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  • Archive for September, 2007

    Sex and Money

    Posted by Frugal on 28th September 2007

    I just opened a bank and brokerage account last week. The banker that helped me opening the account was a young female. Because my wife and I had to take our young toddler with us to the bank, the account opening process was not very smooth. My kid was crying and wanting to leave the bank. So my wife and I were kind of rotating for babysitting throughout the entire process.

    As with most of our accounts, I almost always open them in my wife’s name only, simply for additional financial security for my wife’s benefit. Because we also opened a brokerage account, we also had to disclose our total and liquid net worth as part of the standard questions for application process. I did not sense anything since I was busy calming my young toddler outside of the bank half of the time. But my wife later told me that she didn’t feel the due respect from the banker, and when she asked for a candy from the banker for calming the child, the female banker told her that “NO, it will only make the kid more hyper.”

    I never heard any banker instructing clients on how to treat their children. I certainly think that it was simply not appropriate nor respectful. But I can see that it is just another example of competition among the same sex. Yeah, my wife doesn’t know many of the financial terminologies or the in and out of the the brokerage accounts because she spent most of her time taking care of our kids. So she must have asked several stupid questions. But what does it matter?

    Certainly the people of same sex, especially for those who are closer in age, tend to have more competition whether consciously or sub-consciously. People will compete in all kinds of things, whether it’s personal appearance, cars, money, even kids’ school grades, or just social and financial status in general. But if you spend more time on actually doing things to improve yourself, rather than spending time on non-constructive activities, everything will come out much better.

    I have always believed in simply competing against oneself, and never bothered about much of the office talk on cars, promotions, or anything related to other people’s money. I believe in everyone’s inherently innate value, and it is simply not right to compare people on an absolute basis.

    Despite on whatever I believe in, the fact is that for most people, opposite sex attracts, while same sex competes. I guess next time, I shall use a male banker instead for my wife’s account.

    Posted in Miscellany | 13 Comments »

    Yield Curve Steepening Means No Recession?

    Posted by Frugal on 26th September 2007

    Incidentally Mark Hulbert is posting another bullish post “Ahead of the (yield) curve – Commentary: Post-Fed curve much steeper, a good sign for the economy”. I must say that everything of what he said about a smaller chance of recession based on the steepening of yield curve is correct on paper. However, I cannot agree that one can simply use only the yield curve to determine the odds of recession.

    For one thing, because the long term bond markets are not collapsing or dropping dramatically after Fed raising interest rate, while the short term interest rates are falling, it appears to be a good sign that Fed still having everything under control for now, except on US dollar index cutting through multi-years support at 80. But based on Bob Hoye’s historical analysis (pg.2 at this link), such post-bubble yield curve steepening is more ominous rather than a bullish sign. Bob’s recent forecast has been quite accurate, and I would trust his words as a market historian rather than Mark Hulbert’s who has been putting out 8 to 9 bullish articles out of 10 this year. Such yield curve steepning according to Bob Hoye is simply part of the post-bubble credit contraction process. Certainly, if long term bond yields start to go up much more, they will simply deepen the housing recession. Now, I don’t care about how accurate the predicative power of yield curve. It is simply a black-and-white matter that housing markets will get worse if the bond yields go up. With the housing bubble unfolding, my only attention would be the absolute level of the long term bond yields, rather than whether the curve is inverted or not.

    By the way, if I didn’t make it clear in my yesterday’s post on “is it 1998 or 1970?”, I will now. I believe that more of the emerging markets will be in the 1998-style progression, while more of the senior markets will be in the 1970-style. I think US stock market will be going thru an extended period of sideway with possibly a bullish slant, with $US falling gradually. The best thing for US dollar holders should be trading in this sideway market to make up the $US fall in purchasing power. But you do need to wait for a round of cleansing before jumping into it.

    Best luck, and have patience.

    Posted in Bonds, Real Estate, Stock Market | 1 Comment »

    Is it like 1998 or 1970?

    Posted by Frugal on 25th September 2007

    I’m not too sure why Mark Hulbert at has been putting out so many more bullish posts versus bearish posts this year. Regardless, his latest post Partying like it’s 1998? is interesting. Getting the correct big picture going forward is extremely important for investing. So is it 1998 or 1970 now? Actually, I believe that this answer may depend on which country you’re talking about.

    With the housing bubble bursted, I tend to believe that US stock markets will be under-performing to foreign markets. Although asset deflation is a distinct possibility, I believe that there will be enough paper money supporting the stock market in general (but possibly not all the time on a short term basis). The question for every investor then is which stocks should one buy to maximize the ROI. I personally believe that foreign stocks, precious metals, and energy would continue to out-perform the general stock markets.

    Despite that some foreign stock markets have gone up a lot, I think the time is more like 1998, a short pause before the final height. With paper money continued to devalue against precious metals, I think precious metals will continue to out-perform. Energy sector is the more tricky choice. With a potential slowdown in US (and possibly global) economy, energy demand is “supposedly” to decrease. I think between now and then, there may be a dip before energy sector out-performs again. With this in mind, I have been under-weighting energy sector since the beginning of this year.

    If you’re not in any of the above markets, I think there should be still chances to get onboard. Although short-term wise the market can continue to go up further, it can’t go up without regrouping and consolidating the gain. Investing is about being patient. Don’t buy when the time is still not right.

    Why do I think majority of the global stock markets are more like 1998 rather than 1970? It’s evident from many individual stocks that hot money is trying to find a home. Apple (AAPL), Garmin (GRMN), Google (GOOG), etc. have gone up substantially. As long as the story doesn’t change the pitch, hot money does not leave. And you bet that there will be more hot paper money trying to find a good home. The key is obviously to be one step ahead of it.

    Posted in Investing | 1 Comment »

    Greenspan, here is what you said before.

    Posted by Frugal on 24th September 2007

    Greenspan supported tax cuts back in 2001 (01/25/2001 from CNN Money). Greenspan again defended his position on tax cut in 2005 (’01 Tax Cuts Were Justified, Greenspan Maintains, 3/16/2005 from Washington Post). Now Greenspan is criticizing Bush’s tax cut that he supported (9/14/2007 from Bloomberg). And he says he is mis-interpreted?? Hey, Greenspan, if you are mis-interpreted, you have let it go for 6 years. And I thought you really like to speak up and express your opinions?

    Greenspan says ARMS might be better deal (2/23/2004 from USA Today). This is just right before the first interest rate increase in June 2004. What does that mean that ARMs might be a better deal? Is that an encouragement for would-be homeowners to take up the extremely low initial teaser rate at 1%, with the potential of resetting to 5% later? And you said that you don’t get how subprime mortgages were rampant until late 2005/2006. I wonder who specifically taught the homeowners about all the benefits of ARM.

    On the housing bubble, Greenspan defends himself in an interview:

    “Sometimes I get criticized, and I deserve to be criticized, and that’s part of the game,” Greenspan says. “But this one, I’m innocent.”

    Greenspan argues that the Fed mainly has influence over short-term interest rates, which affect adjustable-rate mortgages, a small portion of the overall mortgage market. Long-term interest rates, which influence fixed mortgage pricing, are somewhat beyond the Fed’s control and became more so earlier this decade.

    “We tried to push them up in 2004, and we failed,” he says. “What we found was that the global forces of disinflation were far too powerful for even the Federal Reserve. We tried again in 2005, and we failed.”

    Greenspan notes that if the housing bubble was the Federal Reserve’s fault, why were similar such bubbles — many of them worse than what was seen in the USA — created around the globe?

    Sorry, Greenspan, I don’t buy that at all. If you want to say that globally there were also other housing bubbles, and so, it was not your fault, then you should refrain from taking all the credits for the low inflation due to the low manufacturing wages from globalization. It’s simply your job of watching over US economy, whether there are globalization factors or not. With increasing globalization, inflation in the USA is spilling over to many countries, especially in countries where there is a currency peg or link to US dollar. Greenspan/Clinton simply got lucky to take the ride in the best part of globalization.

    Mis h has an excellent review on Greenspan’s words (click to read more). Greenspan’s lies are obvious to those who remember.

    Posted in Investing | 4 Comments »

    I bought a new car below dealer’s invoice

    Posted by Frugal on 21st September 2007

    I have been thinking of getting a new minivan because my old camry is getting really old, and things are starting to break down. With my friend’s help, we both each bought a new 2007 Honda Odyssey. Before tax and fees, we paid roughly $23,900 for the car, which has a price of $24,584 from, an invoice price of $25,846 from Yahoo, and a MSRP of $29,330.

    Why did I choose this car? I have been extremely busy at work, so I simply relied on my friends’ advice for the choice of car. In fact, I only spent part of the last 3 days shopping for the car. Because my friend told me that both Toyota and Honda have a promotion going on, with manufacturer rebating the dealer about $2000 if a sale is made before the end of September, dealers have more rooms to go down in price. And with Honda, you can easily request price quotes via internet at the website. So it made the price comparison much easier. At the end, my friend was able to solicit 3 different quotes all within $100 of each other. With the housing market slowdown, the inventory at dealers is definitely significant. Price concession is certainly easier, especially for 2007 models.

    Certainly car prices have been going down after adjusting by inflation. I’ve paid almost the same amount for my old camry, some 10 to 15 years ago. And now I’m paying about the same price for a minivan. The power of technology brings deflation, and improves life quality. Relative to housing price, cars are getting quite insignificant these days.

    P.S. I will adjust my net worth by the amount that I’ve spent on the new car through a period of a month or two. I will be putting a value of $0 for my cars, since I consider that is money spent already.

    Posted in Debt/Frugality, Miscellany | 9 Comments »

    Markets will probably challenge the old high

    Posted by Frugal on 19th September 2007

    Looks like the parties are not over yet. And that’s just great, because I haven’t started shorting yet. I did sell some 10% of my portfolio.

    I didn’t think that Bernanke will abandon $US this fast, but I guess subprime problems are very serious, and 50 basis cut was necessary. And it’s an unanimous decision! So much for all those “tough” Fed talks. Today’s decision clearly shows that Bernanke is THE Helicopter Ben. I guess things are really playing out according to script. Higher inflation is to come for sure. $US is going to go down. And looks like a 1987-style correction may be in the process of turning into a 1998/99 prelude to another stock market bubble.

    This incredible bubble blowing series may really crunch all bears to pieces, but ending up in hyper-inflation, then depression. So with the biggest high-tech bust, Greenspan created the biggest housing bubble. Now with the biggest housing bust, Bernanke appears to be in the process of blowing up the stock bubble to replace it. Money may be “funny” money again. Sometimes, I’m amazed at how these people lived in their lies, especially the Numero Uno Greenspan, a maestro of words, but crumbled in front of real truth. His recent lies and shunning of the housing blames truly make me repugnant. I don’t even want to talk about his greatest irresponsibility of this decade in human history. Not realizing that subprime is getting out of hand?? I thought it is YOUR JOB as the chairman of central bank, Greenspan?

    So what should one do now? I believe one should get back to stock market at the opportune time. If there is not a good opportunity, one should temporarily park ones cash in gold or foreign currency. $USD is going down. According to Frank Barbera’s podcast this week, Chinese currency Yuan looks like it may have a revaluation soon. And Walmart’s prices are soon to go up.

    Eventually one day 99 cents store will cease to selling $1 stuffs, but maybe $2 or $5 goods. I always wonder that whether they have ever thought about inflation. One day, $1 will be worthless as five cents, and what are you going to buy with that??

    See the chart of $US below. There goes your 3.4% of purchasing power in 1 month (from 82 to 79.2). And you just thought that you are earning a decent 5% on a bank CD after a year?? The sad truth is that US government is going to rob you blind through inflation, and then tax you mightily too after you generate some good amount of “capital appreciation” through inflation. The middle class will continue to shrink at the expense of upper class and foreigners. The politics and social unrest will be increasing. And I only wish that Bernanke would have written his script differently. Unfortunately, one day far away in the future, we will be paying for someone (Greenspan’s + Bernanke’s) else’s sins. And we collectively speaking won’t even know how we get there, and recognize the real culprits of our economy.

    Do me a favor, don’t let the government take away your hard-earned wealth. Invest in something tangible, and forget about paper money. That literally is just a number in some computer of your bank.


    Posted in Investing | 6 Comments »

    A Miserably Failed Prediction From Sherman McClellan

    Posted by Frugal on 18th September 2007

    Market timing sometimes fails terribly, even for the best market technicians.

    McClellan oscillator is one of the respected technical indicators for people in TA.

    Sherman and his mathematician wife Marian developed the McClellan Oscillator and Summation Index in 1969. Many other traders, investors, and software developers have found these to be useful market timing tools. The Oscillator is derived from the number of advances and declines each day on the New York Stock Exchange.

    Back in Dec 2005 when I saw he made his bearish report on gold freely available on his website, I went through carefully with his report and made decisions about my own gold investment that I will keep holding. Here are his words from his Dec 14, 2005 special report:

    In a couple of years, people are going to be looking back and asking each other, “Do you remember that big gold blowoff back in `05?” Then they’ll co-opt the line uttered by thousands of Texas oil men, and say, “Lord, just give me one more of those gold bubbles and I promise not to screw it up this time.”

    Certainly, gold is near its high again. I don’t know why he was so bearish. But there are just things that gold bugs believe in, that no one else gets.

    That chart also allows us to see that the recent run up from the congestion earlier this year at around the $420 level dwarfs any of the other price structures in this 15-year chart history. Clearly, something unusual has just taken place, and now we get to see the after effects.

    Well, I definitely agree with him that something unusual just took place. And it was Helicopter Bernanke going to pilot the great inflation ride, with M3 money statistics all hidden from public view. But obviously McClellan didn’t understand the significance at all.

    While Sherman McClellan failed both in the short and probably long term predictions on gold price, he was definitely not the only one. The revered gold technician Frank Barbera also bailed out right at the end of year 2005.

    Today, gold and gold stocks are again at the inflection point with Fed cutting interest rate. You may call me stupid that I’ve held on to a class of investment that pretty much go nowhere for an entire year. But I don’t want to try to time the market too much, especially in a bull market that I believe in. I didn’t sell because McClellan nor Frank Barbera said something negative. I allocated the amount of money that I can tolerate for its volatility.

    In fact, I hope gold & gold stocks fall, so that I can buy more. As time goes on, the muddy big picture gets more clear, and my confidence in my investment gradually increases. And we shall see.

    Posted in Investing | 1 Comment »

    All is not well – A British bank run in progress

    Posted by Frugal on 17th September 2007

    Four billion of cash withdrew from Northern Rock in about two days. That’s how fragile confidence is in something “solid” as a big bank. Monday’s stock market will be interesting, and it will be a big tuck of war between bulls and bears, or maybe it’s a no-brainer sell.
    Maybe this is simply a prelude episode for Countrywide (CFC). Watch out. I must admit that everytime I saw their ad of 5.7% APY for their bank CD which is FDIC-insured, it is so quite tempting to think that “oh, well, it’s going to be alright for another 6 months, what the heck.” But then, things are truly getting worse in the mortgage land, and definitely not better. The peak of mortgage resetting is coming next March, and the drama has just begun. It is hard to imagine how stock market will not fall between now and then. Boy, I think I should be selling more and more.

    Fed will be cutting interest rate on Tuesday. Have you opened your CD yet? Unfortunately, like in 2000, Fed cutting interest rates will not save this stock market. This is going to be a bumpy ride. Don’t lose your sight on the big picture.

    As I’ve said previously, I’m in the process of unloading my equity stake. Looks like I’m not doing it fast enough though.

    Posted in Investing | 2 Comments »

    Investing in Alternative Energy

    Posted by Frugal on 14th September 2007

    This issue of Kiplinger’s magazine focus on the “green” energy. The alternative energy mutual fund in the issue is NALFX. While its performance is quite impressive, gaining 9% annualized for the past ten years, there is a sales charge of 4.75%. Other comparable/cheaper products that you can buy into are PBW, GEX, GAAEX, and CGAEX. I personally own PBW for probably more than a year, and my gain on that is not much at all. Since the inception of PBW, it performs about the same as NALFX, but this year, NALFX had an outstanding year, outbeating PBW by some 20% in the past year.


    My current take on alternative energy is that you can probably put your money to better use. I believe that this is not the time yet for alternative energy investment, but the time should come in about 2 to 3 years, under the assumption that crude oil price will keep soaring. That is the biggest driving factor for alternative energy investment. Under such assumption, investment in alternative energy will outbeat the performance of the crude oil spot.

    Even though recently crude oil price just beat its record price, perception in the market place is everything. Alternative energy has not taken off yet. Once the market perception starts to turn, you want to get into this sector as soon as you can.

    So keep these on your watch lists closely. In the coming years, I do expect that they will pick up steams. And if you can’t remember this in 2 years, you’d better pick up some shares today.

    Posted in Investing | 2 Comments »

    Over $200 cashback on my credit card

    Posted by Frugal on 12th September 2007

    Less than a year ago, I applied for this credit card to replace the old Citi Dividend Platinum Select card. This is the only credit card that I know that still gives 5% cashback on any things bought in grocery, drug stores, and gas stations. For more details, you can see my post from last year.

    With some $200 saved from cashback, it’s equivalent to earning $400 pre-tax (at least in my case). Certainly easy money, since you don’t even need to make any efforts (besides applying for the card). And if you buy those gift cards for Circuit Cities or any other restaurants in a supermarket, by default, you get 5% off too.

    If you know another better cashback card, please let me know. I’ve stopped using my Citi Dividend cards, since their cashback is only 2%.

    Posted in Credit Cards | 6 Comments »