mess with trying to fix my Toyota Supra. I had spent some time investigating the issue and narrowed the problem down to one or two possibilities – both of which are more costly to repair and more trouble than I am willing to take on. Plus, in the back of my mind, I kept thinking that when you are dealing with a 20 year old car there is always going to be something that needs repair. I started dreading doing any work on the vehicle and got to the point where I was ready to part with it. So, just like that I wrote up a description, slapped a price on it and posted it with some photos on Craigslist.

The listing was free and very easy to execute. I wrote a quick paragraph describing the car, submitted it and few minutes later received an e-mail from Craigslist with a link to be used to publish the listing. The same link can be used to edit or delete the post at a later date. The listing runs for 45 days.

It didn’t take long – within three hours I had a couple of e-mails with phone numbers of the interested party requesting to set up a viewing time. I knew right away I had a really good hit. The first guy to respond actually rebuilds Supras and was looking for a car just like mine to use to rebuild his damaged racing/show car. I liked the idea of only showing the car once; the fewer strangers visiting my house the better! We arranged a date and time set for three days later for him to “meet” my car. In the meantime, I received many more e-mails from people interested in the car. Most folks wanted to trade. I had offers for vans, cars, two motorcycles, a fish/ski tri-hull boat and a registered yearling quarter horse. I rejected all offers to trade, as I was trying to get rid of something and didn’t want to add any more stuff to my collection.

The Craigslist site does a good job of warning sellers about common scams. For instance, cashiers checks can be easily faked and the individual cashing the check is held responsible! The only way you would want to take a cashiers check, nowadays, is if you called the bank and verified it on the spot.

I also read through their scams FAQs and it really made me wary of even cash! It’s not that hard to counterfeit bills and since I don’t deal with cash on a regular basis, I don’t have a counterfeit bill detector pen. Even so, it probably would have been worth it to pick one up for a few bucks just for the peace of mind.



In preparation for the showing, I found a bill of sale form on the internet and an application to transfer the title. As usual the buyer tried to low bid my price, but I held firm. The car had generated a lot of interest, so I knew I could sell it given more time. He finally relented but had to go to an ATM to get the remaining cash. Evidently he was confident he could talk me down, because he had initially arrived with $500 less than I was asking.

I signed over the title, completed the bill of sale and made copies of both. He arranged to pick up the car the next day. It was obvious that he was excited about getting the car, so it made me feel good that I had found the right home for my Supra. In fact, its got a whole new exciting life ahead for it as a model show car!

click HERE to subscribe to The Financial Engineer

Updating my Holographic Will

Being so frugal or maybe even something worse, I didn’t want to fork over the money on an attorney to create a will. And, of course it takes time, appointments and trust in an attorney. Instead, several years ago, I did a little research using a book on Texas probate which was sent to me as a gift by a local funeral home!

The book gave some examples of wills, some common errors, what not to do and helped me hand write my first will. This is perfectly acceptable in the state of Texas and is referred to as a holographic will. It must be written only in the hand of the testator and signed by the testator; no date, no witnesses and no notary public are required. Perfect.

I made a copy of the document, stored the original in a fire resistant safe at the house and kept the copy locked in a safe at my place of employment.

I have not thought much about it since then, but of course, things in life change over the course of several years and the will needs updating. By chance, I also caught the Suze Orman show last Saturday where she provided a gift code to get a free copy of her online Will & Trust kit.

I had not watched her show in quite awhile and had forgotten how amusing it is to see her reaction to some of the unbelievable financial moves that people make. A lot of her advice seems like common sense, but every now and then she hits on something new to me.

In addition to the will, her software allows you to setup a revocable trust, Financial Power of Attorney, and an Advanced Directive / Durable Power of Attorney for Healthcare.

What a deal! Of course, using her software will require two witnesses and a notary public. I figure it’s probably worth going through the questions to get info on these other documents and maybe add that wording to my soon to be updated holographic will. I signed up for the offer and created an account. It appears that I can go back at any time to work through the questionnaires and generate these documents.

click HERE to subscribe to The Financial Engineer

Best and Worst U.S. cities for building Personal Net Worth

Salary.com has released its 2008 salary value index ranking of 69 U.S. cities with at least 250,000 residents. The index measured local salaries, the cost of living and unemployment rates to come up with the communities with the most favorable combinations. The top five and bottom five cities are shown below in the table. The top five offer the largest difference between pay and costs providing the best opportunity to build wealth.

It’s no surprise that New York city or Honolulu are expensive places to reside, but I didn’t expect to see Washington DC so high up on this list at #2.

As for the top five, I can attest that as a whole, Texas has an inexpensive cost of living. Eight other Texas cities made the best cities list as well. Of course, just being a cheap place to live is not enough to rate highly in this index, it’s also important to have good paying jobs. And that combination does not seem to lend itself to some of the prime real estate locations in this country.

click HERE to subscribe to The Financial Engineer

The story of my roof replacement continues....

It took over a week, but I now have my insurance adjuster’s estimate for replacing my roof that has suffered hail damage. I looked it over line by line and found several errors. The estimate is difficult to read. It’s inconsistent, sometimes material and labor are included for an item and other times it is not. I found that he had missed a couple of items (power wash and re-stain a chimney) and one of the subtotals was incorrect (short) by over $600! But, the most surprising thing was that his estimate to replace my roof was $2500 less than the two contractor bids that I have.

The adjuster had left me with a long distance phone number to call him with any questions. I don’t see why I should need to pay phone charges to talk about an insurance claim, especially when I have a local agent. I called the agent and they said they would contact him and have him call me. Two days later, I still had not heard from him. I called the corporate insurance claims center. They gave me another 1-888 number to reach the adjuster. I left three phone messages over three days before he returned my call. He said he didn’t check that voice mail very often!

His response to the huge difference between his estimate and the two contractors bids, was that I needed to get three bids. That’s interesting as these two contractors must have 20 signs up in my neighborhood. Could they be that overpriced and yet have so much work?

The adjuster assures me that the insurance company wants to make my roof "whole" again. If that is the case then why did he underestimate the cost of the work? Here’s an example: he estimated the cost to power wash the chimney and re-stain it as $48.80. I don’t know anyone who would want to climb my very steep roof with a power washer in tow for less than 50 bucks. I wonder if I could even rent a power washer for that?

When I pointed this out, he offered to add on another $50. Then he throws out that they have decided to send the depreciation check immediately. I should have it in less than a week. I mentioned this to a roofing contractor and he looked at me in disbelief. He had never heard of such a thing and said that the depreciation value is usually sent after the work has been completed. I get the impression that this insurance company wants me to put this cash in my pocket and just go away.

It is frustrating that this adjuster was not as thorough as he needed to be. He mentioned that he had completed over 7 house estimates for that one day. It seems quite possible that because he is paid by the claim, he rushes from one house to the next to cash in and then takes weeks to get the paperwork out.

I am certain that this will all work out in the end after I do a lot more work collecting bids. I plan to get that third magical bid, as well as three bids for the power washing and staining of my chimney and wood decks. But most importantly, I already have an attractive quote for a home insurance policy with another company.

click HERE to subscribe to The Financial Engineer

Upgrading my workstation - the hard way

My Dell Precision 650 dual processor workstation has fully depreciated after 4 plus years and now it’s time to order a new machine. I attempted to go through my employer’s IT department, but the cost of an extra 8 GB of RAM sent the total over their allowed budget for a workstation. I reasoned that it could be ordered with 8 GB and then once it was delivered, I could order an additional 8 GB on a separate purchase order to get it to the desired 16 GB.

The IT guy would have no part of that deal. He said that I should order the machine to meet the requirements – which means I have to write a capital equipment request. That translates into a lot more paperwork, requires 9-10 signature approvals and instead of being on a 2-3 year refresh cycle, the workstation will need to fully depreciate before its next replacement – that’s 4 plus years. All of that for 8 GB of RAM. Such is corporate life…

Last week, I got the price quote and the justification paperwork together and sent it on its journey through the corporate procurement cycle. It’s going to be a great workstation. It’s a Dell T5400 with dual quad Xeon processors, 64 bit OS and a 512 MB video card. I’m looking forward to the expanded capability – it will allow me to build much larger and more complex computer models for electromagnetic simulation purposes.

The only downside is that now my PC at home is going to seem like even more of a slow dog! It’s a little old Dell Dimension 2400. I actually won it in a lottery at work. If that sounds odd, let me explain how it worked. For each piece of old computer equipment brought in for salvage, you got a lotto ticket. The first 5 names to be drawn won various types of new computers. I hauled in a bunch of old computer equipment from the labs that I manage and amazingly my name was drawn 2nd and I won a desktop PC. Too bad they don’t have those lotteries anymore!

click HERE to subscribe to The Financial Engineer

Behavioral Finance - Bias from Deprival, super-reaction syndrome

This is the eleventh in a series of posts about common human misjudgments. The series is based on a Charlie Munger speech at the Harvard Law School in 1995.

Why study human behavior in relation to finances?
Recognizing and understanding why people do the things they do, what drives them, and what are innately human tendencies is the first step in overcoming your own self and making sound decisions! We want to make rational, logical decisions, but emotions and irrational tendencies get in the way.

These behaviors are not all bad, many are good in some way - that is why they survived. In fact, these behaviors served some purpose that helped extend life at some time in the evolutionary process.

11. Bias from Deprival, super-reaction syndrome
Have you ever noticed that when there is a perception of scarcity, people totally over react to the situation? It seems that when people believe some item or thing might run out they tend to hoard that something. This behavior would probably be a pretty good survival instinct. For instance, if grain was running in short supply, early humans might try to stash away as much as they could to prepare for more lean times. That is probably a good trait in that type of situation.

Problem is, that behavior also permeates into other areas – like gambling and stock market speculation. Charlie provides the example of slot machines. Casino owners know that a slot machine that provides a lot more near misses than another machine that has the same probability of winning will translate into more collections for the casino. Its the near misses that keep enticing players to put more money in. If you weren't coming close to winning, you would probably give up a lot sooner.

As for stock speculation, a lot of the motivation is to get in on a stock that is moving up so as not to miss the boat. There is nothing worse for a stock trader than to miss out on a big move. These folks are motivated not so much by what they have to gain but what they stand to lose if they don’t do something.

I see this type of bias on a regular basis and have recently experienced it myself. The most recent case involved my dealings with my home insurance company. The insurance adjuster was late making an assessment of my damaged roof and then late getting the estimate to me. I didn’t really get upset until a couple of my co-workers with similar claims for hail damage with the same insurance company told me they got their estimate the same day as the assessment. One even had a check within a week of filing. It had been over two weeks since I filed my claim - Why wasn’t I getting the same level of service? It prompted me to start calling the adjuster, then the agent, then the corporate claim office to get my estimate. I got motivated once I realized I was missing out on something.

click HERE to subscribe to The Financial Engineer

Still awaiting my hearing notification for Property Tax protest

On June 2nd, I filed a protest of my property taxes. As of Friday, I had not received a notice or any type of confirmation from the county, so I called them. They do have my paperwork on file, but the clerk said they had not yet assigned a date for my hearing with the appraisal review board. Hmmm. According to the county, all of the deliberations are to be completed by July 18th. That doesn’t leave much time. The clerk assured me that I would get two weeks notice and she encouraged me to come down to the office now to settle this before the hearing.

I suspect that they have received a lot more protests this year than in the past. Most indicators are that house prices are declining and yet the county is raising the appraisal values.

I have my fingers crossed that the review team will try to settle my claim prior to the hearing, so that I don’t have to miss work for this. To my surprise the clerk said that most hearings only last 15 minutes with the home owner allowed 5 minutes to state their case. She also suggested that I bring lots of photos of the house and estimates for any work that needs to be done.

For now, I will wait until I either get the hearing notice or a settlement. If I get a notice, I will probably go in to their office ahead of time and try to work out a compromise with the appraiser.

click HERE to subscribe to The Financial Engineer

Free Nuvi with TD Ameritrade deposit

TD Ameritrade sent me an “exclusive” offer for a Garmin nuvi 660 navigation system in exchange for a deposit of $50,000 into my TD Ameritrade account. For another $50,000, I can get an additional $200 Shell gift card.

Those are some pretty nice gifts – sure beats the old toaster or steak knives that Savings and Loans once offered for opening a new account. The nuvi can be purchased for $399 or less with a little shopping around.

The fine print on the offer indicates that the account must maintain the balance for a year.

Account must remain open with minimum funding required for participation in the offer for 12 months, or TD AMERITRADE may charge the account for the cost of the product(s).

I wonder how many investors will take them up on this offer? I don’t hear too much talk about people wanting to invest in the market, right now. Most seem to be in damage control mode. They are frustrated with losing money and are moving into safer, non-stock related investments. Moving 50 grand into a trading account is the last thing on their mind.

click HERE to subscribe to The Financial Engineer

Evaluating Risk and Reward

We all take risks, especially when investing our hard earned money. And, most of us have heard that risk and return are closely linked. Risk is an important factor in asset selection, because if you select an investment that is more volatile or goes down more than you can handle, you may be tempted to make irrational choices at the wrong time – such is typical of the “sell low and buy high” crowd.

As I approach the brink of financial independence, I want to reduce my risk. I won’t need to take so many chances anymore. I will have enough. Of course, I do not want to eliminate all risk as I believe some is necessary to continue to grow, slow and steady. So, how does one go about assessing risk?

It’s easy to calculate the returns on investments, but evaluating the risk is much more nebulous. Everyone has a different definition of risk and how to quantify it. One approach that I have used in the past applies the statistical measure called standard deviation.

Standard Deviation can be calculated based on returns over several years and provides insight into how often an investment's return is different than its mean return and by how much.

How much return does risk-taking buy you? To help answer that question, I created the following table with data that was pulled from this Matt Krantz article in USA TODAY. The analysis begins with the average annual compound returns and standard deviation for several asset classes over a bunch of years. The return data was derived from the market research firm Global Financial Data.

From there, I calculated the 68% confidence intervals for one standard deviation. For normally distributed data, 68% of the values will be within one standard deviation of the mean, while 90% will be within 1.645 deviations of the mean. So, it is very likely that the return for an investment will fall within the minimum and maximum values provided in the table. I then determined the return to risk ratio for each investment type.

The return/risk ratio is the amount of percentage points of return that can be expected for every percentage point of risk. In other words, how much risk is involved in achieving the return. Volatile investments, with average or poor returns, such as oil and emerging markets, have low ratios.

With a little bit of study, the table can provide some valuable information. For instance, you may notice that value-priced stocks have beaten the S&P 500 and are considerably less risky. In fact, its even money for value stocks. Surprisingly, corporate bonds have an excellent ratio providing good returns for low volatility, while municipal bonds do not appear to pay out enough to compensate for the downside risk.

Housing is another interesting asset class that has an extremely low return to risk ratio. It averages 3.5% return, but it has significant volatility. This is one of those asset classes that is difficult to make a broad assessment because property values vary considerably with location. While I have seen steady appreciation in my neighborhood, others have seen sky-rocketing home values and now plunging prices. Another thing to keep in mind when looking at this data is that some of these assets, like gold and housing, have not historically been considered investments.

One other item of note is the years column. This indicates how far the data series goes back – the more years, means more data and more reliable numbers. Gold is the only asset class with data for more than 200 years.

What other information can you glean from this data? Were you surprised by the return to risk ratios associated with certain asset classes?

click HERE to subscribe to The Financial Engineer