Step3 Prophet

IRA 2010 decisions

I've been giving a lot of though over the past two weeks to what I should invest my IRA money in this year. Last year I did pretty good investing in the Vanguard REIT fund, but this year the fund is up quite a bit, just like everything else. With pretty much all asset classes rising phenomenally in the past year, it's hard to find what is undervalued. Granted, bonds didn't rise as much as stocks, but they are not really expected to. I'm not that confident in my bond assessments yet anyway. Headlines like this could give anyone pause " Mamas & Papas To Streamline Recruitment Process With Applicant Tracking Software Bond Talent. " WTF mate? So I've decided to let my asset allocation strategy be my guide. Currently here is where I stand:

	Current	Goal
S&P total	28.28%	25.00%
Loans	8.73%	10.00%
Small Cap	5.85%	10.00%
International	19.58%	20.00%
REIT	11.89%	15.00%
Stocks	19.81%	10.00%
Bonds	5.85%	10.00%
SUM	100.00%	100.00%

As you can see, the allocation is grossly out of sorts. I'm not going to try and force the numbers to match my allocation exactly, because that usually incurs extra fees and taxes. I'm going to pour a little more of my investment money into certain areas, namely small cap, loans, and REIT, and sell a little bit of my individual stock holdings. I won't touch bonds for the moment because I only invest with them through TSP, and I don't want to change my allocations there just yet. For the small caps stocks, I'll look at adding a small cap fund to my vangaurd IRA, or maybe using their brokerage services and getting an ETF. An ETF would probably offer lower expense ratios, and because I'm making a big one time purchase the brokerage fee would not be as big a factor.

Since I think stock prices in all areas are still overpriced, I'm not in a rush to make changes right away. I predict we'll see a drop toward the end of January and into February. My goal is to have all my IRA money invested by the end of the first quarter, so I have a little time to research funds and to time when I put my money into them and my current REIT. Loans are good to invest in any time, but I'm not going to use them in my IRA just yet, although I probably should since they are high interest generators.

Home Paperwork Reduction Initiative

While I was traveling over the holidays I saw an interesting kiosk in one of the airports I was passing through. It was an advertisement for Neatworks scanning and organizing suite to help people reduce clutter by digitizing all their old receipts, business cards, and documents. Now that is something truly useful, I thought to myself! Right now I have stacks of accordian files that contain all my useful documents for the past 10 years and I have bunches of old reciepts and business cards that I don't really use, but don't want to through away either, and by digitizing them I would save myself quite a bit of clutter.

Buying things spur of the moment like that is almost always a bad idea, so I made note of the name and did some more reseach after I got home. The biggest sticking point is the price. They are asking $400 for the scanner and the software. I just purchased a brand new computer for less than that. If it does everything it promises, then it would probably be worth it, but as you can see on Amazon, the reviews are mixed (when are they not?).

Actually there is a product with nearly unambiguous reviews. The Fujitsu ScanSnap 1500 is rated as a five star product after 41 reviews on Amazon, which makes it pretty rare indeed. It comes with 4 different software programs to help you organize your paperwork, business cards, and other files. It's a little more expensive, but not enough to put me off right away (unlike the other $800+ scanners), but now I'm conflicted as to which to choose. After careful review of the Amazon feed back and other sources, here is what I've discovered:

Neatworks:

Pro's

• Cheaper overall.
• All in one fileing system with no other software needed and a slick user interface. This could be a big time saver vs. 4 different programs from Fujitsu.
• Albe to export to PDF, Outlook, Quicken
• Intelligent OCR on scanned items for quick database entry. This is important to me because my primary use will be reciept scanning. 
• Excellent website, and has video tutorials on how use the software/hardware.

Con's

• Proprietary hardware and software, meaning it is not intended to work with any other program or equipment. Also, some possible software stability issues. If this is supposed to replace my physical documents, then I really want it to be stable.
• No automatic alignment of scanned items. One review said every document comes out a least a little crooked, and you can actually see this in their video tutorials. That could get annoying quickly, and I can't determine if you can manually correct the issue. 
• Only 3.5 stars on amazon after 57 reviews

Fujitsu: 

Pro's

• Unparralled scanning and document handling, with auto alignment.
• Good double feed detection and correction, and easy jam clearing
• Non-proprietary, which gives easy access to all documents through the windows file system.
• Reviews say it works with neatworks software
• Folds up, which will help prevent dust from fouling the scanner when it sits idle.
• 5 stars on Amazon after 41 reviews

Con's

• 4 different software programs.
• Fujitsu's Rack2Filer software seems to be a quickly slapped together product to answer the need for software support for their scanner.
• More expensive. If I got this and neatworks for the reciepts, it would be over $500
• No TWAIN driver, which means limited support for other software.
• I'm not sure how well it handles receipts. It's primarily a document scanner, which receipts and business cards as an after thought.

I'll have to do a little more research and thinking about pro's and cons before I buy.

2010 Predictions and 2009 Review

Two-thousand nine was a pretty crazy year for finances. Thanks to a steady job and relatively little stock exposure( by which I mean almost all my investments are stock, but they are not worth that much yet) my day to day living hasn't really been affected by the markets ups and downs. I like the downs because it incentivises me to buy more stock.

  Looking back at this time last year, I remember thinking that the market was down and probably going to be on the rise in 2009 (I was right, but it still had 40% drop left in it!) and that I would do better investing all my IRA funds at the beginning of the year. Following that reasoning invested all my IRA contribution for the year in vangaurd's REIT index fund (VGSIX). The results look like they are in my favor, since I bought at 10.07 and now the price is 14.84(thats 47% gain), I'm curious to know, would I have done better with dollar cost averaging? Assuming I bought the same dollar amount on the last market day of each month I would have 44 shares less than I do now(which means $660 less). So it looks like I made a good gamble in that regard. 

  So what's ahead for 2010? Honestly, I have no farking idea. The only reasonable prediction is that in the long term, the market will rise. Yahoo! Finance has a nice article on the folly of predicting individual stocks for long term sucess. So I'm not going to be doing much prognosticating, but I'll record mine and a few other people predictions here to laugh at next year.

• CNNMoney Predicts that home prices will fall this year. Hurray for me since I may buy a home.

•  A CNN quck poll show's most people think stocks will rise, or at least stay flat. Only about 20% expect markets to go down. 
• I predict E-readers will make it mainstream this year, if you don't consider them main stream already. B&N is putting serious pressure on Amazon, and other readers are in the works.
• 1stMillionat33 is bullish on gold and bearish to the point of doom saying on the future of the US. He thinks our National debt will be at 13.5 Trillion by years end, right before we implode. As a side note, I don't follow any of his advice, but it is interesting to see a different investing perspective.

Credit Card Disputed Charge (2nd Try)

I was reviewing my monthly statement from CHASE last weekend when I noticed something odd. I had a charge for $370 from a company called Istock *International. My first thought was, what the hell did I spend $370's on? A week before that I had purchased a digital still camera in Singapore for nearly the same amount, but I had already identified that purchase. It's not uncommon for me to not remember exactly what I purchased a month ago, but the size of the purchase and the unknown vender struck me as odd, so I did a little more research. I concluded that the purchase could either have been for a Macintosh stock screening application, or an online stock photograph vender. Neither of these purchases makes sense for me, especially since I was on travel to Manila pretty much the whole day in question, so I decided to dispute the charge.

            I was surprised at how easy CHASE made it. I've disputed an unknown charge on one of my credit cards once before, but that was about 10 years ago and I remember that it took awhile just to find out that it was a charge I had made after all but didn't recognize the company name. This time was quite different. CHASE walked me through the steps of identifying to them the charge in question, categorizing what I thought was wrong with the charge, provided me the merchants phone number, and allowed me to give them any comments I had or the merchant had if I contacted them. Using the phone number provided I was able to determine that it was, in fact, the photostock vender who assessed the charge. I'm not keen on paying for random photos since I don't use them professionally, especially digital ones. I tried calling them, but they were closed for the weekend so I went ahead with the dispute anyway. As a final step, CHASE asked me to mail in any evidence I had for the dispute. Since this was a charge I suspect I did not authorize, I have no evidence to send in.

            This morning I got a reply from CHASE saying that their initial assessment is that the charge was invalid, so they are giving me a credit toward next months bill. If the merchant offers evidence to the contrary the matter may come up again, as near as I can tell it's settled. Sweet! That was easy.



(I'm still playing around with email postings. For some reason my first post today didn't show the text!)

TSP redistibution and email blog test

  This post mainly to test my ability to email a post to my blog before I leave for a high seas adventure. I'll only have limited connectivity, so being able to email in blog posts would be a real time saver.
  I decided to change my allocation mix and my overall distribution of funds in my retirement account at work. My new split is 25% each to fixed income, large cap, small cap, and foreign investments. Probably not an ideal distribution, but then, my work retirement funds are only a portion of my overall investments. What I really wanted was a little more exposure to fixed income, handy way to gauge it a sector was over or under performing based on my own portfolio. That way I can make future redistribution and allocation choices more strategic.
 My retirement accounts are still pretty small right now, so it's not a huge change in allocation, but they will be growing rapidly based on my current investment rate which is designed to maximize my TSP contributions for this year.

October Update

Once again I've let the blog go on too long without a post. This is getting to be like my gym membership! J/K, my gym membership is free, so I don't feel guilty about not going to the gym for monetary reasons. However, I should still exercise more, and I should still post more as well. To be fair I've been out at sea for about half the time since I moved to Japan, but typepad has an email post feature that I'm going to try and take advantage of in the future.

So where am I know now in terms of finance? Not surprisingly I've been doing well since coming to Japan. While I pay more for housing and life's necessities like food and transportation, I'm also being compensated more for the cost of living difference. The networthIQ badge shows almost steady growth (baring a few stock market ups and downs).

Recently I've also taken care of a few personal finance basics. I picked up a money magazine at the airport during some of my recent travels, and while most of the financial advice it gave was stuff I already knew, sometimes you have to be reminded. That's why I just got my credit report from www.annualcreditreport.com. My credit situation hasn't changed much, but you should check for errors every 4 months or so and It's been about 9 months since I last checked.

Along those same lines I finally signed up for creditkarma.com. It's a web site that will check your credit with one of the bureuas and give you a free fico score. I've heard good things about it, but hadn't tried it until now. I found the site was pretty easy to use, and gave some good advise and tips about how to manage you credit limit. The only piece of advice I didn't agree with is the sugestion that you should open lots of credit accounts to improve your score. While this will increase you lower you credit to debt ratio, I think having many accounts exposes you to more risk. Another interesting thing it does is track fico history. I'll log in again in a couple of months to see if it has an update.

Lending Club Numbers Revisited

  In 2008 I did a post on expected returns from using the Peer to Peer loan service Lending Club. It's been just over a year now, so what better time to take a look at the results? (Thanks mike for the comment on my other post).
  I'll come out and state right now, it's not as rosy as my initial assessment led me to believe(O RLY?). Much as the initial Propser investors took a beating, so have my first LC investments. I made the post when LC was still getting started, and there was a lack of historical data at that time, so I used the historical data for traditional loans that LC had on their website. Also, I wasn't as savvy about how to invest in loans at that time. Now you can take the historical data that they post on the LC website and do calcs with actual results. Interestingly enough, LC quite period last year provides a clear demarcation between my old and new loan strategies. But enough chat, here is a screen shot of my portfolio of "Old Notes".
 

Click to enlarge the image if you can't read it. It shows that of my 225 original loans, 10 are charged off, 16 are in default, and If you count those 1-4 months late as defaults, then that is 38 loans total in default. That makes almost 17% defaults. That's not terrible, but keep in mind that this is only after 1 year. These are three year loans, so most have about 2 years left to be fully paid. Also not that good either, since my original calcs show give a annual rate of return of around -1%.

  So how am I actually doing? If you look at the interest earned versus the defaulted amount, it's a net gain for me, but not by much. About $1029 defaulted, compared to $1,133 in interest payments gives me a prophet so far of $104 You can slice that value a number of ways, but since the payment/default process is still on going, and I don't want to delve into statistics tonight, I'll just leave it at that. The reason I have a profit vice the loss my original calcs showed is due to the assumptions made(ie, the loan defaults at origination, and all loans are of equal value). My actual portfolio is not homogeneous, and, of course, not all loans default right away.
  What this really means to me is that I'm not being adequatly compensated for risk(ie the interest rates on high risk borrowers is too low). Lending Club's interest rate model assigns an interest rate based on a number of risk factors, but I suspect that the for the D,E,F,G category notes that interest rate is too low. It's a tough choice, because if LC sets the rate too high, poor credit loanee's will not even apply. Plus I don't want to gouge people, I want to help them out of those high interest credit cards or bills. Some of it is also my fault for not being careful how I invested in the those old notes.
  So what can a person who wants to invest in do to mitigate the risks? First, only invest the minimum amount in any particular loan. This allows for greater loan diversity, and minimizes the chance that one loan going bad sinks your whole portfolio. I actually have a loan like that in my old notes. Thankfully the borrower has proved to be trustworthy so far, but I will never again go out on a limb for a single borrower, no matter how good there profile looks. The fact is, you can't really know the borrowers situation, or even if you do, it could change during the 3 years of the loan.
  Second, weight your portfolio toward the A,B, and C categories. You don't have to limit yourself soley to them, but the compensation isn't there for a large portfolio of low grade loans. Here is a snap shot of my current "new" note portfolio.

Most of the loans are about 3 months old, so there is not much of a history yet. This newer portfolio is definatly more risk averse, but by following the two principles outlined above I think my overall yield will be much better.

Awesome V-Day Weekend

This was an awesome three day weekend for me and Mel. She's here with my in San Diego before I make the transition to Japan, so we are making the most of it.

On Saturday we went to the San Diego Zoo. It was very nice as zoos go, although zoo's make me feel sorry for the animals kept in small cages (especially after seeing the Point Defiance zoo!). On the bright side, I got in free with my military ID. It turns out that three major attractions in San Diego offer free entry to military: The SD Zoo, the Animal Park, and Sea World. The cost is normally $35. While we were at the zoo we met up with some friends of Mel. I ended up getting a gorilla hoodie because it was a bit chilly. That evening we went downtown to look around and have dinner. We didn't make any reservations, we just walked around the city taking in the sights. We ended up at Las Hadas because they offered us a free appetizer coupon at the door and it wasn't that busy. It's a recently opened restaurant with an urban Spanish theme. The food was quite good, and the service was some of the quickest I've ever seen. The interior decor is urban night life with a mix of Latin pop and English music coming over the speakers.

On Sunday we chilled for most of the day and then went to the Fashion Valley mall.  Some of the worst parking I've ever seen for a mall. It was yet another of San Diego's open malls, and the store selection was impressive. It was the first time I've seen a Sony store before. Our big purchase ended up being from The Art of Shaving. An upscale shave store, who knew? Mel bought me a travel shave kit with a pre-shave oil, shave lotion, a badger hair brush to lather with, after shave, and a fancy blade handle for disposable razor heads. I'm still trying it out, so I'm not sure it it's worth all the extra effort, but it is an interesting experience. The lady at the store was enthusiastically giving demos. After the mall we went to dinner at an Italian place in Point Loma called Solare. It was well worth it. I had a black ink pasta stuffed with broccoli and sea bass in a tomato lobster sauce and Mel had sausage potato dumplings that were very rich. Portion sizes  were just right, but it was a little on the expensive side.

On Monday it was crazy weather for San Diego: Cloudy skies, high winds, and heavy rain. We stayed inside and listened to the sound of the waves crashing on the beach and the wind blowing. That evening we went to visit some relatives of Mel's who live in El Cajon. They were very nice, and fed us dinner.

All in all pretty good.

The magic of Skype phone calls

I've recently become a huge fan of Skype (in case the headline wasn't enough of a tell). Skype is a computer program which allows users to make voice and video phone calls over the web. I'm a little behind the times, since I've known in the back of my mind that this was possible for quite a while now, but I've never really had a reason to use it. Wikipedia tells me it's been around since 2003.

Now that I'm stuck 1000's of miles away from the woman I love, and am going to be going further still, it made sense to explore this option. It also helps the my EEE PC comes equipped with a built in web cam and a version of skpye pre-installed. The pre-loaded version was somewhat outdated, but installing the latest version was quite simple.

I've been using it now for a few days and I am quite impressed. The best part of skype is that PC to PC calls are free. Thats video and voice. Calls can be made to a land line or a mobile phone as well for a fee. The call quality is decent, and the video quality is not too bad either. I don't know if the video is limited by the poor quality of my camera, or by bandwidth limitations, but over all the quality is fine for my purposes.

I expect this will save me and my sweetheart quite a bit of money while I'm traveling in foreign lands, but it can also be useful to see friends who you haven't seen in a while. Even though I could call them on my cell, a video would be nice as well.

To learn more check out Skype's website.

 

Rental Car insurance

I'm back from my trip to Dallas. It was a whirlwind of friends and family and I had a lot of fun catching up with people I haven't seen in over a year. The only down part of the trip was the rental car. I hate renting cars. It's next to impossible to get a good deal on one. Even the price they quote you on the web usually doesn't take into account extra fees and taxes and there is always the question of getting add ons and insurance.

I ended up renting a car for 3 days to go visit my grandparents in Houston. As I was driving the car back to my parents house the night before I was leaving for Houston, I was blessed with two flat tires on the passenger side. Talk about crazy bad luck. I called the rental company assistance line and they sent out a tow truck and brought me back to the rental agency, and the rental agency set me up with a new car at no additional charge (for the rental). I am, however, stuck with the fees for towing and tire replacement because I didn't have any kind of insurance on the vehicle except my own ordinary policy. Since then I've done a little research and in general you have three options:

Rental Company Provided

The Rental companies love to sell you additional insurance. The company I was renting from had offers ranging from $20-$50 per day. PER DAY! For three days that would be at least sixty dollars. I'm getting ready to rent for two weeks. That would be an additional $280-$700. The rental itself is only $300! That is kind of hard to swallow. For my little blow out incident, if I had taken the $20 a day coverage then I would have come out ahead overall on. However, if something similar happens during the two weeks I'm renting the resulting repair cost would be about even. How cost effective it is to buy the extra insurance really comes down to how often you rent, and what your normal insurance covers.

Your Regular Insurance Provider

I talked to my insurance company about what would be covered during a rental. Pretty much all the same coverages apply to the rental car as to my regular car. In terms of accident and personal liability I'm covered exactly the same, as well as for road side assistance. (which I didn't have at the time, but that's another story). Something as minor as tire repairs won't even meet my deductible.

Third Party Insurance (ie credit card benefits)

I have a number of credit cards for various reasons, and my American Express card has the benefit of offering additional insurance for rental cars (among other things). If I had used this card, I might have been covered for the tire repairs ( but not roadside assistance). I don't normally use it for anything, so I didn't have it with me at the time. This benefit is a secondary insurance, which means it only pays for things after your other means of insurance has paid out. A representative I spoke to said that would cover my deductible from my regular insurance. There is also an option from Amex to sign up for a primary insurance with greater coverage. For $25 a rental they will cover theft or damage up to $100,000 for 42 days after you rent. If you sign up it is automatically charged at the time of rental. That sure beats $20 per day!

Which is best for you?

That depends on a number of factors, but I think the biggest would be how often you rent. If you only rent a car once or twice a year for a few days at a time, the piece of mind offered by the rental company's policy is probably best.

If you rent frequently then all those insurance fees are going to add up pretty quickly and you would be better off finding another option.

If your regular insurance is spectacular, then you may never need to buy additional insurance. Just be sure you know what coverages you have before you go declining the rental companies offer.