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Monthly Archives: March 2008

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Recession Bells are Ringing!

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Hi All,

Just saw this headlines from yesterdays news. Evidently 70% of economists polled by the New York Times are saying that America is in a recession. Whats remarkable about this survey is that its hard to get economists to agree on anything. If 70% agree on an interpretation of statistical data, something is definitely going on.

So, two initial thoughts:

1) The FED will probably cut interest rates – lock in any high rate bonds or CDs while you can.

2) Since US fundaments will likely be weak over the next few months, you might consider bargain hunting in the US stock market or – better yet, send your dollars abroad. There are LOTS of great investment opportunites in markets outside of America.

I hate to advocate betting against the USA, but the sages are saying the tea leaves aren’t in our favor.

Best,

James

Three Signs of a Struggling Bank

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Hi All,

Yesterday afternoon I went by the bank to take of some business with our safety deposit box. Now, just to give you some background on why this is relevant – we bank with PNC. Its recently been having some problems in the DC area. By problems, I mean that its closing branches and having problems getting new depositors.

Well, when I went in there, they’d lost the paperwork for our box. It took the better part of 40 minutes to get things straightened out. Now, I’m not an expert but that’s a bad sign for PNC. – And more importantly its given me some cause for thinking about how to recognize a company that’s struggling. We don’t know much about retail banking but I think our experience with PNC bank and Washington Mutual(WaMu) shows that struggling banks can be identified by at least three factors.

1) Closing Branches:

We’ve banked with both PNC and Washington Mutual. Both of them have recently closed branches in the DC area. WaMu doesn’t have any retail places inside the beltway, but they have closed some of their mortgage lending branches.

2) Can’t Deliver Basic Services:

Case in point, my local PNC branch can’t keep their safety deposit records straight. While they were good enough to check my ID, its BAD when a bank can’t do basic stuff like that. Either the staff is not skilled or the management isn’t properly exercising oversight. Its the same story with Washington Mutual. We’ve had serious problems trying to get WaMu to do basic customer service: here, here and here.

In fact we’ve had so many problems with WaMu we might as well call this blog the “we hate Washington Mutual” blog rather than Dinksfinance.com…but I digress.

3) Slipping Stock Price:

Stock markets are meritocracies. All things being equal, companies which bring in more earnings have their share prices increase. In so far as earnings are a reflection of management’s ability to realize profits, declining share prices are indicative of a company with problems. Not surprisingly, both PNC and Washington Mutual have seen the value of their shares slip.

Food for thought, perhaps you can suggest additional criteria.

Best,

James

How We Made Money – The Short Answer

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Many people read personal finance blogs for tips on how to make money. To assist the reading public, we thought we’d briefly discuss the top three sources of our net worth so the reader can see areas we’ve been successful in.

1) Investment Real Estate: Miel and I have had two investment properties. We sold one because of the wear and tear on our relationship. However, we still have the other one, and its equity is about 18 percent of our networth. The DC housing boom was good to us.

2) Hansens Natural Corp: While the wisdom of placing a large position in a single stock is debatable. We made approximately $50,000 by investing in Hansens. We’ve still got a limited holding, but the market has been hard on the company recently, so we’ve invested elsewhere.

3) TIAA & CREF: Miel and I have both made healthy contributions to our retirement accounts through TIAA & CREF. Roughly 28 percent of our networth comes from this. Generally speaking, retirement 401ks are great because they a) reduce your taxable income b) come with employer matching funds and c) give your funds a chance to earn market returns.

While I’m a big fan of TIAA & CREF, I think the reader should be aware that they have recently changed their business focus to emphasis retail mutual fund sales. Accordingly their fees have gone from .5 to 1 percent in many of their funds. This not a good move from an investors standpoint.

Getting back to the point, nearly half of our net worth comes from three sources.

As always feel free to leave a comment or drop us an email if you’d like to chat!

Good luck and happy investing!

Michelle Singletary

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Hi All,

If you’re looking to read some good stuff on personal finance, you might consider checking out what Michelle Singletary has to say. For those of you don’t know her, she’s a columnist with the WashingtonPost focusing specifically on personal finance issues. Black America has the goods, but you might consider her postings: Honey, I Need Some Money! and Q & A On Couples Financial Management.

Best,

James

How much is enough?

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Clearly we humans have an issue with never having enough, Americans in particular.

Wealth and abundance is such a very relative feeling. Working hard to achieve our goals, related to paying off our second mortgage, I am reminded of the relative feeling of prosperity I felt as a Peace Corps Volunteer making $85 a month.

Then I thought that my $5k in the bank when I returned from service was a goldmine in comparison to my friends who had stayed stateside and had that much in debt, while simultaneously being deprived of sunlight in the cube farm.

Now the $5k increase in our net worth initially looked like a paltry progress towards our long term goals.

I’ve decided it’s enough of that. We need to work less and feel more abundant with what we enjoy right now. Not judging from what we’ve had, or what we hope to have, but the here and now.

By feeling prosperous in the now, I believe that will better enable us to reach our goals in the long term. Better to honor what we have than to fight for more.

While this is a more personal posting, I believe that we can all learn from ourselves in where we feel prosperous and how we appreciate what we have.

Thanks for all.

Miel

How We Are Paying Off Our Second Mortgage

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Hi All,

This weekend our good friend Brad paid me a visit. In addition to discussing his love life, we chatted a bit about our blog – well okay, I wanted to talk about the blog – Brad wanted to discuss his love life. However, it did come up that we sometimes don’t give enough specific examples in our postings. So, in this one we wanted to give you more details about how we’ve been paying off our second mortgage.

1) Reprioritizing:

All of our funds from stock dividends, blog income, prosper.com, and our investment property are going to the payoff the trust. Much of our salaries are going into it also. We will be applying big blocks of Miel’s income when a couple of administrative issues get cleared up with her job. So far, we’ve been able to drum up $900 per month from these sources. The actual amounts we pay are shown below.

2) Linked Accounts:

Nearly all of our finances are linked electronically. Our prosper and brokerage accounts are linked to our checking accounts. Our paychecks are direct deposited into our checking accounts also. Finally, our checking accounts are connected to the mortgage account. This ensures that when funds become available, they can be quickly used to pay off the mortgage.

3) Credit Card Arbitrage:

Miel applied for and received a Citbank Professional Cash Card. The card has a 0% balance transfer rate for 12 months. We intend to transfer $9,000 of our mortgage debt onto this card. This should result in an approximate interest savings of $570 over the next few months. Miel shopped around and got a better than standard offer for the balance transfer.

Here is a screenshot of our second mortgage payoff so far:

Personal Finance Tools

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We’d like to hear from our readers about what kinds of financial tools you have found to be most useful, and what are those that you’ve dreamed of, but haven’t been able to locate yet.

We DINKs have been invited to a personal finance leaders workshop in San Francisco at the end of the month. Miel will be attending and presenting on behalf of the DINKs. Aside from having bloggers contribute from their own experience, the workshop will look into what tools we can put our heads together and build.

As we’ve begun to put together our powerpoint presentation, I realized that our best resource is to ask our readers what they are interested in finding. We can do our best to put together helpful tools, but if you’ve got ideas on what you feel has been missing in your financial toolkit, please let us know. We will present your contributions and share with other bloggers to see what we can do in furthering your financial resources.

Thanks much for your ideas and suggestions.

Best,

Miel

Buy Stock People, Buy Stock!

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Hi All,

Since the markets are choppy, people are seem to be reluctant to buy stocks. Here is a quote from Peter Lynch that sums up why you should reject this view:

“When stocks are attractive, you buy them. Sure, they can go lower. I’ve bought stocks at $12 that went to $2, but then they later went to $30. You just don’t know when you can find the bottom”.

– Peter Lynch

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