Of Extravagance and Parsimony July 17, 2000February 15, 2017 First, extravagance: Thanks to Tsvi, who let me know about the Jewish couple that won the lottery. Perhaps you read this? They bought a magnificent mansion in East Hampton and filled it with the finest art and contemporary furnishings. Then they decided to hire a genuine English butler through one of those agencies. They even flew to London to interview the candidates before choosing one. The day after the butler’s arrival in East Hampton, they instructed him to set up the dining room table for four — they were inviting the Cohens to brunch. Then they went shopping. When they returned, they found the table set for eight. Why, they asked the butler, when they had specifically instructed him to set the table for four, had he set it for eight? “The Cohens telephoned,” he explained, “and said they were bringing the Bagels and the Bialys.” I thought you should know this. Now, parsimony: Click here to read about a guy who grabs used soft drink cups and pop corn containers off the movie theater floor, washes them out in the restroom, and then goes to the counter for “his” free refill. (Thanks to John Bakke for alerting me to this by Michelle Singletary in the July 2 Washington Post.) You can never be too rich or too thin, but you apparently can be too cheap. (I had not known this.)
A Good Site for Cheap Life Insurance July 14, 2000February 15, 2017 Pete C: “I am thinking about buying some I-Bonds and went to savingsbonds.gov. I used their Savings Bond Calculator to calculate the value of a $500 I-Bond issued in June and redeemed on 6 months later. The Calculator told me the bond would accrue $9.20 in interest. To my simple, (seemingly) straightforward math mind, that means the bond would have returned 1.84% of the principal in a six-month time period — an annualized return of 3.68%. However, isn’t the annualized return supposed to be 7.49%, the current posted rate for I-Bonds? Help please, I don’t understand.” –Redeeming Savings Bonds before five years have elapsed, you forfeit three months’ interest. Robert Pistey: “While searching for 20-30 year level premium term life insurance, I discovered John Hancock’s Marketplace website (jhancock.com). They appear to offer the most competitive rates, offering a 20% discount for ordering through the net as well as a 5% discount on the first year’s annual premium if paid by credit card. I’ve also found that calling the toll free number and mentioning the word ‘Internet’ will get you all the discounts without having to type in the information. The rep will take it over the phone.” –Click here to get a quote. A 30-year-old nonsmoking male in good health might pay a flat $570 a year for 20 years for $1 million in coverage (until, say, the kids are largely grown). Before you buy, do some comparison shopping over at Quicken‘s insurance page. (Interestingly, entering the same healthy 30-year-old male here and asking for the same $1 million with a flat premium for 20 years yielded a John Hancock quote of $1,000. Just goes to show the importance of “shopping” — even within the same company.)
SOME Dot.coms Are Still Willing to Give Away the Store July 13, 2000February 15, 2017 The bad news is that many of the dot-coms that have not yet gone broke have begun thinking about making profits, which means that fewer and fewer will be able to send you free sneakers. (That was my favorite one — I didn’t even have to pay for shipping or register with anything more than my address. I have no recollection which dot-com gave them to me, but they came! They fit!) The good news is that there are still some deep pockets out there. So, where the last free Palm Pilot I told you about required a $10,000 deposit in a money market fund, this free Palm — courtesy of a Citibank dot-com subsidiary — seems to require just $1,000 in a new account. (You actually have to use the account, which may involve some fees, but check it out — the “rules” begin at the bottom of the page this link takes you to.) That nice little find comes courtesy of my Kansas librarian e-pal Allan Tanner, who is a muggle with a tale. I hereby declare this Allan Tanner Day and offer you that tale. It’s about a dot-com you gotta love — I do — even if you don’t necessarily gotta love its stock. Allan writes: “My daughter, who will be a freshman at Reed College in August, ordered the new Harry Potter book from Amazon.com. She received it Tuesday. Today she received an email from them saying they had promised to send it by Federal Express so that she, as one of the first 250,000 customers who ordered it from Amazon.com, would have it last Saturday. Amazon.com apologized for missing this delivery date, and said they were refunding the entire purchase price and shipping. That’s impressive.” Indeed it is. I have been rooting for Amazon (the company) from Day One. Here’s the message Amazon sent Allan’s daughter. Can you imagine something like this coming from, say, the folks who administer the dreadful General Motors MasterCard? Not in a million years. Greetings from Amazon.com This message is regarding your recent order for “Harry Potter and the Goblet of Fire.” As you may already be aware, as a special bonus for the first 250,000 customers who pre-ordered the fourth Harry Potter book, we offered a complimentary upgrade to FedEx Saturday delivery whenever possible. However, we received well over 300,000 pre-orders for this title and unfortunately omitted a small percentage of eligible orders by accident. We are very sorry that your book was not shipped via FedEx Saturday Delivery. Your order was one of the first 250,000 pre-orders placed on our site, and your address did fall within the FedEx Saturday Delivery range. Unfortunately, due to an error in the program we used to process addresses for this upgrade, your address was mistakenly deemed ineligible. We realize how eagerly all of our customers anticipated the release of this book, and we hope you will accept our sincere apologies for the disappointment caused by the delay in shipping this title to you. To help rectify this situation, we have decided to refund all of our customers affected by this oversight for the cost of this book and the shipping fees incurred on this item. Again, please accept our sincere apologies for any disappointment this may have caused. If you have any other questions or concerns, please don’t hesitate to contact us. Best regards . . . It will be interesting to see whether all this good will that Amazon is building up is worth the $12 billion-plus the company is selling for. And speaking of e-giants, you saw that Yahoo made 12 cents for the most recent quarter instead of the dime Wall Street was expecting — and that that unexpected extra $10 million or so in profit caused Wall Street to add $10 billion or so to Yahoo’s market value yesterday. Yahoo is currently gushing profits at the rate of 48 cents a year (four 12-cent quarterly profits), and you can buy ownership of one of those 48-cent profit slices for a mere $125. Of course, the idea is that the quarter billion a year in profit Yahoo is currently making (48 cents a share times 543 million shares) is peanuts compared to what it will be making in a few years. And that may be. Call me old-fashioned, but I think it’s still a pretty dicey gamble, and remain short a few shares. (Do not try this at home! If I had a dime for every dollar I’ve lost shorting stocks, I’d be rich!) Tomorrow: A Good Site for Cheap Life Insurance
Do You Need an Estate Plan? Do Your Folks? July 12, 2000March 25, 2012 I like to think the estate tax will be changed so that only estates above $5 million are taxed. That would eliminate the estate tax on almost everyone, and the big advantage would not be social policy — I think the estate tax is good social policy — but tax simplification. So much energy, intelligence and angst now go into avoiding estate tax! It’s nuts! You could replace all that revenue with a small excise tax on cars above $35,000 and homes above $500,000 (all this tied to inflation) and be done with it. (I know, many of you would rather not replace the revenue at all, but that’s a different discussion.) In the meantime, though, click here for Fidelity’s helpful new Estate Tax information center. I am not endorsing any Fidelity products, per se — nor all the generic strategies, like revocable trusts, that you will learn about. But this is a very handy way to learn the basics of the estate planning game, to find out what QTIPs and QTRPs are, and to get some sense of what you might be up against if, one day, you had to be the executor of a loved one’s estate.
What Every Bartender Should Know about Magic July 11, 2000February 15, 2017 The Amazing Randi came to visit — he was last on my living room couch 23 years ago helping me understand how Uri Geller had driven me, blindfolded, through Central Park. (Geller was blind-folded, not me.) Randi won a MacArthur Foundation “genius grant” some years ago and really is amazing. He has spent his life debunking frauds and bursting bubbles (Geller possesses no superhuman powers, he could see through the blindfold). He’d come to conjure up an endowment for his institute. (If you’re very rich, please let me know.) Knowing my weakness for stuff like this, he placed on the edge of the table a Bic pen I had just used. He placed it half on, half off — well, maybe 51% on, 49% off, because it didn’t fall. He then stood ten feet back from the pen, at my side, and asked me to concentrate on trying to make it fall off the table. We both concentrated pretty hard for about 10 seconds, and then it began to tilt — like a slow-motion see-saw — until it fell to the ground. He did this with supernatural powers, I assume, or else by unlocking my own. I told Randi about Sam, the bartender at the Mayflower Hotel in Washington who does magic. (If you ever have a chance, stop in. He works there most nights from 5pm to 2am. He closes his fist around your $20 bill and opens it to reveal two tens. Then changes it back to a $20 and makes it levitate. Nothing up his sleeve, no strings or wires. It is completely jaw dropping.) Randi was not impressed, though like any good magician, he would not tell me how it was done. “Go to Tannen’s [Manhattan’s venerable magic shop],” he told me, as he had told me 23 years before, “and you can buy the trick.” (It turns out it’s a trick! The $20 doesn’t really levitate!) But he did tell me his own bartender story. Here’s what you do. Go into a bar with a friend. Ask the bartender if he wants to see some magic. Get him to give you a $20 from the cash register — but to fold one corner distinctively and write down the serial number first. Now do some magic with the $20 bill. It may take a little while to get through your act, as he serves other patrons their drinks, but you’re in no rush. At the end, make the $20 disappear. (Actually, you are doing this magic with a different $20 bill. The original $20 you slipped to your friend, who has gone down to the other end of the bar to buy a drink with it.) Now, ask the bartender if he can guess where the $20 is? Can’t guess? It has levitated right back into the cash register! Maybe you jumped over the bar and stuck it in there — real fast — when he was distracted, tell him. He is skeptical, but looks in the cash register and quickly finds the folded-corner $20, checks the serial number . . . awesome! Whoa! What a great story to tell his girlfriend when he gets off work! Meanwhile, you leave and meet your friend outside. Your own $20, that you did the magic with, is back in your pocket. Your friend is one rum-and-Coke richer — along with $16 in change from the cash register. (I know: where can you get a rum and Coke for $4 these days?) Everybody’s happy. Hit ten bars in a night and you’ve got one very drunk friend and $160 for your trouble. This is, of course, cheating, as all magic is. (They use mirrors! They use identical twins! One of the girls really is sawed in half, but her twin is fine!) And you should be ashamed to steal $16, or even the drink, from an unsuspecting bartender. You should try this neither at home nor at the pub. I doubt very much Randi would ever have done this. His thing is about exposing frauds, not perpetrating them. As for the pen, this one really was supernatural powers. (Well, there is also a slim chance that he cheated. Randi had handed me that Bic to jot something down for him. It was his Bic. It’s possible — unlikely, but just possible — that when I handed it back, he switched it for another Bic . . . one that he had doctored, replacing the ink cartridge with some slow-moving molasses equivalent. With the pen upright in his pocket, all the molasses would be at one end, making it heavy. But once laid flat, overhanging an edge, the molasses would slowly even out until the weight shifted enough for the pen to keel over. Nah. Who would go to that much trouble? I say it was supernatural powers.) Visit Randi’s website. Buy his books. Endow his Institute. He is a force for good and truth and logic. Tomorrow: Do You Need an Estate Plan? Do Your Parents?
Tech Stocks vs Tech Funds July 10, 2000February 15, 2017 David Codelli: “I have been a long-term, enthusiastic investor in T. Rowe Price Science and Technology fund. Since your mutual fund calculator pretty much deflated that enthusiasm for me, I have been looking into alternatives. I have stumbled on a new theory. Since, (1) most technology funds buy the big players (Cisco, Sun, AOL …) anyway; and (2) those companies often buy small high tech startups on their own (i.e. to some extent they are mutual funds themselves); and (3) with stocks, I have less expenses and taxes to worry about than with funds . . . don’t you think for some investors (long term focus, only about 15% invested in technology), it makes sense to replace the managed fund with three or so such companies? I’m thinking Sun, IBM, Cisco. I got this idea by graphing the performance of these stocks against the performance of the funds.” Yes. (And I would throw Microsoft into that mix if I were you, too.) I am no expert on tech stocks, but I certainly don’t think 15% is too high a weighting. And by setting up your own “Personal Fund” for these stocks, as we call it, you will, as you note, have a big advantage over the mutual funds dragged down by expenses — as well as the advantage of controlling your own tax consequences. What you do miss with this strategy is the potential for huge gains if you catch just the right small tech stock. But that’s true with a fund, also, because although the fund may well own it, its impact will be diluted by all the other stocks the fund owns. Tomorrow: What Every Bartender Should Know about Magic
Free Palms, Hell, Lobster, and a Cash Stash July 7, 2000January 28, 2017 Doug Gary: “I just learned that anyone willing to park $10,000 at DLJDirect for six months (competitive money market rates available, no trades required) by opening up a new account will be given a “free” Handspring Visor — valued at about $180. That’s quite a return! Being in love with my Palm, I signed up to get my partner a Visor. The link is: www.dljdirect.com/handspring.htm?OITSCH21K. The deal ends on July 15th. Full disclosure: no position in DLJ, but a happy brand new customer — at least for six months.” Leaving aside the issue of being in love with one’s Palm, if you keep money in a money market account anyway — why not? Every extra $180 helps. David D’Antonio: “In your Copyrights and Copenhagen III column, you reprint the ‘Hell’ joke wherein the student ‘proves’ that Hell is heating up (because he hasn’t (yet?) slept with Ms. Banyan so it couldn’t have frozen over). But this is not true! As you may recall, when the band the Eagles broke up, Don Henley (I think) said they wouldn’t get back together until Hell had frozen over. Yet they not only did get back together, they released an album by that name — Hell Freezes Over — signifying the event! Also, if I recall correctly, Dante’s Ninth Circle of Hell was, in fact, a frozen lake. Embedded in the ice were those servants who betrayed the trust of their masters, which Dante obviously felt was the most grevious sin, since it was the lowest Circle.” Russell Turpin: “Re” Where Do Maine Lobsters Come From? . . .One enterprising Maine ISP set up a digicam inside a lobster trap. You can go to this webpage, and watch your (or someone’s) future dinner when it first takes its fatal turn. Seemingly, some lobsters are caught in Maine. Maybe those are the ones that get shipped to Texas?” Tom Sasek: “I have a friend who has a large amount of excess cash (around $75,000) sitting in his checking account. He realizes the need to invest the money. However, he is concerned that a money manager or investment firm will charge excessive fees. Also, he does not have a lot of free time or expertise, so he cannot do anything complicated on his own. What is the best way to invest this money safely, without paying hefty fees?” There is no rush, Tom. To have money in a bank earning interest when the market is falling 20% is not a bad thing. Think how much your friend “made,” relative to his friends and neighbors, by not being in dot-coms. Your friend should transfer the money into one of those accounts at his bank that pays interest and allows him to write three checks a month. Then he should take a weekend to read my investment guide (borrowed from the library, to keep this from being a shameless plug) and maybe do something slightly more sophisticated with some or all of it. E.g., committing a portion of it to two or three index funds — in regular monthly installments over a couple of years, not all at once. And/or putting some of the money into the Series I US Savings Bonds I’ve been writing about. Your question set three parameters: low fees, simplicity and safety. I totally agree with the first two. Simple is often cheapest and best. Keeping fees, taxes and transaction costs to a minimum puts you way ahead of the crowd. (For more on this, mutual fund owners should click here to see what a difference costs make.) The third parameter — safety — can make sense also, but should not be accepted blindly. Safety sounds as if it’s always a good thing; but over the long run, the safest investments are likely to grow only very modestly compared to those that entail more risk. The long run could be very long, and taking risk by no means guarantees a high return — far from it. But choosing safety exposes you to a different risk: that you will wind up with less than you need.
Three Handy Things July 6, 2000February 15, 2017 1. Tell Me: 1-800-555-TELL (8355). Try it! Free weather, sports, stock quotes, traffic reports in some places — and more. I don’t use it often, but it can come in very handy. Say you you have no quarter for the pay phone and you left your Nokia at home. Just call TELL ME, toll free, say “PHONE BOOTH,” and make your free call.) 2. QB-Search. There are several good search engines I use — Google.com is often the one I find most useful — but why ever bother going from one to the next to the next. I always start at QB-Search and get the 1st page of hits from all the search engines, on one page. (I could get the first 2 or 20 pages from each, but never seem to need more than those first hits.) QB-Search is part of Quickbrowse.com (www.QB.com) and I own part of it. Every time you use it free, I get 50 cents, half of which I pay in taxes and the other half of which goes to the Democratic Party. Be warned. OK, I’m kidding about that last part. I only get 30 cents. But why would anyone go to Altavista or Yahoo or Googol or any of the others, when you can just as easily go to all of them at once? Bookmark it, Danno. 3. This link, courtesy of Mike Brown, helps you make rational decisions when you’re a contestant on “Who Wants to be a Millionaire.”
TIPS and I-Bonds As Investments Within a Roth IRA? July 5, 2000January 28, 2017 Mark Bell: “Your tangential forays into the world of anything and everything are amusing, albeit unfocused. But could we swing back to a financial question for a moment? Retirement age is coming up faster every day. The jury is still out on whether I’ll pass the means test. So let’s talk money. In the spirit of diversification, how would you rate TIPS and I-Bonds as investments within a Roth IRA? I got the stocks, the bonds, 401K, the rental real estate, etc. but a few ‘secure’ things that pay reasonably well seem attractive. What do you think?” Tangential forays? Whatever could you mean? But just before answering your good question, here, courtesy of Dana Dlott, are the results of a contest for Great New Theories, sponsored by Omni magazine. Omni’s Honorable mention: The quantity of consonants in the English language is conserved. If omitted in one place, they turn up somewhere else. When a Bostonian “pahks” his “cah” the r’s migrate southwest, causing Texans to “warsh” their cars and invest in “erl wells”. 4. Deforestation will cause the days to become shorter. Just as a twirling skater spins faster when she pulls her arms in, chopping down a lot of tall trees will make the Earth spin faster. 3. China is technologically backward because they have no alphabet. Therefore they cannot use acronyms to communicate ideas at a faster rate. 2. Why yawning is contagious: You yawn to equalize the pressure on your eardrums. This pressure change outside your eardrums unbalances other people’s ear pressures, so they must yawn to even it out. 1. If an infinite number of rednecks riding in an infinite number of pickup trucks fire an infinite number of shotgun rounds at an infinite number of highway signs, they will eventually produce all the world’s great literary works, in Braille. Grand Prize: When a cat is dropped, it always lands on its feet. And when toast is dropped, it always lands buttered side down. I propose to strap buttered toast to the back of a cat; the two will hover, spinning inches above the ground. With a giant buttered cat array, a high-speed monorail could easily link New York with Chicago. Now. “In the spirit of diversification, how would I rate TIPS and I-Bonds as investments within a Roth IRA?” Highly. Go with the TIPS. TIPS are U.S. Treasury “inflation-protected securities.” They are completely safe and will grow about 4% faster than inflation. They make great sense inside a Roth IRA. (Outside an IRA, they’re rotten. Not only is the interest taxed each year, as you’d expect, so it the inflation adjustment — even though you don’t receive it until you sell the bonds.) Yes, stocks might well outperform TIPS over the long run (although my own guess is that the next decade will disappoint investors who’ve been spoiled by the amazing 18-year bull run). But stocks already have very favorable tax treatment, so if you own both — stocks and TIPS — why waste the wonderful tax advantages of the Roth IRA on stocks? You should hold stocks outside the Roth IRA. If a stock you own does well, your gain won’t be taxed until you sell; and at a favorable rate when you do. (If you wind up leaving the stock to an heir, under current law the gain will never be subject to capital gains tax.) If a stock you own does poorly, you can sell it and buy a different one, using your loss to lower your current taxes. You can’t do that with a losing stock inside an IRA. I-Bonds are swell, too — and, if you’re looking for inflation-protected Treasury obligations, the only way to go outside of an IRA. But if it’s even possible to buy them for an IRA, I see no advantage to using them instead of TIPS.
Where Do Maine Lobsters Come From? July 3, 2000February 15, 2017 Wednesday: Should you buy TIPS and I-Bonds for your IRA? But today, a more pressing question: Where do Maine lobsters come from? A lot of them, as it turns out, come from . . . Long Island Sound. That’s right. You folks from Massapequa Park who drive all the way up to the great state of Maine for, among other things, that great authentic lobster are, in many cases, eating lobster that’s been trucked up the Interstate right alongside you. And I have news for you: French fries aren’t from France, either. But we should cut the French some slack. Their Eiffel Tower Millennial display was the best in the world — vive la France! And back in our earliest days, the French came to our aid in the struggle against King George — a struggle that ultimately changed the world. IN CONGRESS, July 4, 1776. The unanimous Declaration of the thirteen united States of America, When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation. We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness . . . . Happy 4th. And a deep bow to our founders.