Wednesday, December 23, 2009

Marry Christmas, Happy New Year!

Have a wonderful holiday season and a great next year!


PS. I didn't know you can buy wine online... not that I ever would...

Tuesday: Home sales up, Wendsday: Home sales down

Manipulated headlines?

Yesterday: November home sales soar 7.4 percent

Today: November new home sales sink 11 percent

And markets expectedly seesaw. Obviously these aren't the same data points, one refers to resale of existing homes, the other to sale of new homes by home builders. One would expect some correlation between the two though.


Tuesday, December 22, 2009

GDP projections too optimistic, only 2.2%

On the bright side (not that it would help in case of repricing markets), growth is positive. (or is it?) So for now, it's a validation of prevailing recovery.

Economic Growth at 2.2%; Well Below Original Projections
The U.S. economy grew at a much slower pace than previously thought in the third quarter, restrained by weak business investment and a slightly more aggressive liquidation of inventories, data showed on Tuesday.

The Commerce Department's final estimate showed gross domestic product grew at a 2.2 percent annual rate instead of the 2.8 percent pace it reported last month. Analysts polled by Reuters had forecast the report to show GDP, which measures total goods and services output within U.S. borders, unrevised at a 2.8 percent growth rate in the third quarter.

It was still the fastest pace since the third quarter of 2007 and ended four straight quarters of decline in output. The resumption of growth in the July-September period probably ended the most brutal recession since the 1930s.

Growth was boosted by government stimulus programs, including the popular cash for clunkers and tax credit for first-time home buyers, and debate continues to rage over the sustainability of the recovery once government support wanes.

U.S. financial markets were little moved by the report.

Data such as retail sales, business inventories and the trade balance strongly indicate the economic growth pace picked up speed in the fourth quarter.

Happy Holidays, Merry XMax, Cheers!

Saturday, December 19, 2009

Reviewing risk measurements on portfolios, Update: Released EzBacktest 0.9.3

Update: Sharpe and standard deviation added to EzBacktest, released today at version 0.9.3
Original Message:
While adding the risk measurement feature to EzBacktest, I'm reviewing several risk measurements and samples. If anyone has an opinion, please leave a comment:

Investopedia: Modern Portfolio Theory Stats Primer, Also: Measure Your Portfolio's Performance

Some blog: Calculate Your Own Portfolio’s Standard Deviation

Wikipidia: Sharpe ratio

Another blog, with an excel sheet: Risk Adjusted Return - Sharpe Ratio using MS excel sheet free

OK, so here's where things stand: I'm a bit confused. Generally - you'd calculate the standard deviation using years of sample data - however, you might only be presented with 1, 2 years or just months worth of data. The excel sample uses annualized std of monthly returns - which I ran through code - and it isn't the same as yearly. Also, some document the expected ratio as calculated from AVERAGE yearly returns, others from ANNUALIZED yearly returns. And I need to add that ANNUALIZED MONTHLY AVERAGE returns are simply completely different.

So there you have it, the feature is nearly complete - but I'm left with some statistical doubt regarding the results.


Thursday, December 17, 2009

Thanks to Paul Douglas Boyer for mention of EzBacktest on his podcast

Like mentioned in a comment he left, he thinks the software needs to improve in measuring risk - and I did respond, I'll get to it by next release...

To listen to the podcast: Mad Money Machine

To try EzBacktest yourself: EzBacktest download page.

Answering questions:
* The results are based on the adjusted stock prices, that means - non realistically reinvest on day of ex-div. So all dividends are taken into account.


CRISIS WATCH: New jobless claims rise unexpectedly


New jobless claims rise unexpectedly
The number of newly laid off workers filing claims for unemployment benefits unexpectedly rose last week as the recovery of the nation's battered labor market proceeds in fits and starts.

The Labor Department said Thursday that the number of new jobless claims rose to 480,000 last week, up 7,000 from the previous week. That was a worse performance than the decline to 465,000 that economists had expected.

The four-week average for claims, which smooths out fluctuations, did fall, dipping to 467,500, the 15th straight decline, viewed as an encouraging sign that the labor market is gradually improving. The four-week average is now at its lowest point since late September 2008, the period when the financial crisis was hitting with full force.

As one late night show joke said about two years ago: We can't have a great depression, because not enough people wear fedora these days as they stand in line for soup.

Tuesday, December 15, 2009

Government tries to sneak in a massive 38 Billion bailout of Citigroup through IRS

And bloggers expose them in the act.

Washington Post, via Huffington Post:
Citigroup gains massive tax break in deal with IRS

Another day, another big bank being bailed out.

The only interest this blog has in this issue is that obviously - the crisis is still alive and kicking, and the economy is on life support.

400 Billion more to rescue Fannie/Freddie?!

How much? Can this pass the current political climate - or are we at this point all saying 'whatever - who cares?'.

MISH'S Global Economic Trend Analysis:Fannie Freddie May Need Another $400 Billion Taxpayer Assistance

Are we at the last phases of this financial collapse - or is it going to get worse?


Last days of internet freedom of speech

It started in oppressive regimes like China and Iran, will definitely continue to western world if not enough protest is made.

Australia will try to censor the Internet
THE AUSTRALIAN GOVERNMENT has decided that the land Down Under will become the only Western Democracy to attempt to censor the Internet.

Despite warnings that the government is committing political suicide and the technology will not work, the Rudd government is screaming for the same controls over its citizens as Communist China.

It is insisting that filtering a blacklist of banned sites will be accurate and won't slow down the Internet.

The Communications Minister, Stephen Conroy, said today that he will introduce legislation just before next year's elections to force ISPs to block a government blacklist of "refused classification" (RC) websites for all Australian Internet users.

The website blacklist is a 21st century version of book burning, featuring everything that good decent citizens should not like.

The Australian Government claims its list only includes things like child sex abuse, sexual violence and instructions on crime. However the list will be compiled using a public complaints mechanism, Government censors and URLs provided by 'international agencies'. Of course no one can imagine how anything could go wrong with that.

Conroy said that most good decent cobbers know there is a some Internet material that is not acceptable in any civilised society and it is important that all Australians, particularly young children, are protected from this material.

Of course good decent cobbers will be asking the government to tell them what is bad for them and this is where it will all go pear-shaped.

The Government's top-secret list of banned sites was leaked onto the web in March, revealing the scope of the filtering could extend significantly beyond child porn and other bad things.

About half of the sites on the list were not related to child porn and included poker sites, Youtube links, regular gay and straight porn sites, Wikipedia entries, euthanasia sites, fringe religions, fetish sites, Christian sites and bizarrely a tour operator and even a Queensland dentist.

It is starting to look, however, like the Rudd Government's Internet censorship initiatives are being watched closely by other democracies.

Enjoy your last days of freedom of speech online.

Monday, December 14, 2009

Sad Christmas for families hurt by recession

This is how it was titled on : Yes, Virginia, there is a Santa Claus, and the recession's farked him over, too [sad]

The article on SF-Gate: Recession increases holiday toy shortage

Luis Osorio was very good this year.

The 6-year-old San Francisco boy was nice to his little sister, never complained when his family lived in a van for seven months, and even learned to write - a valuable skill at this time of year.

"I love you Santa because you are good and I like you," Luis wrote, in a note that hangs on the Christmas tree in his family's South of Market neighborhood apartment.

"I've been a good boy. Can you bring me a toy and cars? Baby Stephanie wants a doll. From Luis."

The wishes of Luis and thousands of other children around the Bay Area, though, are in jeopardy because of a severe shortage of toys collected by charities for the poor.

The recession, apparently, has struck the North Pole.

"A lot of people who donated last year are now in lines to receive help," said Sally Casazza, chair of the San Francisco Firefighters Toy Program, the largest toy drive in the city and, at 60 years, one of the oldest. "This is our worst year ever."

Donations to the firefighters' toy drive are down 60 percent from last year. In the East Bay, the Mayor's Holiday Toy Drive in Oakland has seen donations plummet by half.

"It's been a rough season," said Paul Rose, spokesman for Oakland Mayor Ron Dellums. "It's the economy. We've been doing this for 30 years, and this has been our greatest year of need."

In San Francisco, demand over last year is up almost 20 percent, from 270 to 319 families a day receiving toys. Of particular need are gifts for girls between ages 9 and 12: lip gloss, hair barrettes, backpacks, bubble bath.


Friday, December 11, 2009

Greece in midst of financial collapse

Just in case you haven't notice, Greece is falling apart financially while the EU is standing back making statements.

EU's Barroso - Confident Greece Will Tackle Problems
European Commission President Jose Manuel Barroso said on Thursday he was confident Greece would overcome its debt problems.

"After talks with Greek Prime Minister George Papandreou, I am fully confident that Greece will be fully successful in that endeavour," Barroso told a news conference after the first day of a summit of EU leaders.

Greek debt and stock prices have taken a beating after a downgrade from rating agency Fitch this week because of the country's huge budget deficit and public debt.


Global crisis continues...

Wednesday, December 9, 2009

Burn your savings, invest in micro-cap ETF-s

Should be called Mega-Crap, not Micro-Cap. H/T to Abnormal Returns.

4 ETF-s to replace your favorite Casino: IWC, PZI, FDM, STH
The Best Micro-Cap ETF
A lot of investors have an interest in small-cap stocks; for them, it’s not all about the S&P 500. In small-cap territory, they assume, there’s more growth potential.

That’s even truer of stocks that fall below the usual small-cap cutoff point. One could make the argument about so-called micro caps that there’s nowhere to go but up (or possibly blipping out of existence). After all, as of Sept. 30, the Russell MicroCap Index had an average market capitalization of $268 million, and its largest component was $983 million.

But for the index ETF investor, micro caps are a problematic asset class simply because there are not a lot of vehicles that provide focused exposure—just four ETFs in all.

The largest by far is the iShares Russell Microcap Index Fund (NYSE Arca: IWC), which has assets of roughly $290 million. It was launched in August 2005.

IWC’s underlying index covers 2,000 stocks. It consists of the smallest 1,000 stocks in the well-known Russell 2000 Index and the 1,000 stocks falling below those in market capitalization. However, the fund’s portfolio has been optimized to hold 1,317 stocks. The largest holdings are in Dana Holding Corp., 0.47 percent; Schweitzer-Mauduit Intl. Inc., 0.44 percent; Veeco Instruments Inc., 0.39 percent; First Financial Bancorp, 0.32 percent; and ArvinMeritor Inc., 0.32 percent.

IWC charges 68 basis points.

First-Mover Status Is Key

The PowerShares Zacks Micro Cap Portfolio (NYSE Arca: PZI) is a distant second to IWC in terms of assets, with just $47.8 million. Like IWC, it was launched in August 2005, just a few days later, which goes to show how important the first-mover status really is and perhaps how helpful a well-known brand name can be.

PZI tracks an index from Zacks and holds 400 different companies. That’s fewer than IWC, but still, a broad number in the micro-cap space. Interestingly, PZI has an average market capitalization among its components of $355 million, while IWC has an average of $229 million. So IWC clearly skews a bit smaller in its focus.


OK, not that holding a portfolio with all 4 ETF-s makes any sense - but I did use EzBackTest to produce the following Chart of 2 years of equally allocating the ETF-s.

Amazingly, the results are very close to S&P 500.


Tuesday, December 8, 2009

EzBackTest 0.9.2 Release

I'm proud to announce new release of my freeware EzBackTest. Experiment and verify your investment portfolios with EzBackTest, download here.

* Improved selection and measurement tool over graph
* Minor bugs
* Link to open yahoo quotes web page for viewed portfolio
* Allow hiding legend in graph
* Allow reviewing error messages for failed quote downloads


Time to reconsider bullish/bearish outlook for next year?

While going into 2009 with extreme bearish outlook, and seeing an even lower low than in 2008 - for investors who stayed in the game and didn't go bankrupt with the March low, 2009 was a really good year. The rally was impressive and record breaking (well, somewhat - see research houses reports).

There are many big questions ahead:
* Will unemployment reverse course?
* Will gold continue to rally?
* Will we see commodity prices go up or down? Inflation? Stagflation? Deflation?
* Will we see double dip recession?
* Will political optimists prevail over political pessimists - is it all just rhetoric? (I'm sure everyone has an opinion here)
* What'll be the effect of government action thus far and in the 3 years ahead?
* Where is a good place to hide with your money considering 0.01% yield in Money Markets and the inherent risk in everything else.

Well - to crap on our glorious rally parade - opinion by Meredith Whitney:
Government 'Out of Bullets'; Consumers in Trouble: Whitney
The government is running out of ways to help the economy as the US faces major issues regarding credit and employment ahead, banking analyst Meredith Whitney told CNBC.

"I think they're out of bullets," Whitney said in an interview during which she reinforced remarks she made last month indicating she is strongly pessimistic about the prospects for recovery.

Primary among her concerns is the lack of credit access for consumers who she said are "getting kicked out of the financial system." She said that will be the prevailing trend in 2010.

Despite being able to borrow at near-zero percent interest, banks are not taking that money and putting it back into the marketplace. The Federal Reserve said Monday that consumer lending dropped 1.7 percent on an annualized basis in October, the ninth straight monthly decline.

With consumer spending making up about 70 percent of gross domestic product, the inability of even credit-worthy consumers being able to be able to borrow could put a severe crimp in future growth.

"What's so frustrating is you have an administration that is arguing such a populist (ideology) and not appreciating all the unintended consequences that the consumer and small businesses have far less credit," Whitney said.

"You're going to get a situation where you revert from a consumer standpoint," she added, "where those that had bank accounts for the first time, credit cards for the first time, homes for the first time get kicked out of the system and then fall prey to real predatory lenders."

The problems taken together also will pose difficulties for investors.

"I have 100 percent conviction that the consumer is not getting any better and there's not more liquidity," Whitney said. "So if everything touching the consumer is going to be represented in the S&P, then the S&P is going to be under pressure."

The solution, she said, is for the government to take proactive steps that will give consumers more money to spend.

"I don't think you can cut taxes enough to stimulate demand," Whitney said. "For a 2010 prediction, which is so disturbing on so many levels to have so many Americans be kicked out of the financial system and the consequences both political and economic of that, it's a real issue. You can't get around it. This has never happened before in this country."

Trouble ahead.

Cheer up, 2009 was a rally to celebrate for decades (until it all goes away in next bubble bust).


Sunday, December 6, 2009

Site update

I'm in the process of editing and republishing older posts from my older blog. That blog has died - and is linked to a lot from my "how I budget" page. Many articles have been reposted here today, remaining ones include:
* Setting Goals
* Things Investments Shouldn't Be
* Frugal Investor Seeks Low Fees


Reading - Improving Myself, for Cheap

Article restored from original posting at within-my-means on Aug-15 2008

Regardless of where I am at life, I always feel humbled and a need to know more and seek better and greater success. I am quite proud of my achievements thus far but I know that life is a journey, and through that journey I strive for more. The obvious path to acquire more knowledge is to seek what others have discovered through reading. And reading a lot is what I want to do. I wish I did read a lot more. Most of the time, when I plan to read, I stack up a queue – and set myself up for failure by doing time wasting things. Things like watching TV, playing computer games and reading news and commentary on the web. Having a family (I love you guys) doesn’t help that goal. Kids require our attention as parents and my wife rightfully expect us to communicate at our leisure time, not to bury our faces in books (or blogs) most of the time. Getting tired or unmotivated at times can also be a challenge.

Since books are our window to further improve ourselves, we like to cheaply possess more and more, to give us a chance to know more. Buying new books all the time at the store as soon as they arrive is only good if you can’t wait. You might HAVE to buy right now – if you are boarding a long flight and have not stocked up in advance with entertainment or books for the flight.

Here are a few ways we reduce the cost of books we read:

  • Join the local Library and borrow. You already finance it through your taxes – make use of it. You can usually order new books you want and are unavailable yet. You might also be able to reserve a book online as well.
  • Sign up for a book club. I would especially recommend a paperback book club.
  • Buy paperback editions, or wait until the paperback is out. It’s usually cheaper
  • Buy used at Amazon’s marketplace (or Ebay’s
  • Buy on special sales at the library. Our library makes such a sale once a month and we stack up with many excellent classics and children literature at those sales.
  • Buy at Amazon discount sales and have it ship for free – still much cheaper than the store.
  • I don't know about you - I don't like reading e-books although I do have a laptop. There are many free e-books sites out there...
  • When you are in college, consider swapping books with other students. Also, try - it seems to provide a lot of benefits for students beyond books exchange.

Being frugal and enjoying visits to the book store gets tricky. My wife and I, as well as the kids, enjoy the occasional visit to the book store to browse through the new selections. We sometimes do indulge our selves – when the budgeting is right – and buy something.

I wanted to write a post about buying books on the cheap, but when I began my preamble – I got carried away with my personal story. If you are still interested, the following was written subsequently after the first paragraph.

More about reading and striving for knowledge…

When I studied for my graduate degree online I was married and already had our first child. I was working full time and I dedicated the night hours to studying. Usually between 10:30pm to 2am. It was a fully packed day and only because I was driven by a schedule and homework deadlines did I read and finish my tasks. As graduation approached, I felt a void in my time was forming – such voids are easy to fill with nonsense – but combined with a New Year resolution I expressed a desire to fill that void with a desire for knowledge.

At first I set my sights on learning a new language - French. There’s something romantic and exciting about new languages. I bought a book, some CD-s and began learning without restriction of a framework pressuring me to reach results. I played the Fifa soccer game on my laptop while listening to “learn French” audio content daily for about 20 minutes each day. I put a CD in the car and listened at the car for a while. I peeked and read about 3 of the first chapters of the French for dummies book (I find the name of the book series insulting, but the content superb). I wouldn’t call that experience a success or a failure – it’s a work in progress, and after about 3 years of studying I think my ability is akin to studying in class for the second year.

Next, came my desire to understand money better. As it was for many others, the need to understand how to manage your own money comes out of immediate necessity. We earn money, we spend money, I wanted to save some of it as well and reach a balance together as a family. We bought two books together and have been following a plan for 2 years now which should take us to where we want to reach together.

Starting to accumulate savings in different forms (retirement, college fund for kids, money market account and others) is what drove my next big curiosity. Now that we will have taken charge of our financial destiny – where should we steer our funds? Should we just stuff it under a mattress? Just let it lay there in a bank (in a dark cold safe, all alone without a hug from crusty crab)? What would be a risky choice or a safe choice? Budgeting and savings is only the first step – the next step relies on making money management decisions.

I began watching CNBC. I think that at some point in life in America, most people do. I took interest in Cramer. His show was loud and he tried very hard to grab attention by joking around. I bought his books too. Two of them. I’ve also finished reading those two books. Because of the time of day the show is on, I gradually watched less and less of that show. All the while, I did not take his advice – and did not invest in stocks. I assumed (correctly) that I don’t know enough – and jumping in the water head first is dangerous (especially when the pool is half empty).

As mentioned in my post about not watching CNBC (soon to be restored) – Cramer is a complicated man (link to CEO’s thoughts on Cramer). I assumed that much way before it was proven. I still respect his advice – but I take the CNBC disclaimer very seriously. It’s an entertainment/educational show. It’s not the gospel – and for investments it is only the starting point of a research.

I moved on. I might watch CNBC, but I just have enough reasons not to. Right now I have a queue of books on investments, options, trading and self improvement (a book from the 60-s!). The hard part is finding the time to delve in. And once that time is found and dedicated, staying focused. As my wife says – how can you read that? It sounds so boring? Well it might be, and sometimes it is and I take breaks. The problem might be what I do with these breaks (guitar, PC games, TV, movies, family time – anything but return to what I dedicated the time for).

Since we discovered the book sales at the local library, we have accumulated quite a bit of classical literature as well. At some point I do intend on enriching my culture and not just my knowledge. I still intend to finish reading our O’Henry stories collection. It seems we will probably won’t buy a new book for a while… we do need to buy some new bookshelves though.

L’Chaim! (Cheers!)

A frugal single can be a distressed married couple

Originally posted on within-my-means, restored article

It is reasonably easy as a single person to restrict your own self to a tight budget so that you can achieve some goal like pay down a mortgage, go on that dream vacation, reach a golden number to identify yourself as rich, or simply reaching a comfortable financial safety cushion. If as a single person you find yourself unable to contain yourself from spending, get a book, get some help, use software and always ask yourself what it is you are giving up on in the near future for the momentary gratification of immediate spending. It can and is done by many.

Once you get married your financial future is intertwined. Regardless of having a joint or separate checking accounts, what you spend and what you keep matters to both of you. You can no longer keep your own personal goals selfishly, you must share those goals. If as a single person you spent some months eating very little and very cheaply, your spouse might never agree to such restrictions. If you used to shop for clothes once a year (or less), you should not be surprised to find out how such behavior might be completely unacceptable on your partner’s behalf.

People have different views of what fun is, as the former frugal single that is in a relationship you must acknowledge that your wife or husband enjoys an occasional Sunday shopping. Just walking around in shopping centers and picking up things. As a single person you might never have done that, especially not in distressed months. Now you bite your tongue and smile and say how lovely the new shirt is and how the kids definitely need all these new shoes for next year.

Trying to raise the issue of being in a financial hole can often lead to vocal arguments regarding the purpose of recent shopping. Who is the selfish one when one buys for the family based on needs and on sales and discounts, and the other wants to put money aside for vacations and other things? It gets even worse if the frugal mind fails to write down what those mysterious future needs are and then gets into a corner in the argument – accused of being cheap for the sake of being cheap.

You might think you are having a great relationship, you communicate and the love between the two of you is still blooming – you are probably right. There’s still something you should do. To become frugal as a couple, to succeed financially as a family, you must dream together. You must know what it is you want and your spouse wants to achieve financially in the near and distant future.

Dreaming of a better future is the first step. The next is getting back to reality. Those dreams should be translated into attainable goals. You should not be surprised to find out you could probably reach an annual or semiannual well funded family vacation. You should probably know that you could live rent or mortgage free if you do certain things.

Now that you share some dreams and goals look into your current joint financial situation. List out your income sources and expenses and agree to live by a budget. You may consider the budgeting system I propose here, but there are many worthy others and you must agree to adhere to that budget together.

Now that you have shared goals and agree to adhere to a budget together, begin allocating small sums into future goals. Now is the time to exercise your spreadsheet abilities (or seek some help) to see what will happen if you save so and so, and how much could you spend on your goals each year.

Speaking out of personal experience, doing exactly what I described above enhanced our mutual frugal sentiment and brought some excitement to it. We began planning annual vacations, writing destinations and budgeting costs. Every few years we plan on big ones like going to Disney world, abroad, visiting back in Israel (someday…). I bring the vacation thing again and again because that’s the easiest and most common goal. There are many other such goals and to each couple their own.

Be fiscally concerned, not cheap and remember that you need to always keep a balance between staying happy as a couple in the present and building up your even happier future.


Spending Less Than You Earn

Not very much in a nutshell - as I originally titled this post when publishing it on about 2 years ago.

We've all heard about getting rich slowly techniques. The key point in trying to do so is spending less then you earn. Once you have achieved that, you can start eliminating debt, growing your savings; start investing and possibly some day get rich.

At the time I initially wrote this post, without delving into my personal story, before generalizing my spread sheets, I thought it might be proper to lay out in a simple way what it is we do to spend less than we earn - and thus meet our goals and live richly.

Before you plan and implement what I suggest here, imagine spending a couple of days a month living like the poorest man in your neighborhood. Imagine you have no money for the next couple of days and you need to spend the last 100$ you have in your pocket to stock up for basic things you and your family can survive on. For us, this means always having piles of the cheapest rice and pasta. If we don't have enough money to buy a thing, we can still cook some white rice. Like the title says, I'm fiscally concerned.

Now start asking yourself some questions about what you earn, and how it is spent:

  1. Write down all of the expected annual income your family makes, and divide it by 12 regardless of the month to month fluctuations due to number of working days or other variables. This sum should include the amounts you get after tax deductions.
  2. Write down all of the recurring expenses you cannot control. Including monthly-quarterly-yearly bills. This includes home (mortgage or rent),cars' license plate renewals, average cash withdraws from ATM, loan payments, existing credit debt payments (above minimum - enough to pay off someday). This does not including any items for which you go to a store for, or which you can choose to skip for months. Again, reach a yearly sum and divide it by 12.
  3. Subtracting the monthly recurring expenses from the average monthly expected income - the remainder should be considered the living expenses you still have some control over. This is the sum where we will exercise our flexibility. I will refer to this sum as "available flexible living sum", or "the living sum".

I'll pause here and stress something out, you have to be honest with yourself and write real numbers. If the sum you reach at item 3 is less than 900$ then I think you should consider ways to reduce your "uncontrollable expenses". This is your food and gasoline money and you have to be able to pay for it. Cancel some home services, relocate to a cheaper place, get another job or a raise - because whatever you do, you need to have enough to get by - and that money must be earned, not borrowed.

Only from here can we start cutting the income pie:

  1. Dedicate a fixed amount into your deferred goals. Take some percentage off the living sum and put it into some savings. I'll leave the discussion of such saving to some other time... for us, it goes into a high yielding money market - and we spend a fixed amount of it annually to vacate. We also allocate it for other goals... again, I'll discuss this elsewhere. On our long term plan we plan on increasing this amount and have detailed why such an increase will happen (raise, stop some fixed payment, buckle down).
  2. Split the remainder into 3 sums, and allocate those sums to 3 parts of the month, typically 10 days each, except the last third of the month which could be longer. Be strict with yourself, you can buy or spend that third of the flexible living sum however way you want, but when that 10 days budget is used up enforce virtual abstinence and don't buy a thing.
  3. We use a single credit card we pay in full each month. Every purchase me or my wife makes we record on an online excel sheet, and compare it to the card's online records so we can't really miss out and lie to ourselves.

What?! Wait - what did I just say? Well, that's the point - you need to think of your money like cell-phone minutes, you can carry them over, but over usage should be considered very punishing.

You need to prepare yourself as a family to a situation where there could be 3 to 7 days where you "virtually" don't have any money - even if the bank statement says you do. Use canned food - store bulk products and live like a cheap bastard. For only a short number of days, it can definitely be done.

And that's the "secret". We do and buy whatever we want. It's not a question of "if", it is a question of when. We don't buy when we can't, but only a few days away we assure ourselves that we can.

Notice I didn't budget for expense types. It doesn't matter if we go to a theatre and dine out every night, if we can - it's our privilege to enjoy what we earn. If we want to buy a sewing machine, we can - but if it takes away from the 10 days budget - we have to limit our selves after the purchase and wait until our self placed budgetary restrictions are met. No money means no money, even if the bank says otherwise.


Communication - The Key to a Happy Marriage and Financial Equilibrium

Originally posted at - which is no longer live

Since starting to post on my blog - about a week before writing this article - my wife's been frowning at me. I sit too much time in the evening in front of the laptop and I'm not talking enough. I agree honey - and I'm sorry. I believe that communication is the key to a successful marriage. One of the examples given in the book "Dealing with people you can't stand" is of a mature couple where the husband says nothing and the wife is frustrated. It seems that for many married couples, that situation is at least the perception of reality - if not the reality itself. The book gives a good strategy on how to improve upon the situation by engaging in inquisitive conversation and insisting on getting answers. A conversation has two sides, and if you think your partner is not saying much - be assertive and muscle out some answers. If your partner is drowning in his newspaper, book or laptop and you feel left out, reach out - touch - and stare at his/her face from a short distance. You will get that kiss your face is demanding and it is the right opportunity to talk about something. Don't hesitate to start the conversation.

At our first years as a couple - finance was a touchy subject. Whenever I raised the issue I came out as a villain and as cheap. I avoided talking about it altogether and I silently observed as our tiny savings account shrunk further and further. We didn't have a plan, we didn't agree, we spent on what we thought we needed. It wasn't selfish; whenever my wife would buy something she would feel guilty and try to explain to me how it is for the family. We struggled for years to reach an understanding between us on our money.

About two years ago I did something very sneaky. We both enjoy going to book stores and browsing through the selection. Our kids scan through their section and we take turns on looking for what might interest us. I picked up two personal finance books - "Smart couples finish rich", and "The automatic millionaire". I suggested to my wife that we each read one book, and when we are done we exchange and read the other. The result was stunningly good. We both learned more about managing our money and we finally began thinking together on how we should plan and execute together. My wife came up with the program discussed in my blog post "How to spend less than you earn, in a nut shell" and I added the electronic part to it - "How to spend less than you earn, part II".

The books introduced us to the idea of setting goals. For me it was always a given that we should save money. Even if we don't get rich, money would be there for us when we need it. My wife, coming out of Russia and seeing how inflation and political turmoil can render yesterday's money worthless always assumed that money is there for us to use now. We now have an understanding of why we save and how we will use the money in the future. Money isn't accumulated so that we could count it greedily - it is there for a purpose and we have already seen the fruits of that strategy. Before - we would charge our credit and I would act frugally. We have begun taking annual vacations with money we save each year and we enjoy it so much more.

Since then, we regularly discuss where we stand on a fiscal basis. My wife no longer feels guilty she buys things when I don't. We have turned the corner and have begun saving more. As long as our income and health do not change - we know where we are heading financially and are pleased with it.

Communicating about money between couples is key to a happy marriage.

Communication in general and expressing fondness and love is what ties it all together.

Friday, December 4, 2009

Friday Funny: Hilarious NSFW Frosty Promo

Only down side, I thought this was a spoof, turns out its actually CBS - what if the kids see that? Not a great idea. They should have let it be published on satire sites, not themselves.


Thursday, December 3, 2009

Save on groceries, Save-a-lot offers $5 off next purchase of $20+

A nationwide chain, which I'm happy to report I've found a location not far from where I live - is offering $5 off purchases over $20

Check them out: Save-a-lot thanksgiving coupon

More to follow when I get a chance to visit the store.


Looking for some dividends?

One well known investing technique is buying the momentum leading to dividends ex-date, and selling a day before. Another is, buying a month before, selling only after a certain percentage above purchase after ex-div date - which could be several months. In any-case, if you are trading and this fits your style consider these two links: Free Ex Dividend Calendar

TheStreet.Com: Dividend Calendar


Wednesday, December 2, 2009

Permanent Frugality? Not so fast

Consider the following article:
As consumers cling to wallets, some analysts say it's permanent
The New Normal.

It's a phrase used in recent months by analysts who see slower growth and lower expectations for business for years to come.

But other observers reject that, saying the U.S. will see a strong recovery with few lingering effects from the recession. They point to the stock market's rebound as justification of that optimism.

What they do agree on is that this year's Christmas sales will be an early signpost for the future.

So far, it's been a tough year for retailers. People largely stopped buying in the spring and summer, but local shop owners are reporting that people are starting to relax a bit.

Dawson Grimsley, chief executive of Wichita's Davis-Moore Auto Group, has his own barometer of buyer anxiety: He sold two 425-horsepower Dodge Challengers one day last week.

That tells him there are a few people out there who aren't worried about the economy anymore.

As for the rest, it will take time, he said, but they will be back.

"It will take time to be back to normal," Grimsley said. "But when it does get back to normal, they will buy - they love cars, they love clothes, they love to eat out."

Consumer confidence really is hanging in the balance, said Michael Stead, Bank of the West's head economist and director of capital markets.

Overall, he's fairly optimistic that most indicators are moving up and that unemployment will start dropping soon.

But, he said, consumer spending is 70 percent of the economy. How much people spend this Christmas could say a lot about how the nation recovers next year.

"If I see another drop this Christmas, it will mean consumers are getting their debt levels down, and that puts a little damper on economic growth. ... My hope is that if we come in flat versus '08, we will continue to move forward in a reasonable manner."

Continue Here>>>

One cannot make a prediction focusing only on today, this month, and next year. A new consumer generation is created with every college graduation. That means, every year. While the party might seem to be over, it cannot be an absolute analysis. The next boom cycle might be just around the corner. This could still be no more than a momentum contraction in consumption triggered by a recession. I'm not very optimistic, but just suggesting that at a slightest sign of prosperity - those who can might jump on the affordable opportunities presented to them by the recent slump.


Tuesday, December 1, 2009

Smart move? Gold miner eliminates hedges, expect only higher gold prices

Remember the oil bubble of 2008, the hedges, the producers drunk on unimaginable returns - which culminated last week with the default of Dubai?

So how smart is it to drop all hedges in a business relying on fluctuating prices of trade-able goods? Yes - many analysts would suggest that the outlook for gold prices is great, does that mean its time to bet the farm?

Is this move temporary? Simply eliminating OLD and losing hedges?

What does it mean to the private citizen? Time to buy the commentary and be a 'gold believer'? Are we at the first leg of a long rally in Gold, or at final stages of a bubble? (Think about it)

Barrick Gold eliminates all gold hedges
Barrick Gold Corp. on Tuesday said it completed the elimination of all gold hedges in an effort to fully gain from surging gold prices.

Gold hedges are contracts to sell gold ounces in the future at a fixed price. By eliminating its gold hedges, Barrick sets itself free from past commitments to sell gold at prices that now seem unusually cheap.

Gold has become a safe haven for investors moving away from the weakening dollar, a shift that has pushed gold prices to record highs. The Canadian gold mining company wanted to benefit from these climbing prices -- as it expects gold to remain strong -- so it unwound its gold hedges.

"Our positive view on the gold price led us to accelerate the elimination of these contracts ahead of the schedule we had established," said Aaron Regent, Barrick's CEO.

In September, Barrick announced its plan to eliminate all of its gold hedges within 12 months. It estimates a final $300 million fourth-quarter charge as a result of the change.

Looking ahead to 2010, the company expects gold production to grow between 7.7 and 8.1 million ounces, with lower total cash costs than 2009.

Doesn't this news bit at least eliminate the 'peak Gold' theory? (which is a part of the rally)

My opinion: Gold is a multi decade hedge, never to be owned at more than 15% of net worth. When markets collapse, gold goes with them - and most trades eventually unwind into Dollar. Economists have pointed out to the risk of a 'Wall of Money', carrying away from current trend of betting against the Dollar - and causing huge rise in worth of Dollar - despite Governments' irresponsible debt and expenditures.