Sometimes You Got to Let Your Baby Go

Well, I finally sold all of the shares of ACAS I had with Sharebuilder (I still hold 66 shares with Zecco). I was very hesitant to get rid of this as I think it will eventually go up significantly eventually - but there is a lot that could happen.

I originally purchased ACAS at about 72¢ a share in March. That was one of my best investments. I purchased some more at $2.01, $2.09, and $2.66. I was an idiot and in May I purchased $1123 worth of shares at $4.61 and $4.75. The stock had risen quickly over the past few days and I thought it would keep going up. Well, it didn't - that's what happens when you chase a rising stock.

ACAS paid out a dividend in stock in August. I got 174 shares (worth $562.87 at $3.36/share). Unfortunately, a few weeks later the Call Options I sold were called, and I lost not 200 shares but 266 shares. I made a total of $575.76 all total from the option.

I really wanted to keep the 434 remaining shares, but I think it would be best to put this money directly on my mortgage. Furthermore, I don't think we are out of this recession yet, so I am expecting a general decline in stocks. ACAS has also stopped paying dividends on a regular basis - so their next dividend wouldn't have to be paid until September of 2010 - and that's IF they have a profit to pay out.

Turns out that it was very good to have sold my shares when I did - I sold at $3.46 a share on September 29. Today it closed at $2.92 a share - 54¢ less.

I ended up making $388.19, so I'm thankful I did make a profit. However, if I had not done the options, I would have made $732 profit.

Sold FNM

Yesterday I covered my option position in FNM and sold all 300 shares. I would say that this was one of the most stupidest investments I made. I read a little article in the Wall Street Journal a year ago saying how people were making money buying FNM and selling Call Options on it. I ended up purchasing 300 shares averaged at $1.90 a share. I sold it yesterday at $1.60 a share.

I originally had sold call options that expires in Jan of 2009 for $2.50. Those expired and I kept the profit for those ($150). Then I sold options for Jan 2010 at $2.50 and made $47 after trading fees (keep in mind this was when the market was bottoming out). I was debating on whether to just wait until Jan when they expired or buy the options back. I decided on buying them back now so that I could sell the stock. I really don't think there is any value to FNM and I don't see it ever going back up again any time soon (if ever). Of course, I thought the same thing about AIG, too (and that still doesn't make sense to me!).

So I bought back the call options and sold the stock. Here's a spreadsheet showing everything:




Well, I'm glad I didn't loose anything, but a $21.38 profit really isn't worth it. This also frees up $467 that will go right on the principle of my house. That was the main reason for selling now instead of waiting for the options to expire.

Update on House

I tell you, this has been one of the most frustrating things I have ever done.

The thing that has bothered me the most is that the mortgage originator I have been dealing with at the bank is always very nice when you talk to her or e-mail her, but she doesn't tell me the full picture. I don't know how many times I have asked her "so when we finish this that's the last thing I need to do to get the house?" and she says yes, and then after I finish that she tells me, "oh, we still need this and this and this." It is very frustrating.

For example, it took almost 3 weeks to get the SONMA approval (come to find out it was not even submitted until the last week) and she had told me that that was all that we needed. After that was done she now tells me that they are still waiting on the water/septic tests. If she had told me this before, we could have gotten them done while we were waiting for SONYMA approval. Instead, that added another 2 weeks. Friday, September 18th we finally get the results of the tests and have them faxed to the bank. I talked to her Monday morning and she said everything looked great and I would definitely have my closing date later that day. I called the bank around 3 and spoke to a different lady, who told me that they still needed to get a copy of the septic test and some other information from the seller's attorney. Why didn't the other lady let me know that, instead of telling everything was fine?

We get all that stuff faxed over to them, and they tell me that the bank's attorney will be calling me that day to setup the closing date (this was Tuesday, September 22). I called them around 4pm and spoke with the secretary who told me that they would still have to submit for the title insurance and it will be another 5 days before they can give me a closing date.

I don't have a problem with waiting - I just can't stand having someone tell me that everything is fine when there is more that I still need to do. Especially when it happens repeatedly.

Getting Sued by MonaVie

A fellow blogger is being sued by a company called MonaVie simply because he wrote a blog post giving their product a negative review. You can read the blog post here.

MonaVie produces very expensive juices that sell for about $40 a bottle. The recommended serving is only 1 oz. That comes down to $1.60 an ounce - which is way to expensive for my own tastes.

The juice is made from the Acai berry and a mix of several other concentrated fruit juices. Nowhere do they tell you the percentage of Acai berry is in the juice.

MonaVie has sent Lazy Man and Money several letters telling him that because the words "MonaVie" occur in his URL that he is violating their copyright. I guess they even contacted the company that hosts his blog. Sounds like a very nasty company to me.

I have read his posts about the juice and he is right about it. It really does sound like a scam.
It is just very sad that companies won't tolerate any type of negative review of their product.
It sounds similar to Monster Cables, a company that thinks that they own the name Monster and sues any other company that use the word monster in their name at all - they even sued a Monster Golf company for copyright infringment. I refuse to buy a product with that brand name on it because of that.

Are Bonds Better than Stocks?

I've always been under the impression that bonds are a safe investment with a very small return and stocks were more risky but had the potential for great returns. But looking at 10 year charts seem to tell me something different.

Here are the 10 year charts of the funds I have in my 401k plan:

FUSEX - Fidelity Spartan US Equity (SP 500)Growth of $10,000 after 10 years: $9,148.46. At the highest, it was only about $13,750. SWPPX, another company's SP500 index fund, returned $9,179.17.


FDIVX - Fidelity Diversified International

Growth of $10,000 over 10 years: $18,014.62. At its highest it was almost $30,000.


FBALX - Fidelity Balanced

Growth of $10,000 over 10 years: $15,680.43. At its highest it was around $20,000.


FLPSX - Fidelity Low Priced Stock FundGrowth of $10,000 over 10 years: $26,859.74. At the highest it was over $35,000.


BGRFX - Baron Growth Fund

Growth of $10,000 over 10 years: $18,641.04. At the highest it was around $27,500.


FBIDX - Fidelity US Bond Index
Growth of $10,000 over 10 years: $17,991.81


PTTRX - PIMCO Total Return FundGrowth of $10,000 over 10 years: $20,570.46.


Looking at these charts I have come up with the following conclusions:

1. The SP500 is not a very good investment. It didn't even top $14,000 at anytime in a 10 year period, even at the top of the economic bubble.

2. Actively managed funds (FDIVX, BGRFX, and FLPSX) seem to have done the best out of all the stock funds. I was always told that an index fund would bring better returns than an actively managed fund. Hmm.....

3. The bond funds seem to be the best in terms of both growth and safety. PTTRX doubled over 10 years, and FBIDX did just as well as BGRFX and FDIVX. Furthermore, over the 10 year period, the dips for the bond funds are much smaller than for stocks.

Of course, if I had put $10,000 in FUSEX around March of this year I would have made about $6,000 today. But that's timing the market, which I am not any good at (nor are most people, from what I understand).

But overall, those charts would seem to imply that a bond fund is a much better investment over time than an index fund.

Switching from ING to local Credit Union?

ING has lowered their interest rates yet again to a meager 1.292%. My local credit union gives 1% (and they have never changed that since I've been with them). I had been keeping most of my money there as I am getting ready to close on my first home (only a few more days!), but that was simply because of the ease of access. But ING just keeps lowering their rates more and more, and I am seriously considering just switching completely to my local credit union.

One of the reasons I went with ING was the interest bearing checking. So far this year I've made a whopping $1.64 from that. Hmmm.... Not so good. Especially when you figure that another local bank I use, Citizens, will pay me up to $10 a month for doing electronic withdrawals.

Their CD's have dropped so much that I wouldn't even bother with them. One year ago I helped my mom open one at ING with a 4.5% APR. Today they range from 1.15% for a 9-month CD (why would you even bother? - that's lower than just putting it in the savings) to 1.85% for a 1-year CD. The 5-year CD only earns 1.75%.

Both my local credit union and Citizens Bank do free bill pay (and Citizens will even pay me 10¢ a transaction), so there are only two advantages left for using ING - the ability to transfer funds between banks online (I can transfer funds from Citizens Bank to the credit union), and being able to setup multiple savings account (though not a big deal if I can't).

I haven't decided for sure yet, but I am definitely considering it. If I did, I probably wouldn't close the account - because perhaps a year or two from now the might offer good rates again.

ACAS Options Called

I sold two options for ACAS in March for August 2.50 Calls - profit was $97.05. I was prepared for ACAS to go up and be sold at $2.50 (I'd still come out a head if it did), but unfortunately I lost more than that.

Not only did Sharebuilder take the 200 shares, but they also took 66 more shares for the dividend. I don't understand how that works, as the dividend was paid out before the option was called. I found out today that each option was now worth 133 shares. So "sold" 266 shares for $$499.99, plus paid $1.28 "Cash deliverable from assignment" (what is that?) and a $20 fee to Sharebuilder.

So the total proceeds for those shares was $575.76 ($2.16 a share). Fortunately, those shares were purchased in March at an average cost of $1.35, so I still made a profit.

I was pretty dissapointed with Sharebuilder however. Firstly, they never gave me a chance to notify them how i would have liked my ACAS dividend - in shares or cash. I was expecting to get a slip in the mail like I do for just about all of my stocks from them. Note that my default setting for ACAS is that all dividends appear as cash. But I got nothing. I guess I should have e-mailed them to tell them, but I was not expecting to have to do that.

I also e-mailed Sharebuilder earlier in the week a question about the options. Their response said they would get back to me within 2 days. I have yet to hear from them.

Get $100 with TD Ameritrade's Save Yourself

TD Ameritrade is again offering their Save Yourself program. You open up an account with them and agree to put in $100 every month for one year. At the end of the year you will get a $100 bonus. You can withdraw your money penalty-free at any time, but if you withdraw it before the year is up you will not get the $100 bonus, but you will get whatever interest you have accrued.

I did this a year ago (only it was $50, not $100), and I did get the $100 bonus. I had to e-mail them, but they gave it to me with no problems. I am doing it again this year.

Here is the link: Save Yourself Account.

Note that this is a FDIC-insured bank account. You can also use your money to buy stocks/mutual funds, but you do not have to - you can just leave it in the savings account and at the end of the year, withdraw it.

Comparison of Banks

I have used several banks over the years, and some have come to be much better than others. The best bank was one I hated at first, and some of the ones I really liked at first were ones I would never do business with again!

1. ING Direct. I opened my ING account several years ago after getting and advertisement where if I opened a savings account with them with $25, I'd get $25. So I did that. What was confusing was I didn't know how to access my account. I did not know it at the time, but if you do not have any activity on your savings account, you would only get a statement quarterly. I tried to access my account online, but because I did not know my Customer ID # (I thought I would just need my account #) I was unable to. Eventually, when I finally got a statement, I mailed them a letter saying to close my account and send me a check for my money, which they did.

About a year later I got another advertisement from them and sent in to open another account. I was told that because I had already done the promotion before (I guess it's once per person for ever) I couldn't do it again, but I opened an account anyway. This time I opened both an Orange Checking and Savings accounts, and was able to easily access it online. For probably the last year ING has been the bank account I use most. The interest rate is much higher than any other bank I've used - even though it has been reduced over the past year (from almost 4% to 1.39%) it's still significantly higher than any of my other bank accounts. The only drawback is that you cannot use paper checks, but I rarely use those anyways.

You can create multiple savings accounts, which I find very useful. For example, I pay my car insurance every six months, so every month I put in 1/6 of the bill, and when the bill comes due I have it all ready. You can easily open a new savings account with just a couple clicks - no paperwork to sign. You can also close it just as easy. You can also open Orange CD's just as easy.

You also get interest on the checking account, which is an added bonus. I've seen other banks offer interest-bearing checking accounts, but the rates are very low and they usually have a minimum of $5,000 or more. There is no minimum for ING. The current interest rate is .25%. Before all the interest rates started falling it was at .50%. Interestingly, even at .25% that rate is still much higher than the interest rate on savings I've had at any other bank (except the local credit union).

They've always run a promotion - if I refer you as a customer, and you open an account with $250, you'll get $25 and I'll get $10. E-mail me if interested.

2. Citizens Bank. I've really enjoyed this bank. The people in my local location are very friendly and helpful. I only have a checking account with them, but I have enrolled in their GreenSense Cash program where I get 10 cents for every electronic transaction I make (limited to $10 a month). So I have my ING bank setup to every day withdraw $1 and deposit $1 into that account. :-) I considered opening a savings account here, but they offer a whopping .10%. Citizens also does free electronic bill pay. They also offer several interest-bearing accounts, but even the cheapest one requires a $1,000 minimum (or else a $10 monthly fee). The interest rate was .10%. Their best service (Circle Gold) requires a $20,000 balance over all of your accounts, and the interest rate is increased to .15%. ING's .25% with no fees/minimums is much better.

The main reason I have this account is for rebates. I get a ton of free-after-rebate stuff and this bank has never given me a problem cashing them (see Woodforest below). It's not uncommon for me to come with more than $500 in 20+ checks, and they don't give me any problem.

3. Woodforest National Bank. One of these opened up in my local Wal-mart and I opened up an account with them. I was going to switch from Citizens to here because Citizens is located in a grocery story that is a little out of the way, whereas Wal-mart I go to at least once a week anyway. The main reason I use a local bank is to drop off rebate checks.

The first couple of times I deposited rebate checks I had to wait while the girl entered them one by one into the computer (at Citizens all they do is check and make sure my math was correct on the slip), and with 10+ checks this takes about 5 minutes (and defeats the whole purpose of going here because it takes just longer than if I went to Citizens). I was willing to put up with this at first - the bank had just opened, so maybe they just didn't know what they were doing. But one day I came in at 5pm to deposit about $300 in checks. Keep in mind that I have deposited about $2,000 of rebate checks so far, and none of them have ever come back bad or anything. I put them down on the counter and the teller (she was a manager as well) looked them over and told me she'd have to call the banks to verify that the funds where available. Again, keep in mind that I was depositing these - I wasn't getting any cash back. Since it was after 5pm the banks were closed. She told me that she would not be able to deposit them and that I'd have to come back the next day in the morning! The whole purpose of me going here was to make it more convenient than going out of my way to Citizens. I almost told her to just close my account, but I remembered that I had a pending electronic payment, plus I knew that if I said much, I'd probably be yelling. So after the payment cleared I simply wrote the main office a letter and closed my account. I would never bank there again.

4. Chase. I opened a savings account here with a promotion (get $125 if you get direct deposit). I got my bonus a few days after my direct deposit. There was one condition though - you need to make 6 transactions a month with the debit card or else you would get hit with a $6 service charge. This is not a problem. But what I did find out this month is that they don't go by a calendar month - their month goes from the 15th of the month to the 15th of the next month. So I ended up getting a service charge for the month of August even though the month is not over yet. I have complained to them but have not gotten a response yet.
They also charge a $3 fee to transfer money to another bank account (whereas ING will do it for free). There is a 6-month period that I have to keep the account open or loose the bonus, but after that is over I will be closing the account. Why would you want a bank account that doesn't give you anything for using it except the potential for lots of fees?

5. Bank of America. I have twice tried to open a savings and checking account with Bank of America to take advantage of their Keep the Change program. Under this program, if you use your debit card they will round the transaction up to the nearest $1, and put the difference into your savings account. So if you spent $1.54, it would show up as $2 on your checking, and 44 cents would appear in your savings. They would match it 100% for the first 3 months (I think up to $300) and then 5% thereafter, and every year you'd get that deposited in your account.

The first time I opened up an account, I used a credit card and did $200. The $200 never showed up in my Bank of America account. I waited 2 months, and nothing. I called them and the lady I spoke with said she had no record of it. I called the credit card company and they reversed the charge. I closed my account with Bank of America and when I closed it they sent me a check for $200! But what was funny is that it never showed up on a statement. So I ended up with $200 from that!

I tried just recently to do it again. I opened it with $100 from another credit card. A few days later I received an e-mail from them stating that I needed to re-enter my information. The e-mail did not look like anything from Bank of America - it looked very much like the spam I get supposedly from PayPal that tells me to click here and enter my password. Hence I did not click on it. I never heard back from them, nor did I get anything in the mail from them until about 3 months later I got a letter saying I did not qualify for the promotion because there were no funds in my account. No money was every transferred my the credit card I used.

So I guess I will not open another account with Bank of America - it never seems to work.

I also have an account at my local credit union. Years ago that was the only bank I used, but they didn't offer online account access or bill pay, and so I opened an account with Citizens. They now offer both. I have originally kept my account there the past several years because I was planning on getting my mortgage through them, but I am not. I am planning (hoping) to close on my house soon, and so I did transfer most of my savings from ING to them so that it is easier to access (otherwise I'd have a 3-day wait while I transferred it), as now I am buying some things that I can't just put on my cards (there will be a post on cash-back credit card soon). The interest rate is 1%, which is not bad at all. It's a little lower than ING, but for the convenience for the house that's ok with me. After I close on the house I will probably just put the bare minimum in the account ($25) and leave it (I won't close it because perhaps it will come in useful again).

Some Thoughts On The Housing Market/Tales of a Debt Collector

I came across an interesting article in The Wall Street Journal today that basically said the American dream should be renting instead of owning your own home.

I disagree. I think just about anyone can own their own home - but it takes diligence, sacrifice, and hard work.

The problem today is that people think they need (or deserve) a big house with all the bells and whistles. They think they need a full cable package and hi-speed internet, and cell phones for everyone in the family. And before you know it, they become a little more in the whole each month.

I work with defaulted student loans, and just about every time I take a financial statement I see the same thing: I'll see a mortgage that takes up 1/2 the income, then a car payment for a brand new car (sometimes 2!), lots of credit card debt, and there's no wonder they are in the situation they are in. People just won't deny themselves anything! I once talked with a person who owed $25,000 for the defaulted student loan. When I told her she could either pay us $300 a month for the loan or face wage garnishment of $450 a month based on her income, started to cry and say we were taking the food off of her table. Yet somehow she can pay a $2000 mortgage on a $200,000 house! (She ended up refusing any voluntary arrangement and ended up being garnished for over $600 a month - wage garnishment is 15% of income, so she lied to us about her income, too!).

I talked with another person who had 2 car payments totaling $1,500, which she said she worked hard and deserved those. Interestingly, she receives bonuses from her job occasionally, and instead of using them to pay down her debt, she uses them to take her family to Hawaii. And then she cries because she is faced with the choice of having to get rid of one her vehicles, not pay her mortgage, or not pay her student loan and have her wages garnished.

But the icing on the cake was this person who defaulted on their student loan (I believe the balance was over $40,000) and come to find out, they've got two mortgages. The house they live in they pay over $2,500 a month for, and then when their kids went to college, instead of living in the dorms, they took out a mortgage on a house for them (over $1000 a month). They intended to sell it after the kids graduated, but then the housing market bottomed and they don't want to sell it for such a loss. This person also refused any voluntary arrangement and is currently being garnished for almost $1000 a month (ironically - wage garnishment is set by the government at 15% - and that usually ends up being much more than what the required payment for the student loan would have been - in this case it was more than twice as much!).

It is really hard to feel sorry for people like this. They got themselves into that situation because they refused to deny themselves anything. If they wanted something, they got it, and they gave no thought as to how they would pay for it. What's even sadder is that when you try to help them, they refuse, and then the legal consequences come.

I would say that a large number of foreclosures would not have happened if people had just lived within their means. Based on my income, the bank would have qualified me for a mortgage almost twice the size of the one I applied for - but the payment would have been too much for me. I could probably do the payment, but I would not have anything left over to save, and I'd probably eventually start racking up the credit cards. As it is, my mortgage (including taxes) will be less than 1/4 of my income - very doable for me. This allows me to have some left over each month to pay down the house sooner, to save for an emergency (I plan on opening an ING Direct CD each month over the course of 1 year, each one being enough for a mortgage payment. This way if I loose my job, I know that I have a year's worth of mortgage payments), or to invest.

One of the benefits of working with defaulted student loans is that you learn hands on a lot of what not to do. I would definitely say that since working there I have improved a lot of financial habits, and I certainly see the need for living within my means.