Free Calls, Chinese CDs, Terror January 31, 2005February 28, 2017 CHEAP SKYPE Alex: ‘While the DUALPhone that you mentioned in your Skype discussion will set you back a cool 135 euros, you can get this device for $50. It will let you use any phone in your house (even cordless) to send/receive Skype calls.’ ☞ Remember, if you – and the people you call – have broadband, your calls anywhere in the world are free. Even calling someone on a regular phone, they can be under 3 cents a minute. Ah, brave new world. EVERBANK Jon R: ‘I heard about EverBank‘s foreign currency CDs about a year ago, and have a few which I’ve been rolling over. So I was feeling like a bit of a fool for not doing more due diligence when I read about the 0.75% ‘vig’ in your column. Especially because – due to the flat ‘yield curve’ their CDs have for the various durations available (3-month, 6-month and 1-year rates always seem to be virtually identical) – I have been sticking with 3-month CDs. ‘I called EverBank yesterday and told them that I had read that they were charging a 75 basis point fee on each rollover, and they responded that it wasn’t a ‘fee’ but it was a ‘spread’ and that the rates on their CDs had that spread already baked in. ‘Their rationale for this spread was basically a ‘little guy investing 10K versus big guys investing N millions’ argument, i.e. it’s the price we pay to allow EverBank to offer these CDs in such relatively small amounts. ‘This sort of makes sense to me, but my real objection concerns whether this situation is adequately conveyed to the customer on the web site. I told them that I did not see any of this in their fee schedule which has generic text like: WorldCurrency Conversion Fee: EverBank World Markets does not charge any fees for your WorldCurrency™ deposit; the full U.S. dollar amount deposited funds your chosen investment. It is EverBank’s pledge that the exchange rate you receive when converting your U.S. dollars to foreign currency will be among the best in the nation. “I then asked them if this ‘spread’ information is available anywhere else on their web site. After a bit of internal consultation, they came back with the response that it is found in the ‘Guide to Currency Investing.’ I foolishly did not ask for a specific URL, and then spent a few minutes using their site map, their search page, etc. to try and find such a guide on their site. Bottom line is: if you can find it, then you are a better man than I am (which may well be the case even if you can’t find it). Therefore, my own anecdotal conclusion is that EverBank should do a much better job of describing these details to potential customers. If the explanation is as innocuous as they would have you believe on the phone, then surely it can withstand the light of day. “I am going to keep the CDs I have and continue rolling them over for now, but probably settle on a 6-month duration as a compromise between tying up funds and excessive fee accumulation.” IRAQ Here’s to the Iraqis who had the courage to go to the polls. And here’s to the courage and skill and sacrifice of the American and British troops that made it possible. BBC DOCUMENTARY ON TERROR According to the LA Times: “The Power of Nightmares: The Rise of the Politics of Fear,” a three-hour historical film by Adam Curtis recently aired by the British Broadcasting Corp., argues coherently that much of what we have been told about the threat of international terrorism “is a fantasy that has been exaggerated and distorted by politicians. It is a dark illusion that has spread unquestioned through governments around the world, the security services and the international media.” I have no idea whether that assessment is fair. I wonder if we’ll get to see this documentary on U.S. television.
Something for Democrats to Chew On January 28, 2005January 19, 2017 Please don’t be angry with me – for posting this late, for the errors in yesterday’s column (see below), or for giving you too much to read on Super Bowl weekend (or is it next weekend? Shouldn’t they be playing hockey now?). But if you missed the Starr or Friedman columns, this could give you something to do while everyone else is inside making the dip. WHAT TO DO WITH YOUR MONEY NOW? Tim: ‘Your ‘guns, butter, and caviar’ quip seemed a good sum-up, but raises a historical question: What could a fretful person in 1969 or so have done to immunize himself?’ ☞ Get out of any long-term fixed-income securities he owned; buy real estate with fixed-rate mortgages. Of course, that was then. How much of that applies today we’ll know better in 35 years. I do think the part about exiting fixed-income securities applies. But I’m not sure U.S. real estate is a bargain here. Some smart folks think now is a better time to be selling than buying. Either way, now might be a good time to convert your adjustable-rate mortgage to a fixed-rate mortgage if the cost of doing so is modest and you think you might be in your home for a long time. And now might be a good time to do that hardest thing of all – keep a chunk of your money safe, on the sidelines, waiting for irresistible opportunities. But the minute I say that, I hear the engine of Less Antman’s helicopter revving up as he prepares – think Apocalypse Now – to hunt me down and kill me for suggesting anyone try to ‘time the market.’ Most people should just keep socking that $100 a month or $100 a week, or whatever they can afford, into the two or three mutual funds they have chosen . . . hoping stocks will crater, so they can buy more shares ‘on sale.’ MUNI BOND SARCASM Steve: ‘It has apparently escaped your attention that there is currently a shortage of the 30-year treasury bond, which has driven prices up (and yields down) to unusual levels. For a proper comparison with ‘tax-free’ bonds, you will need to use 30-year AAA Corporate bonds.’ ☞ I did think about corporate versus Treasuries and decided that it was fair to stick with Treasuries – corporate bonds are backed by no taxing authority and just aren’t as safe over 30 years. As to the rest, though, Steve makes a good point I hadn’t thought of. So let’s check the Bloomberg screen again and compare, instead, 10-year municipals yielding 3.73% with 10-year Treasuries yielding 4.21%. A buyer of munis would be giving up $48 out of each $421 in interest, placing him, effectively, in the 11%-or-so tax bracket. So I think my larger point still holds – even 11% is a pretty low tax bracket for a guy pulling down $10 million a year in interest – but the sarcasm is less biting. And what, when you come down to it, is sarcasm without bite? Meanwhile, there was an even more basic error in yesterday’s column – the math. Terry Flanagan: ‘I think you are a little off on your calculation of the imputed tax rate on municipal bonds in your example yesterday. The tax rate is $9,000/$466,000 = .019 or 1.9%.’ ☞ My face is getting redder and redder. I started yesterday’s example saying you were getting $10 million in annual interest . . . but then (and I want you to know that a 1982 bottle of port that Charles got me for Christmas had something to do with this) I did the calculation as if the $10 million was the size of your portfolio, on which you were getting $457,000 in interest. Someone needs to get more sleep or stick with Diet Coke, and it isn’t Terry Flanagan. Several other errors followed from this, but, as with Steve’s comment, the numbers change but the point does not. SOMETHING FOR DEMOCRATS TO CHEW ON From Wednesday’s New York Times: Winning Cases, Losing Voters By PAUL STARR As Republicans revel in President Bush’s inauguration and prepare for his agenda-setting State of the Union address next week, many Democrats would like to consider almost anything but the substance of politics as the reason for their defeat last November. If only John Kerry had been a stronger candidate. If only the message had been framed differently. If only the party’s strategists were as tough as the guys on the other side. The limits of candidates and campaigns, however, can’t explain the Democrats’ long-term decline. And while the institutional decay at the party’s base – the decline of labor unions and ethnically based party organizations – has played a role, the people who point to “moral values” may not be far off. Democrats have paid a historic price for their role in the great moral revolutions that during the past half-century have transformed relations between whites and blacks, men and women, gays and straights. And liberal Democrats, in particular, have been inviting political oblivion – not by advocating the wrong causes, but by letting their political instincts atrophy and relying on the legal system. To be sure, Democrats were right to challenge segregation and racism, support the revolution in women’s roles in society, to protect rights to abortion and to back the civil rights of gays. But a party can make only so many enemies before it loses the ability to do anything for the people who depend on it. For decades, many liberals thought they could ignore the elementary demand of politics – winning elections – because they could go to court to achieve these goals on constitutional grounds. The great thing about legal victories like Roe v. Wade is that you don’t have to compromise with your opponents, or even win over majority opinion. But that is also the trouble. An unreconciled losing side and unconvinced public may eventually change the judges. And now we have reached that point. The Republicans, with their party in control of both elected branches – and looking to create a conservative majority on the Supreme Court that will stand for a generation – see the opportunity to overthrow policies and constitutional precedents reaching back to the New Deal. That prospect ought to concentrate the liberal mind. Social Security, progressive taxation, affordable health care, the constitutional basis for environmental and labor regulation, separation of church and state – these issues and more hang in the balance. Under these circumstances, liberal Democrats ought to ask themselves a big question: are they better off as the dominant force in an ideologically pure minority party, or as one of several influences in an ideologically varied party that can win at the polls? The latter, it seems clear, is the better choice. Rebuilding a national political majority will mean distinguishing between positions that contribute to a majority and those that detract from it. As last year’s disastrous crusade for gay marriage illustrated, Democrats cannot allow their constituencies to draw them into political terrain that can’t be defended at election time. Dissatisfied with compromise legislation on civil unions and partner benefits, gay organizations thought they could get from judges, beginning with those on the Massachusetts Supreme Judicial Court, what the electorate was not yet ready to give. The result: bans on same-sex marriage passing in 11 states and an energized conservative voting base. Public support for abortion rights is far greater than for gay marriage, but compromise may be equally imperative – especially if a reshaped Supreme Court reverses Roe v. Wade by finding that there is no constitutional right to abortion and throws the issue back to the states. Some savvy Democrats are already thinking along these lines, as Hillary Clinton showed this week when she urged liberals to find “common ground” with those who have misgivings about abortion. And if a new Supreme Court overturns affirmative-action laws, Democrats will need to pursue equality in ways that avoid treating whites and blacks differently. Some liberals have long been calling for an emphasis on “race neutral” economic policies to recover support among working-class and middle-income white voters. Legal and political necessity may now drive all Democrats in that direction. Republicans are leaving themselves open to this kind of strategy. Their party is far more ideologically driven and more beholden to the Christian right than it was even during the Ronald Reagan era. This is the source of the party’s energy, but also its vulnerability. The Democrats’ opportunity lies in becoming a broader, more open and flexible coalition that can occupy the center. In the long run, Democrats will benefit from their strength among younger voters and the growing Hispanic population. But the last thing the Democrats need is a revived interest group or identity politics. As the response to Senator Barack Obama’s convention speech showed, the party’s own members are looking for an expansive statement of American character and national purpose. Secure in their own lives at home, Americans can be a great force for good in the world. That is the liberalism this country once heard from Woodrow Wilson, Franklin Roosevelt and John F. Kennedy – and it is the only form of liberalism that will give the Democratic Party back its majority. Paul Starr is the co-editor of The American Prospect and the author, most recently, of “The Creation of the Media.” ☞ I don’t agree with every word of that, but it is certainly the kind of thoughtful piece Democrats should be discussing. Note – on choice, for example – that abortions went down under Clinton and have come back up under Bush. We need to be sure everyone knows those facts . . . and that they hear our pro-choice message not as shrill but, at least, as caring. As Senator Clinton and others have long phrased it: ‘Abortion should be safe, legal, and rare.’ This is not everything the other side wants. But it genuinely respects their view – as we absolutely should . . . both because it is a view worth respecting and because it makes it easier for people who agree with us on most other things to vote our way. On the gay marriage issue, it should be noted that our candidate (and all his viable opponents in the primary) did oppose gay marriage, favoring civil unions instead. And that the only party strategists who were enthusiastic about gay marriage were Karl Rove and company. Gay activists didn’t put gay marriage on 11 state ballots, Republicans did. With the benefit of hindsight, one can regret that the Massachusetts Supreme Court found in favor of equal rights when it did (couldn’t it have waited one more year?) . . . or that some loving couples went to court years ago to sue for equal rights, setting all this in motion. But what practical way would there have been to shut the legal system to these couples? And would anyone really have wanted to? That said, Starr has given us a lot to think about as – sticking firmly to our principles – we look for ways to appeal more broadly to the good-hearted citizens from whom we’ve become estranged. After all, wasn’t Jesus the original liberal Democrat? If you don’t think so, just re-read the Sermon on the Mount. A GREAT IDEA FROM TOM FRIEDMAN Click here. The essence of it (though it’s worth the full click): Let me put this as bluntly as I can: There is nothing that the Europeans want to hear from George Bush, there is nothing that they will listen to from George Bush that will change their minds about him or the Iraq war or U.S. foreign policy. Mr. Bush is more widely and deeply disliked in Europe than any U.S. president in history. Some people here must have a good thing to say about him, but I haven’t met them yet. In such an environment, the only thing that Mr. Bush could do to change people’s minds about him would be to travel across Europe and not say a single word – but just listen. If he did that, Mr. Bush would bowl the Europeans over. He would absolutely disarm and flummox people here – and improve his own image markedly. All it would take for him would be just a few words: “Read my ears. I have come to Europe to listen, not to speak. I will give my Europe speech when I come home – after I’ve heard what you have to say.” SUNDAY It is possible to deeply resent the way we were misled into attacking Iraq and the tragic incompetence with which we failed to plan for the aftermath . . . to be anguished that 100,000 Iraqi civilians may now have died (equivalent to well over 1 million Americans, if their population were the size of ours) . . . to grieve over the heroic American loss of life . . . to be pessimistic about the prospects . . . and yet to be enormously proud of and grateful to our troops, and to hope that Sunday’s election is one day seen to have been a turning point. That – somehow – the Iraqis can summon the courage to stand up for themselves against those, both the murderous thugs and the deeply misguided martyrs, who are determined to see it all fail. # Go, Green Bay!
Guns, Butter, and Caviar [With the math corrected, I hope] January 27, 2005February 28, 2017 This really bugs me. Say you earn $10 million a year in tax-free municipal bond interest and so – quite legitimately – pay no income tax. And yet the radical left start screaming that you are sooooo rich and you pay nooooo tax. But the truth is that by accepting the lower rates that municipal bonds pay – thus subsidizing the borrowing costs of your state or city – you in effect are chipping in to the greater good. As you can clearly see from this Bloomberg screen, 30-year U.S. Treasury bonds (which are subject to federal income tax) currently yield 4.66%, while the yield you accept when buying a 30-year Triple-A tax-free bond is 4.57% – nine basis points lower. Instead of getting $4.66 in interest on each $100, as you would from the Treasury, you are getting $4.57, which is nearly 2% less. So you’re not some centimillionaire paying no tax on his $10 million income; you are, in effect, paying nearly 2%. You are in the 2% tax bracket. To be fair (which is never as much fun as being sarcastic, but something readers have a right to expect me to strive to be), it’s not quite this simple. Outrage is not necessarily the emotion I am going for here. For starters, while you give up only $200,000 of income on every $10 million in annual income, the benefit to the issuing municipality is a good deal more. If their bonds weren’t tax-free, they’d have to pay a significantly better rate to attract buyers than the Treasury pays – even when they were selling triple-A bonds that are virtually as safe as Treasuries. [Why? Well, for one thing, ‘virtually as safe’ is not the sort of phrase that appeals to nervous people. (Come fly our friendly skies! Our airline is virtually as safe as any other!) For another, it’s just so much easier to get in and out of Treasuries than it is to get in and out of less liquid municipal issues. (‘Our competitor’s flights leave hourly, no reservations required; we fly Tuesday and Thursday at 4:14pm and you have to pay a fee if you change your plans.’) So if they weren’t tax-free, triple-A municipal bonds might have to pay 100 basis points more than Treasuries, say, rather than 9 basis points less. For every $1 billion in borrowing, that would be $11 million or so a year more in interest costs.] So I am not one who would do away with the tax exemption enjoyed by municipal bonds. Nor am I one who would buy them today* – although certainly for a taxable account they are more appealing at today’s prices than Treasuries. (Why go for a taxable 4.66% when you can get 4.57% tax-free?) *If I had $1 billion, I might well put $200 million of it into munis, just to throw off the income to run the house, chalet, plane and boat. But I am still roughly $1 billion shy of that mark. I’d steer clear of long-term munis because: In the long run, stocks are likely (though not guaranteed) to outperform long-term bonds, even the ones that are tax-free. For the little guy buying $20,000 or $100,000 worth, it’s easy to pay more than you should when your broker sells them to you . . . and easier still to take a beating if you need to sell before maturity. (With municipal bond mutual funds, there’s a different problem: the annual fees dig deeper than I would like.) And, mainly, the value of long-term bonds – whether taxable or tax-free – could be deeply eroded if, at some point in the next 30 years, we had a bad bout of inflation . . . as we did, say, after the guns-and-butter years of the Vietnam War. For those not familiar with it, the phrase “guns and butter” refers to the idea of fighting a war without making the economic sacrifices to pay for it. The Bush approach, “guns, butter, and caviar,” is unique in American history. You get your war without paying for it – and you provide a series of huge tax cuts for the rich. And that gets me back to the real point of this column. It is not that rich folks should be criticized for buying municipal bonds – they should not. Or that the tax exemption on municipals should be repealed – it should not. It is simply that as we citizens attempt in good faith to make what is unquestionably a subjective judgment as to “what’s fair” . . . and as our Republican friends press relentlessly toward an ever more favorable split for the rich (reducing the inheritance tax on billion-dollar estates to zero, for example) . . . we should understand that triple-A 30-year tax-free bonds are not really tax-free – they subject their owners to the equivalent of nearly 2% in tax. Too much? Too little? It’s just one more data point to consider as we decide how much further to shift fiscal burdens from the rich onto everybody else.
Would You Filch Your Daughter’s College Fund? January 26, 2005February 28, 2017 The White House yesterday announced a $427 billion deficit projection for the 2005 fiscal year ending September 30, but this is misleading. It does not include the Social Security surplus that we are also planning to spend, which makes the total $600 billion instead. (And now you’re talking real money.) It’s easy for the eyes to glaze over trying to make sense of this until you think of it in personal terms. Imagine your own household budget. You spend $1,000 a week. You earn $940 a week. And your daughter, who works after school, hands you $60 every week for safekeeping. (She’s saving up for college.) Would you say your budget is balanced? You take in $1,000 a week, spend $1,000 a week. Yet, clearly, you are running a $60-a-week deficit, filching $60 a week from your daughter’s college fund – about $3,000 a year. The day will come that your daughter presents you with the bill for Duke and expects you to pay it with all that money she earned mowing lawns and sitting babies. In Uncle Sam’s case, it’s not $3,000 a year but $200 billion. Add that to the admitted deficit and you get the real deficit – about $600 billion, approaching 6% of our Gross Domestic Product. It used to be that Republicans, who for some time now have controlled the purse strings, called vigorously for a Balanced Budget Amendment to the Constitution. It was not a good idea – it went too far – but the general notion of fiscal responsibility was a good one that the Democrats, beginning in 1993, came to embrace. Now, the Republicans have totally abandoned the call for a Balanced Budget Amendment, shifting their focus to an Anti-Marriage Amendment instead. That’s quite a shift in Constitutional priorities! In the 204 years from 1776 through 1980, our nation had accumulated not quite $1 trillion in national debt. In the 24 years since, we’ve added nearly $7 trillion, more than $5 trillion of it under Presidents Reagan, Bush, and Bush. There’s a lot that Republicans can take credit for – preventing increases in the minimum wage, slashing taxes for the rich, opposing the earned income tax credit, opposing the Family and Medical Leave Act, calling for a global ban on the embryonic stem cell research (the same research Nancy Reagan and others call for), inviting industry lobbyists to draft our new laws. But one thing they can’t claim is the high ground when it comes to managing the nation’s finances. And those who think these chickens will never come home to roost know even less about chickens than I do. Which is saying something.
A Difference in Philosophy January 25, 2005January 19, 2017 Last week, in response to Jeb Bush’s intention to halve my Intangible Property Tax . . . again . . . I wrote that I might buy some renminbi with the extra cash he would raise for me by hiking tuition for community college students Michael Fang: ‘I have an idea – why don’t you and your like-minded fellow Democrats create a charity fund financed by the tax savings that Jeb gave you folks (but you folks apparently don’t need) and use the fund the help out those poor community college students? Such an act of kindness I’m sure will be greatly appreciated by the poor community college students. Think of all the positive publicity you will get for the Democratic Party and the political points you will score. I eagerly await the creation of such a fund with bated breath.’ ☞ It’s not cost-efficient to set up and market and administer a whole new charity for the proceeds of this tax cut, though I expect a lot of folks, Democrats and I’m sure some Republicans, will indeed give the money away. I think it’s a mistake to be against all taxes and to favor all tax cuts . . . and I sense from your message that’s your position. After all, Florida has NO income tax, so you’re already starting from a very millionaire-friendly premise down here. Can’t you preserve your good free-market principles (which I share!) and still wonder whether Jeb Bush is right to want community college students to pay higher tuition so millionaires can pay less tax? Remember, the tax was just two-tenths of one percent when Jeb took office (and exempted such things as all retirement funds, bank accounts, government bonds, and real estate). He halved it to one-tenth of one percent. Do you really feel that – at one-tenth of one percent – millionaires are overtaxed? You almost – and I’m sure this is not the case – but you almost seem from your message to be selfish and insensitive to the needs of others. Michael replies: ‘Of course, I am not really suggesting that you create a fund. My missive was only meant to be a sarcastic jab. It never occurred to me that the ‘needs of community college students’ should be my (or the state’s) responsibility. Do I feel the slightest trace of guilt for the poor community college students? No. A need does not automatically create an entitlement. There are different ways, public and private, of meeting that need, other than just taxing others. The government may extend student loans to them during their bootstrapping years, and when they get a job, they should pay the loans back. ‘In general I support the use of a tangible property tax to fund things that are related to the safeguard the citizens’ private property – such as fire department, police, road maintenance, etc. I don’t think it is appropriate to use property tax as a general revenue source or to fund entitlements. In general, I can live with a consumption tax, but I find the idea of a wealth tax such as Florida’s intangible personal property tax appalling. I hope it never gets widespread adoption across America. Jeb Bush should kill the whole thing instead of merely reducing it.’ ☞ We may have to agree to disagree. I think as a nation we want to make education widely available and affordable. An educated nation is likely to be more prosperous and civilized. I guess it’s fine to cut off free education at the twelfth grade (Michael might cut it off earlier if he offered it at all). But I wonder whether we shouldn’t make it as easy as possible for those who want to go further. (This would include the student loans Michael talks about.) In the current scheme of things, are Florida’s wealthy – faced with zero income tax and a one-tenth of a percent Intangible Property Tax – really getting the short end of life’s stick?
Should You Bet Everything on the Dollar? January 24, 2005February 28, 2017 LOSSES We lost two great Americans over the weekend: Walter Wriston, who headed Citibank for many years, introduced ATMs to the world, and once handed me a gold Atmos clock to recognize my supposed prowess of prediction (I had just added 10% to everything, not even quite sure what it was we were predicting, and sure enough, a year later I emerged the big winner) . . . and Johnny Carson, who had me on his show twice to talk about the savings to be had in buying household staples in bulk when they were on sale (the first time, I forgot to unbutton my jacket when I sat down and looked so earnestly geeky he invited me back; the second time, I did even worse). I will spare you the long form of all this, but wanted to say thanks to both. CYNICISM As seen on the inside of a Peach Oo-La-Long Honest Tea cap: ‘Optimism can make you look stupid, but cynicism always makes you look cynical. – Calum Fisher’ CHEAP SKYPE Jay Glynn: ‘I recently flew on a Lufthansa flight equipped with on-board Internet and, thanks to Skype, was able to talk for free with a friend in London while cruising over the wilds of Canada. That was some savings over the normal $6 per minute air-phone charge!’ Anon: ‘Particularly in conversation between people using second language, Skype is great. One can mail files (.doc, .jpg, .gif) and Instant Message (clarify by writing out misunderstood items dessus not desous; a la bourre not a la beure) all while talking on the phone.’ SAVING IN FOREIGN CURRENCY E. Dieter Martin: ‘Would you actually advise putting a considerable part of your retirement savings into a foreign currency fund? Isn’t that contrary to the common wisdom to take less risk as you approach retirement age? To me the only reason to invest in a foreign currency for retirement is when you plan to live there.’ ☞ Well, I’m not saying this is practical or worth the hassle for everyone. But think of it this way. Is it wise to bet 100% of your funds that the US dollar will be the strongest currency in the world? That’s a bet, too, even though – because it requires no action – it doesn’t feel like one. John Williams: ‘Marc Faber says the Singapore Dollar (also available at Everbank) is undervalued and a good currency play.’ Dan Carraco: ‘You say you would hate to give up 88 basis points to the T. Rowe Price International Bond Fund, but the Everbank folks told me they take .75% each way on buying and then cashing in their international currency CDs. That’s 150 basis points, if I’m not mistaken. Ouch!’ ☞ Ouch, indeed! Pays to read the fine print – or, in this case, to call the toll-free number to ask. I didn’t see this on the web site. E. Uprichard: ‘GIM is a Franklin-Templeton closed-end international bond fund that trades as a stock. Since it is a stock, it has no expenses per se, just the commission.’ ☞ Well, not exactly. Closed-end funds deduct annual management and administrative fees from their results (which is one reason it makes sense that they normally sell for a little less than their net asset value). If I read GIM’s annual report right, the fund has performed very well – even after charging about 75 basis points annually in management fees. Then again, it currently sells at a 4% premium (meaning you have to invest $1.04 to own $1 worth of the fund), and that’s another ‘fee’ of a sort for getting on board. STICKY LAPTOP SPACE BAR Clint Chaplin offers this clip – worth a look if you have broadband. (And thanks, separately, to one of you who found me a new keyboard for $19.95 on eBay.)
Chinese Money January 21, 2005January 19, 2017 THE INAUGURATION I was going to take the day off to mourn (and – see yesterday‘s column – buy some renminbi with the tax cut that Jeb Bush has decided I should have at the expense of community college students). But look: it was a great speech. It would be wonderful to end tyranny around the world and to free women, and others, of oppression. Let’s just hope we do better at it in these next four years than we have done it in the past four. Because at the rate we are currently going, both the tangible assets and the ‘goodwill’ on our national balance sheet are eroding at an alarming rate. (And did Trent Lott really need to be the emcee of the whole deal? With Rick Santorum carefully framed as if cheek to cheek with the President during the swearing in? Funny that we didn’t see Messrs. Schwarzeneger, McCain and Giuliani prominently placed as we did at the Convention.) JEB Steve Golder: ‘That’s President-elect (Jeb) Bush to you, Andy! Get ready! Karl Rove is not dead yet. And there’s yet another Bush! I’d stock up on renminbi and move to FL.’ SKYPE HYPE Andrew Meyer: ‘I agree wholeheartedly with your review of Skype. We are actually trying to drive its use into our organization. As an international freight forwarding/logistics firm with offices in 132 countries, we spend well over $1 million in phone bills every month. If we can cut this be even 20% to 25%, it will have a real effect on our bottom line.’ ☞ I have graduated from merely calling Joey in France for free – Ahhhhhhh-LO? – to now having purchased 10 euros’ worth of call time ($13 or so), which, if the only person I call is Charles in China (Charles is in China and says Ahhhhhhh-LO) will buy me about seven hours of talk time to his Chinese cell phone. (Skype calls are completely free when made to other Skype users. But if you want to call some regular phone around the world, it will set you back a few cents a minute.) Think of it: calling China free or, at worst, for under 3 cents a minute. A long time ago, when I first came out with my investment guide in 1978, I wanted to make the point that you should diversify. Nothing is certain in this world. So I reached for the furthest-fetched example I could think of, Ma Bell, the telephone monopoly. ‘Don’t lend all your money to Pacific Bell,’ I wrote – ‘a breakthrough in mental telepathy could ruin you.’ I was joking. There was no way you could have telephones without wires. AVOIDING THE DOLLAR The estimable Less Antman: ‘I would sooner raise funds for Al Qaeda than encourage someone to buy bonds. But unhedged foreign currency bonds have an extremely low, possibly negative correlation to U.S. stocks, and the correlation is usually lowest when the Dow is plunging, so it might well be a superior portfolio diversifier to the run-of-the-mill domestic bond. The no-load T. Rowe Price International Bond Fund invests in a diversified portfolio of high quality foreign bonds and doesn’t hedge back to the dollar (as most foreign bond funds do). It also has a relatively pleasant 0.88% annual expense ratio. For someone who wants to make a fairly tame bet on foreign currencies, it is an admirable choice.’ ☞ I hate giving up 88 basis points – almost a full percentage point. But Less is right; especially for small investors, it’s not a bad haircut to suffer. And compared with leaving your money in renminbi at Everbank, it may look better still to some people – because while it takes no bite out of your renminbi deposit, neither does Everbank pay you any interest. Then again, the renminbi might appreciate a lot more against the dollar than a general basket of foreign bonds. (On CDs denominated in New Zealand and Australian dollars, among others, Everbank does pay interest.) Todd Crowell (who worked as a Senior Writer for Asiaweek in Hong Kong for 14 years and edits his own Asia blog): Should you buy Chinese money? Not so long ago the mere suggestion would have seemed absurd. You might as well have asked whether anyone is interested in buying Confederate money or old Imperial Chinese railroad bonds. The Chinese currency, known as the renminbi or yuan was something to paper your wall with. But try to tell that to the thousands of Chinese who lined up outside the Bank of China in Shanghai one day in November to exchange U.S. dollars for their own currency. According to the Wall Street Journal they feared that a revaluation of the renminbi would cut the value of their dollar savings. For more than a year, foreign pressure has been exerted on China to revalue its currency, which has been pegged to the U.S. dollar at a rate of 8.3 for more than a decade. Secretary of the Treasury John Snow has been probably the most persistent proponent of a de-linking or re-pegging at a higher rate. Beijing’s leaders have resisted all such calls, saying they will move steadily toward greater flexibility in their own good time. Depending on whom you listened to, the renminbi is overvalued by about 15 to 25 percent. So, if the Chinese authorities allowed the currency to float to its ‘natural’ level anyone holding large amounts of Chinese money could make a killing. But two questions remain. How realistic is that expectation, and how do you get your hands on yuan? After all, it is not that easy to open any foreign currency accounts in the U.S. Just try going down to your local bank branch and ask to open an account in, say, euros. You will likely get a blank stare in return. American banks stubbornly resist opening foreign currency accounts, claiming that there isn’t a demand for them. That’s in contrast to other places, like Hong Kong, where you can walk into any bank branch, not just the sophisticated headquarters of international commerce but the ones in purely Chinese neighborhoods, sandwiched between the Chinese medicine store and the birds nest soup shop, and open an account in any one of a dozen currencies. How realistic is it that one can make a profit from renminbi? To date, China has resisted revaluation pressure for a variety of reasons. The banking system is still in poor shape, and any revaluation would simply increase the value of the mass of non-performing loans, for example. But more to the point, Beijing simply does not like to be stampeded into making large moves under foreign pressure. Premier Wen Jiabao, in response to growing speculation over revaluation, stated Beijing’s case quite explicitly recently when he said, ‘To be honest, the more speculation that is made about the renminbi, the less chance there will be a measure to change it.’ STICKY SPACE BAR Scott Nicol: ‘According to this page, the difference between the two part numbers you sited, 08K4670 and 08K4699, is the OEM who made it. One is made by NMB, the other by Alps. It most likely doesn’t matter which one you get. Manufacturers like to have multiple sources for parts, and they generally demand the parts from their various OEMs to be interchangeable. The easiest way I’ve found to locate old parts (which for a notebook means ‘it was released a year ago’) is eBay. Just search for the part number and click on ‘search title and description.’ eBay is the only way I can keep my laser printer going. The printer is 9 years old, the toner cartridges were discontinued 5 years ago, but every once in a while a brand new, factory sealed cartridge will come up on eBay and I’ll snap it up for $20 or $30 (original price: $110).’ ☞ OK, but I find if I bang hard enough on the left side of the Space Bar . . . Have a great weekend.
Jeb January 20, 2005February 28, 2017 Leave it to every other media outlet in the world to be focused on George today – I would like to draw your attention to Jeb. But first . . . RENMINBI Surya: ‘You suggested everbank CDs. Which foreign currency is a safe CD?’ ☞ I don’t know, but I see they offer a Chinese renminbi account. I don’t think there is a person on earth (although if there is, he will somehow find this column and write in to tell me I am wrong) who thinks the renminbi is overvalued and could fall relative to the dollar. Please do your own research on both Everbank and whatever currency you select. But I think I’m going to go get me some renminbi. STICKY SPACE BAR Chip Ellis: ‘Did you know that the keyboards on most laptops pop out and that the replacement keyboards are pretty cheap? I didn’t know it until my spacebar stopped working and an IT person came and replaced it in a couple of minutes.’ ☞ Yes, it took me less than half an hour on-line to find out that I need either IBM part number 08K4699 or part number 08K4670 (impossible to know which) and that both have been discontinued. Except that, of course, I’m not sure any of that is right. For now, I am pressing hard on the Space Bar – especially the left side of it. And I find that after I get going for a while, it begins to work better. HALF OF YOU WILL LAUGH Mark Willcox: ‘Funniest headline ever: Poll: Nation Split On Bush As Uniter Or Divider.’ # And now . . . JEB As reported here in years past, when Jeb first became governor of Florida he faced a challenge. How do you cut taxes for the rich in a state with no income tax? Cutting the sales tax wouldn’t work – that would help everybody. Cutting the property tax wouldn’t work – that would help almost everybody. What to do? What to do? (What would Jesus do?) Jeb hit on cutting the Intangible Property Tax that most Floridians have never even heard of (because it applies only to folks with considerable portfolios of stocks and bonds). He cut this tax in half. Specifically, he cut it from a very modest two-tenths of one-percent (applicable to only some assets – not to retirement accounts, for example) to just one-tenth of one percent. Great for the wealthy; but when was the last time you saw a middle-class tax halved? And sure enough, less than a year later Jeb was also eliminating 51 of the state’s 55 prison drug treatment programs (to take just one example) because, well, there wasn’t enough money to pay for them. Adding insult to injury, in his bid for reelection, he claimed to have increased drug treatment funds by 60%. (You can read how he did it here.) Anyway, that’s ancient history. Two days ago, the Miami Herald ran this headline: Governor: Cut taxes, medical help The Guv has proposed ‘substantial tax cuts while eliminating programs intended to help working Floridians with massive medical bills stay out of poverty,’ according to the Herald. Specifically, he would cut the Intangible Property Tax in half – again. (He would also eliminate a tax on beer and wine sold at bars and restaurants, presumably to make it easier for people to drink more before setting off for the drive back home.) ‘The tax cuts,’ reports the Herald, ‘balanced with tuition hikes and elimination of safety-net programs, drew sharp criticism from Democratic legislators.’ It is a grand time to be rich and powerful in America – all the more so in sunny Florida. Have you Bush supporters no shame?
The Skype Is Falling! The Skype Is Falling! January 19, 2005February 28, 2017 AVOIDING THE DOLLAR Peter Kaczowka: ‘I’d like to know how (and whether) to invest in fixed Euro-based funds, e.g. CDs or relatively safe (government?) bonds. My broker (Fidelity) does not provide this service. I realize the fees might be high and obviously the interest rates will be low but I may still be interested. I believe the dollar will continue downward significantly over at least the next decade. I recently bought a fair amount of international mutual funds to guard against dollar devaluation but I’m retired (albeit at 54) and want most of my money in fixed assets. Most of my money will still be in dollars but I want to diversify. Any ideas, from you or your readers?’ ☞ One idea: see everbank.com and, in particular, this page. Perhaps the strongest thing the dollar has going for it these days is the near unanimity of informed opinion that it has further to fall. But whatever short-term rallies that may presage, it may not be enough to reverse the long-term trend. MY STICKY KEYBOARD Tim Bonham: ‘Steps to fixing a keyboard (in order of increasing seriousness): Turn it upside down and bang on the bottom of it to knock out a few months’ worth of dust, dirt, donut crumbs, etc. Take a business card from somebody you don’t like and won’t need anymore, and run it up and down between the rows of keys, to clean out the gunk stuck in there. Buy (!) one of those outrageously overpriced cans of compressed air, and use that to blow out the dust and dirt in the keyboard. (If you’re real cheap, you can use an empty spray can – one that has only the aerosol propellant left in it. But make sure it really is empty. And it’s probably safest to avoid cans that contained non-keyboard-healthy stuff, like oven cleaner, bug killer, spray starch, etc.) Unplug the keyboard, and take it into the shower with you. Really. Wash it with a gentle, mild soap, like Ivory (slivers work fine!). Then let it dry completely (a couple of days) upside-down over a towel. A blow dryer (air-temp, not hot!) can speed this up. If none of these fix it, break down and buy a new keyboard. Should only cost $10-$20.’ ☞ Did I mention it’s a laptop? I don’t think I’m taking it onto the shower. SKYPE When I was a kid, we had this barn. Not that I am even remotely a farm boy, but we did have this barn. And upstairs in the barn there were rafters we could climb that led up to perches that were maybe 20 feet apart. So we did that deal where we connected two empty cans with a taut string and could talk from one perch to the other through this device. It’s a long time ago, so I may have this wrong, but I think you could whisper into one can and, if your brother’s ear was in the other, he could hear you. Failing that, you could just talk – you were only about 20 feet apart, after all. Cut to 2005 and me at my computer, having taken all of a couple of minutes to download Skype, free – you don’t even need to buy string – and my friend Joey is across the way at his computer – in France – and he clicks my Skype screen name and my computer rings. (My computer rings!) I click the little green phone icon that appears and he says (from France), ‘See how easy this is?’ It is completely free, and it is as if he is in the next room. ‘Ahhhhhhh-LO?’ I say. ‘Who EEEEEEEEEEZ zeees?’ I speak virtually no French, but can chatter happily with a bad French accent all day long. Yes, you need a microphone and speakers, but many computers have both already built in. I had never talked to my computer before, but apparently it was just waiting me to want to. Someplace (stuck to the keyboard perhaps?) it has a microphone I had not even realized was there. Yes, once in a while the connection may get dropped. But it’s free! And it has all sorts of bells and whistles, including conference-call capability. To call someone who has not also taken a couple of minutes to download Skype – calling them on their regular phone, that is – you can still use Skype, paying by the minute at a ridiculously low rate. If you don’t want coworkers to hear your conversation, you can get a handset that plugs into the USB port of your computer. Or if you really want to splurge (even if this is not exactly consonant with the whole money-saving point of Skype), you could get this neat “dual phone.” So here we are . . . able to talk to virtually anyone in the world who belongs to the privileged-but-rapidly-expanding Internet class with a couple of clicks . . . and absolutely free. Ah, brave new world that hath such beauteous features in’t!
In Diebold We Trust January 18, 2005February 28, 2017 OHIO WASN’T STOLEN Click here. But we need to fix the states’ voting practices – now – so people can trust them. For starters, every voting machine needs a paper trail, for reliable recounts when necessary. Recounts must be triggered by either the closeness of the election or by significant discrepancies in the exit polls. And a lot more, but those two are completely fundamental. I don’t know how many of the allegations in this list are fair . . . that 80% of all votes in America are counted by only two companies, Diebold and ES&S; that the president of one is the brother of the VP of the other; that they fail the appearance test for impartiality; that a chimpanzee was able to hack into one of the voting machines (I am hoping he might come and help me fix my sticky space bar problem) . . . but isn’t that the point? That reasonable people could have doubts about the integrity of elections in America? We need to fix this. Look for results this time around. I may be naïve, but I think we’re going to get some. $4 BILLION James H.(writing before the election): “In light of recent events, I find the following morally disgusting: ’04 ELECTIONS EXPECTED TO COST NEARLY $4 BILLION.” ☞ We spend $5 or $6 billion a year marketing cigarettes. Is $4 billion every four years that much for marketing 940 candidates for national office? (Two candidates for president, 68 for Senate, 870 for House of Representatives.) The price of democracy? Don’t forget to send in your fourth quarterly estimated tax payment today, if – because you have significant income not subject to withholding – you will owe a bunch of tax on April 15. Tomorrow: The Skype Is Rising! The Skype Is Rising!