Consider Buying Long-Term Certificates of Deposit

Citizens BankMy friend once asked me why anyone would put their money in a 60-month certificate of deposit. In our age of instant gratification and blockbuster returns, the thought of putting a sum of money, even if it’s just $100, locked away for 5 years with a pittance of a return seems preposterous. Why put it in a 5 year CD when a high yield savings account can give similar returns? Thirty year Treasury bonds? Forget about it, they’re not even on the radar.

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Frontline: The Choice 2008

FrontlineFrontline is a part of PBS and an example of phenomenal investigative journalism. If you haven’t seen any of their shows before, you should check them out when you have a chance. I’ve seen numerous shows and the recent ones that really stand out are (you could spend days watching their stuff):

  • Bush’s War: A discussion about the decision to go into Iraq following the attacks on September 11th, 2001. It offers a tremendous amount of insight into the decision making process and is actually quite scary. [March 24th, 2008]
  • Affluenza: “Affluenza is a one-hour television special that explores the high social and environmental costs of materialism and overconsumption.”
  • CARRIER: This is a great series that explores life aboard the USS Nimitz, one of our nation’s amazing aircraft carriers.

Frontline: The Choice 2008

Frontline However, today I wanted to highlight one particular episode: The Choice 2008, aired Oct 14th, 2008. It follows the political growth of both candidates from the very beginning and gives a very balanced perspective on both. It’s non-partisan, takes no sides, and merely presents the facts as they’ve learned them. I recommend watching the full program, rather than the individual pieces on either candidate, because it tracks both men chronologically; showing what each did during the same time period.

Some things I took away from the show were how much planning and politicking goes on. Barack Obama had a two year plan to position himself such that his political peak would occur for this election. Barack Obama leveraged his opposition to the war, which was aided by the fact that he wasn’t in Congress when it was voted on, as much as possible. John McCain absolutely hated President Bush following the 2000 election in which Karl Rove, spreading lies about McCain possibly fathering a half-black baby out of wed-lock, absolutely destroyed him in the Republican Presidential primaries. McCain, who had then alienated the Republican’s conservative base, decided he had to align himself with Bush, despite hating him, to regain that base. That’s part of the reason why he now faces charges that he’s just like President Bush (voting with him 90% of the time).

It’s good stuff, definitely something you should watch before November 4th.


Lazy Portfolios Revisited

MarketWatch used to only visit lazy portfolios every once and a while (it was hard to justify looking at “lazy” portfolios that performed well when you could point out far sexier returns on sub-prime mortgages!) but with the recent financial woes, Paul Farrell had been checking on them more often. It looks like they’ve turned it into a section on the Marketwatch site and the lazy portfolios aren’t performing very well (not surprising but better than their benchmark, the S&P 500!).

The new Lazy Portfolio center tracks eight lazy portolios:

  • Aronson Family Taxable
  • Fundadvice Ultimate Buy & Hold
  • Dr. Bernstein’s Smart Money
  • Coffeehouse
  • Yale U’s Unconventional
  • Dr. Bernstein’s No Brainer
  • Margaritaville
  • Second Grader’s Starter

For those who aren’t familiar with Lazy Portfolios, they’re allocations of popular index funds. I did a whole writeup on some popular lazy portfolios including Scott Burns’ Couch Potato portfolio and Margaritaville portfolio.

 Personal Finance 

50 Financial Skills Every Person Needs To Know

Popular Mechanics created a list of 100 Skills Every man Should Know, which naturally gravitated towards DIY/physical skills like jump starting a car and split firewood. The Frisky listed 30 Skills Every Woman Should Have Before Turning 30, which actually touched on more than physical skills (though #12 is physical :)), with a handful of financial skills (#17 – #20).

This isn’t a checklist of things you need to necessarily do in your life, it’s just a list of things that you should know how to do (in case the need arises).

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The Integrity Dividend by Tony Simons

The Integrity Dividend by Tony SimonsThe first thing I do when I get a book is flip open to the inside flap of the dust cover and read the summary. I like to get a fifteen second feel for the book before I dive right in.

The first line on the dust jacket read: “Corporate and government scandals continue to deepen our mistrust of leaders.” Tony Simons, author of the The Integrity Dividend and an associate professor of management and organizational behavior at the School of Hotel Administration at Cornell University, hit the nail on the head with that line. While the book was probably influenced by the Enron and similar scandals, corporate greed in financial companies and weak governmental oversight (or straight up looking the other way) the last five or ten years has combined to create an economic maelstrom the likes of which haven’t been seen in decades. Add it all together and you get an environment where employees may be distrustful of their management. Are the leaders of my firm focusing on the quick buck to keep shareholders happy or are they interested in building a long term future? Richard Fuld, ex-CEO of Lehman Brothers, earned half a billion dollars in cash between 2000 and 2008. Lehman is now bankrupt, leaving many employees with empty retirement accounts.

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Kiplinger’s Best Discount Brokers

In the latest issue of Kiplinger’s Personal Finance, they rated a dozen discount brokers on a variety of factors including commission, research & tools, fees, investment options, “easy of use,” and customer service. The results were pretty close to the results of Smart Money’s 2008 ranking of the best discount brokers.

Kiplinger’s Best Discount Brokers

  1. Fidelity
  2. Charles Schwab
  3. Muriel Siebert
  4. TradeKing
  5. E*Trade
  6. OptionsHouse
  7. TD Ameritrade
  8. WellsTrade
  9. Firstrade
  10. OptionsXpress
  11. Zecco
  12. Scottrade

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 Personal Finance 

Roundup: Homelessness, Saving, and Recession

With all the negative financial news lately, I thought it might be important to highlight a story I read about famous people who had once been homeless. Many of them are in the entertainment business and the story, which is a list of famous people and their homelessness experience, underscores how perseverance and hard work can take you from the depths of financial difficulty to the heights of fame and fortune. Where you start doesn’t dictate where you end up (much like where you end up may not actually be the end).

QueerCents is starting a new series, Turning Spenders into Savers, which is a task I think each one of us should try to undertake. With the economy in the state it’s in, saving money and being frugal is the easiest and best thing you can do right now. Trying to time the market and trying to gamble to recover some of your investment losses is a fool’s errand, saving money is what will pay dividends.

JLP had a chat with a friend about his rapidly dwindling 401(k) and made two excellent points. The first was that his friend should do nothing, stay the course, and stop checking his 401(k). The second was accurately addressing the perception his friend had about “losing $6,000.” It’s a good post to read if you’re feeling panicky.

Finally, Dough Roller talks about how to survive a recession. Keep saving, hedge your bets, and try to reduce your expenses.


OPEC Despises You, Stop Buying So Much Oil

As oil prices soared from less than $20 a barrel at the beginning of the decade to its peak at almost $150, OPEC cashed in. They made overtures saying they’d increase production to increase supply (and increase their revenue) because they were our friends. In reality, OPEC couldn’t do much to ease prices because there simply wasn’t enough refining capacity. But they were nice about it, they said they’d look into it and try to help us out.

Here’s a chart of the price per oil (in black) vs crude oil production in OPEC nations (1973 to 2007, not inflation adjusted):
Price per Barrel of Crude Oil vs. OPEC Oil Production

Oil was less than $70 as recently as 2007. Now that demand for oil is falling, along with the price (which is in the $70s), it seems as though OPEC is quick to reduce supply in an attempt to boost up the price per barrel of oil. What was once called “too high” was now normal, once they saw we could afford $100 a barrel oil.

Iran’s Oil Minister Gholam Hossein Nozari said “on October 4 that oil producers were pumping too much oil and that a price under $100 per barrel was too low.”

On OPEC cutting oil production: “OPEC president Chakib Khelil told reporters last weekend that any production cut could be “substantial,” adding that the organization would try to stabilize prices between $70 and $90 a barrel.”

You don’t have to believe that we contribute to global warming or believe in peak oil, just believe your purses and wallets. OPEC, which controls 40% of the world’s oil (Venezuela and Russia, hardly our two best friends control a lot of the rest), has us by the throat. You can bet that some of our own dollars are going to Iran, who gives some to Islamic fundamentalists, who use them to buy weapons with which they try to kill Americans.

With gas prices falling, you might be tempted to revert to your old ways (like we did after the oil crisis in the 70s), please don’t. I think sending our money overseas to buy a product from someone who despises us is a terrible idea and one we should limit.


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