Friday, November 30, 2007

Battle of the Sweaters

I'm reading yesterday's WSJ because yesterday I got sucked into the virtual vortex known as Facebook. Yes, I exert no self control over my laptop. So this morning I'm catching up on the news, and I came across an interesting article on the battle of two cashmere (a fancy word for Mongolian goat hair) sweaters. One is Land's End and cost $99.50 before shipping and handling. The other is Brunello Cucinelli and cost $950 before tax and valet parking at Saks Fifth Avenue in Beverly Hills.

While quality and feel is marginally better with the more expensive cashmere sweater, the cut and style is far better with the $950 sweater. Also, the author received no compliments on the Land's End sweater. Which, really, comes as no surprise. It's not like Land's End makes an appearance in Bryant Park during Fashion Week. And while neither do places like H&M, their bread and butter is knocking off the runways.

I was fascinated with the re-tracing of the journey from Mongolian goat, to bales, to auction blocks, to Chinese factory floor or 17th century castle in Italy. Land's End made opaque references to quality control and high standards, without offering information on the exact whereabouts and specific conditions of its factories in China. Small nation that it is. On the other hand, Cucinelli details the work hours, 90 minute lunch break, and invites the author to visit the factory.

I have to continually remind myself that while I am paying for the quality of item purchased, I am also paying for the quality and conditions of those who make what I buy. Grotesquely large CEO compensation aside.

The Five Billion Dollar Election

The 2008 national elections are expected to cost 5 billion dollars. And this is for a democratic process that American voters have a fickle relationship with. Some would say insignificant.

Voter turnout for national elections is appalling compared to other countries. Since 1945 the average voter turnout for all US elections is 48.3%. That's a big fat 139th place for us. Right behind Burma/Myanmar, for chrissakes. But we may be trending upward. The last Presidential election had a voter turnout of 60.7 percent, the highest since 1968 (Kennedy vs. Nixon). Even so, we hardly deserve a pat on the back, let alone $5 billion dollars worth of "information" overload.

From Arms Race article on Bloomberg:

    Spending for the national campaigns, presidential and congressional, will top $5 billion, as many of the Watergate-era reforms -- public financing of presidential elections and limits on expenditures -- vanish.

    The U.S. spends more per capita on these elections than any other industrialized nation, with the exception of Japan and sometimes Israel. The benefits are dubious.

    ``It isn't clear that we have any comparative advantage from all this freedom to spend money,'' says Thomas Mann, a political scientist at the Brookings Institution who has researched and published a book on money and politics in major democracies.

    Voter turnout is lower in the U.S. than in other major countries, and it's difficult to argue that Americans are better informed. The most expensive campaigns are often the most negative and depress voter interest.

    The current election cycle will look like this: The Republican and Democratic nominees combined will spend more than $1 billion by next November; other presidential hopefuls will fork over another $400 million; congressional candidates can be counted on to spend in excess of $1.5 billion, and the various Democratic and Republican party committees will part with more money than that.

What is more appalling to me is that five billion dollars won't necessarily get us a better election, and that yet again the division of wealth in this country follows us everywhere. Even into the polling booth.

Tuesday, November 27, 2007

Secondhand Gift Cards

I just got back from Uniqlo. Last year I bought M some clothes, which of course she didn't like (because I really am just good at picking out t shirts...), but no worries because I returned them all for a gift card. She's been wanting a new pair of pants so I told her I'd meet her there after work. I got there early and decided to wait on line and just check and make sure how much was on the card. Maybe $160? So the checkout lady swipes the card and gets an error message. I'm starting to sweat bullets. I have no other proof that this card has money on it. She tries to hand me the card and tell me it has nothing on it, and I'm like It has $150 to $160 dollars on it! Like my mom likes to say, believe you me! So the lady sees I mean business, and the third person to help her finally just punches the card's number in and it comes up $158. Phew! But it got me thinking that I need to tuck a receipt in with a gift card, whether it's from a return or a gift, because I'm a paper not plastic kind of gal.

Then I handed her another gift card. This one, however, I got on eBay. I knew I was going to Uniqlo this week so I searched for gift cards, and there was only one for $50. The minimum bid was $39.99 and I ended up being the winner. No, it's not another acre of land in Arizona, but still. $10 off of a $50 purchase is pretty good. After Christmas eBay is flooded with iTunes gift cards. I'm all over that, believe you me!

Sunday, November 25, 2007

My Birthday

I hope everybody had a great turkey weekend!

Tommorrow is my birthday, so I probably won't post. Last year I went to Woodbury Common Outlets and had a blast. Of course, it hit my wallet a little hard, and since I just went nuts the other weekend in Northampton I thought I should avoid the urge to shop. So I think I'll have lunch at the MoMA with M, check out the exhibits, maybe go to a movie. While I love parties, I do not like parties that are about me, so I usually do something very low key.

Yesterday I went to Coney Island with M and some friends. It was so nice out, the water was this deep blue and the sky was clear. I get kind of retrospective around my b'day, and this year has been a little hard, to say the least. Nothing like a gorgeous walk along the shore to ease me into my new year. We walked the boardwalk from Coney Island to Brighton Beach and ended up eating in this grand Russian dining hall, Primorski Restaurant. The beef stroganoff was divine, well worth $12. We were there for lunch, so we missed the live music. That could be a very good or bad thing...

I was thinking soup dumplings for dinner tommorrow, any suggestions?

Wednesday, November 21, 2007

The Federal Reserve, What Is It Good For!

I was reading the headlines this morning, and I can save you the trouble of doing so yourself. Economically speaking, it's all in the crapper. Dollar disappoints, growth will be slower than expected (and you can be assured those expectations weren't exactly Himalayan), various big companies report disappointing earnings, another bank is feeling the pain of sub-prime mortgage hangover, and the Fed is doing this and that. Which got me thinking, what exactly does the Fed do and why does everyone care so much?

Okay, so I know a vague answer. But not enough to post on it, so I thought I'd take a stab at it. And hours of online research later, here we go... The US Federal Reserve was started by my buddy, historically speaking, Alexander Hamilton. You gotta love a guy that was an orphan and an immigrant (just like me!), a born-out-of-wedlock leading architect for both the US Constitution and the US economy, a Revolutionary War hero who fought alongside George Washington at a time when wars were fought with bayonets, and a New Yorker with a gun and a slow draw at an inconvenient time. Nevermind the fact that the Federalist Papers are nothing to sneeze at. I bring up Hamilton because the beginnings point to the present.

The American Revolution was largely fought over economic reasons, one of which was the right of the colonies to print their own currency (denied). To say that after the American Revolution the economy was in shambles is putting it lightly. To fight the war, practically starving minutemen were robbing and stealing from households as they marched along. The war was financed by the printing of Continentals, and to keep up with expenses they just kept printing and printing like the Energizer bunny. By the end of the war a Continental was worth one thousandth of its nominal value. It's like leaving home to go shopping with a thousand dollars in your pocket, and by the time you get ready to pay it's magically been reduced to a one dollar bill. The chaos between creditors and lenders was more than dramatic, it was often violent. During colonial times, actual British currency was scarce (hence wampum and certificates for tabacco), the Spanish peso was widespread, and after the flood of Continentals it was all a mess. The US Federal Reserve was created to bring peace and harmony to an economic mudslide. It is a role it competes for to this day.

The Federal Reserve is the central banking system of the United States, who first and foremost directs the traffic of money flow. And here's the part where you can lose interest. So let's talk about the here and now.

Open market operations- If the Fed sells US Treasury bonds, people like your grandma will buy a bond and for the next fifty years, or however long it takes you to find where you hid it, that money she handed over to the gov't for your bond is out of circulation. This would help curb inflation's enthusiasm. The formula goes like this, when the Fed buys government securities (ie you finally found Grandma's bond and want to cash it in) it is putting money into circulation, so there's more money around, interest rates go down, and more money is borrowed and spent. The reverse- when the Fed sells a bond to your grandma, Grandma's money is taken out of circulation, interest rates go up so it's harder to borrow money and spend. Substitute Grandma's bonds with China's US Treasuries, and we're talking our entire federal budget for years on end. In other words, some unfathomable amounts of currency are put in and out of circulation.

The alteration of reserve requirements. Yikes, there's a mouthful! The Fed decides what percentage of a bank's (ie Citibank) deposits must be held in reserve at a Federal Bank (there are 12 scattered around the country). The percentage only applies to transaction accounts, like your checking account, not savings and time deposits (CDs). The reserve requirement is currently 10% for big banks- so again it is a way to remove money from circulation, which theoretically means lower inflation. I say theoretically because banks can pay the Fed a premium to borrow the reserves it needs, but that's another story.

And most famously, the Fed decides key interest rates. I won't get into them all because my poor brain is tired by now (and hooray to you for reading this far!), but the most famous one is the recent spotlight hog, the nominal federal funds rate. Remember that previous 10% I mentioned? Private banks lend money to to each other, yes it's just a one night stand, and it's that interest rate that has everyone's panties in a jam. Which is why you hear phrases like key short term interest rate that impacts consumer loans.

So what's the big deal? Well, if you lower the rate at which a consumer can borrow money you supposedly let us all go hog wild and shop until we drop. Which is exactly what we've seem to have done (that would be the headlines about consumer spending slowing down). The other thing, banks make big money loaning each other money overnight. And you thought it was your direct deposits. So when things like "credit crunch" and "liquidity fears" are tossed around, you better believe that the rate at which they can borrow money is important.

So that's the long and the not at all short of it. Now you know why the news just says "The Fed lowered the interest rate"! There are much more informed individuals out there who can wax mathematical poetic on the rate cut (feel free to chime in), and there's plenty of basics I still don't get. But with an unkempt economy, any action of the Federal Reserve is both an ongoing discussion and, apparently, a lesson for me in economics.

Tuesday, November 20, 2007

Spitzer Holds Subway Fare

In a startling turn of events, the MTA once again has quote-unquote accounting issues. Today, Spitzer held a press conference to urge the MTA to hold the subway fare at $2. Spitzer has been a verifiable swan dive of high expectations in his first year as governor of New York, and the timing of this announcement sure is convenient. But I have to admit, the MTA is my public enemy number one, and their methods of accounting make the Sopranos look spic and span. Any ammunition to badger them into fiscal transparency is fine by me. Now they have $220 million surprise money in their budget, and Spitzer wants it redirected back to the straphangers.
    At a news conference in midtown this morning, Mr. Spitzer said that under a new plan, the agency would still be able to raise some fares, including the cost of weekly and monthly bus and subway MetroCards, commuter railroad fares, and bridge and tunnel tolls. But he said that an unexpected increase of $220 million in the agency’s budget forecast should enable it to forego its plan to raise the base fare next year from $2 per ride to $2.25.

photo by blhphotography via flickr

Sunday, November 18, 2007

My First Christmas Shopping Spree

It wasn't on purpose, but I bought a fair amount of Christmas gifts this weekend. I went away for the weekend to visit M's folks in Springfield, MA and we drove up to Northampton. Lucky for me, it was Bag Day. I guess other towns might do this (I know NYC doesn't), but it's a cool idea. You get a bag as an insert in the local paper, and then participating stores will give you 20% off any one item. Most stores end up giving you 20% off everything. I'm a bookstore whore, and I have to admit I went in and out of every bookstore in sight. Since Northampton is a college town nestled within the recently annointed Valley of the Literate, there are some good books to be had.

I kind of like buying used books as Christmas presents. I usually get them at Housing Works, but this weekend was a boon for presents (am I the only one that gives recycled presents??). I ended up getting bags and bags of books, only 3 of which were for me. I'd write more, but I have to go read some books now.

Thursday, November 15, 2007

The Haves and Have Nots

The leading factoid in The Atlantic's "Primary Sources" reveals that more and more Americans are Doubting the Dream.
    Americans doubt that they live in a land of equal economic opportunity, according to a new study from the Pew Research Center. It reports that Americans are nearly twice as likely as they were 20 years ago to describe the country as divided between haves and have-nots. This change is particularly significant, the authors argue, since Americans have traditionally “turned a deaf ear” to narratives of class warfare, seeing individuals— not society—as responsible for their economic fate.

It used to be that middle class meant comfortable. In 1988, 68 percent of middle class Americans counted themselves among the haves. Today, that number has dipped to less than half, resting at 43 percent. But as the article points out, it's a poll on self-perception. The middle class hasn't shrunk as much as their ego has. What is more interesting to me is to ask why the categorical shift?

    You can read the Pew report here.

Wednesday, November 14, 2007

Steak, Carbon Monoxide Well Done

Here's some ewwwww news. Lawmakers are debating the use of carbon monoxide in meat. Why would you put tailpipe exhaust in meat, a reasonable person might ask. Well, to keep it pink, of course. At one point during the hearings, a congressional member presented the meat industry execs with two pieces of equally fresh looking pink beef, one of which happened to be 2 years old thanks to a carbon monoxide injection.

First, full disclosure. I hate vegetables. And fruit. Which pretty much leaves me on the meat and carb diet. Hence my email address :) So yeah, when someone is mucking about with my dinner I get a little upset. If they were putting carbon monoxide in brussel sprouts, I'd be like Good for them. Anyway, I digress. So the beef is injected with carbon monoxide to keep it pink. Meat naturally turns a darker color when it is exposed to oxygen, but consumers buy meat largely based upon appearance. Sure we take a glance at the "best used by" date, but I know I'm looking at the meat itself.

In all likelihood the practice won't be banned, but will probably be labeled accordingly. Which I'm fine with. In the meantime, consumer trepidation has led Harris Teeter, Safeway, Giant, Stop & Shop, and Tyson foods to discontinue the practice. Target, however, simply asked the FDA to label its meat as carbon monoxided. And if that isn't a verb, it is now.

Tuesday, November 13, 2007

Sexism in Financial Chit-Chat

Last night at work I was talking with "Carlos", one of the delivery guys, about opening up a bank account. Carlos is maybe twenty, but probably younger, he works 7 days a week and is paid in cash. Now throughout this conversation, it's Ben, Carlos, Chef, sous chef, and I just standing around the open kitchen. I can tell they are jockeying around, flashing words of wisdom to Carlos, mostly about their own situation which is so far from where Carlos is coming from.

First he starts asking another guy, "Ben" about banking. Carlos has never had a bank account, so we're starting from scratch. Ben says the most important thing is to pick a branch with the most ATMs, which in NYC is Chase. So I pipe in my $.02. I'm like, no, the most important thing is that your checking account has no minimum and no fees, and it is close to your home/work. Which is Washington Mutual or Commerce Bank. So then Carlos starts asking about debit cards. I mention overdraft fees and he is surprised that you're not allowed to spend more than what is in your account. I say something like, Carlos, I'm going to tell you something very important and you better memorize this- whether it is your cash or your credit, you never ever want to spend more than you have. There's a conversation stopper...

But the conversation, sans Carlos, turns to mortgages and credit fraud. And this is where I wanted to pull my hair out. I swear to god, every time I said something I was completely ignored. I'm not being sensitive or weird here, it was the strangest thing. I felt like I was that person on TV in the coma with everyone talking around them like they're not there and I'm the voiceover saying $h*t like "I'm here, I'm here!" And then they would pause and move on like nothing happened, even though they sense something else was said in the room. But sometimes they did address me, and then they would talk to me like I didn't know anything. Does this happen to anyone else??

I find that men speak to other men as financial equals, assuming that they are from the get-go. They may not assume to know everything, but they assume intellectual equality enough to converse. But then they'll talk to me like I'm dumb and dumber, slow and deliberate, explaining everything they say like, you know what a sub prime mortgage is- it's blah blah blah until I interrupt and say I know, but one can only do that only so many times before you seem indignant. Which is exactly what one is at that point.

Oftentimes I'll leave a social setting with M and we'll be talking about certain exchanges that had happened, and she's like, god if they only knew you read the Wall Street Journal every morning. And I think, god, if they were only reading the same blogs by both men and women I read they would be many times the wiser.

Monday, November 12, 2007

Why You Need To Start Saving NOW

I was talking with a friend this weekend about financial stuff. It started with a simple question, how do you save and pay off debt at the same time? A simple question begat a long ass answer and, many emails later, I think she is on her way to a monthly spending diary. Because the first answer to any question is, do you know how much you spend?

It's a good question, though. And I kind of think the answer is you can't afford not to save. In 2008 the max on your Roth IRA is five grand a year (again a warning to bartenders, waitresses, and other cash cow hustlers- you cannot contribute more than you earn, as in what's reported to the IRS). So I did a quick calculation and came up with the following.

If you were to start saving in January for your retirement, you're starting with zero balance, and you were to max out your Roth IRA contribution at $5,000 a year for 30 years, could you retire? Drumroll please... The answer is with $713,182 (assuming 8% annual returns). Great, you say. Not so fast. The same calculation, but with 3.1% inflation, and you get $264,353. What?!

Well, remember that time way back when and you took the subway with a token and it was a buck and a quarter? Or that time when you gave the movie theater a ten dollar bill and got change back? That is called inflation, the nasty fact of life that a dollar today is worth less tommorrow. The adjusted figure is what $700,182 is worth in today's dollars. $264,353. I know I've harped on this before. Blogger redundancy. But with oil near $100 a barrel, major banks and lenders on market welfare (aka the sub prime loan mess), and recession arguably on the radar, all of which means the smarty pants with MBAs are defecating bricks right about now. Since they're the ones running the economy, it might be prudent of us to to take care that our own finances are in order.

The first step to any financial plan is to track your spending and then make a budget. So my friend will submit her monthly budget, and I'll start posting on the practical side of how to pay off debt and start saving for your future.

Saturday, November 10, 2007

Fee Riddled Credit Card Scam

A scam implies illegality. Unfortunately, when it comes to credit, it's the wild wild west out there, and what should be illegal is not. Today's NY Times article, Big Fees for Little Credit, shows how some credit card companies are taking people for an expensive ride.
    Some issuers of credit cards are “quietly collecting hundreds of millions of dollars in profits selling nearly worthless, predatory credit cards targeting vulnerable consumers, including those with bad credit,” according to a report published this week by the National Consumer Law Center (

    A typical example the law center offered was this: a card issued with a credit limit of $250. After a $95 program fee, a $29 setup fee, a $6 monthly “participation” fee and a $48 annual fee, the consumer winds up with “an instant debt of $178 and buying power of only $72.”

It's called fee harvesting, and it's not just random companies that are doing it. Capital One was listed in the report, though they deny any wrongdoing. CompuCredit is the biggest culprit, collecting $400 million in fees on $4 billion in debt. Again, they deny the charges, and there is a link in the article to NPR in which they defend their practice.

The reality is that predatory lending is a very big business. Until it's properly regulated, the competition between what is morally okay and what stinks to high heaven will be a slam dunk for the latter.

Friday, November 9, 2007

A Food Blog

Everybody knows that cooking dinner at home is less expensive than eating out. I've recently read a lot of posts on PF blogs that have stomach gurgling recipes, and while I'm no cook, I love to eat. So here's my contribution, courtesy of Mama Juani- The Smitten Kitchen. This mouth drooling food blog has great recipes and beautiful photos. From its site:
    "The Smitten Kitchen is 80 square feet of fourth-floor circa-1870 New York City walkup tenement building joy with a skylight on top. It has one counter, a small stove, a pot and pan rack we nabbed from a former apartment, a marginally obsessive spice rack and a grapefruit knife with actual grapefruits on the handle. My favorite things in it are a set of stainless steel measuring cups and spoons, the very first kitchen-related item I ever bought myself to cheer up a blah day, and a husband who picks at things as I chop them."

They even have a handy conversion page that lets you know things like 1 pound onion = 2½ cups sliced or chopped. And best of all, for the month of November it looks like a recipe every day! I never thought of food blogs as a great way to plan meals and shop within a food budget, but I've got my fork ready. Any other favorite food blogs out there?

Thursday, November 8, 2007

A Mutual Fund for Hipsters

toothpaste for dinner
Reading Gothamist this morning and I choked on my coffee. Why, hello there Thrasher Fund, the GenX mutual fund. Excuse me while I roll my eyes back and gaze at my sockets. I am so going to the free 30 minute consultation.

Their GendeX Mutual Fund (GENDX) has a 1.00% management fee, a 2% redemption fee if shares sold within first 12 months, and a $100 minimum with $50 minimum automatic investment every month. Fine. What's not cool is the $2/month fee for accounts below $2,500. Holdings include Apple, Gucci, American Apparel, Uniqlo, and China Mobile. Hence, the fund's name.

Well, this was all very entertaining. Hipsters are probably the most middle class counter culture generation in recent history. They are so not falling for this.

Wednesday, November 7, 2007

Jay-Z + Greenspan = Bling

In a huh moment, the Wall Street Journal reported yesterday that Jay-Z's new video, Blue Magic, featured the hip hop mogul "flashing stacks of 500-euro bills".

Of course, the ensuing maelstrom is that Jay-Z is the straw that broke the camel's back- as in now we know there's a recession a coming. I hate crap like this, like lamenting that even a rap star is dissing the dollar, as though Jay-Z has become the lowest common denominator in financial literacy. Let's be real here, yes I love his music, but the man is also a smart businessman. He's bringing the Nets to Brooklyn for basketball god's sake. And not for nothing, but a stack of fifty grand in US dead presidents vs. $72,000 in US currency for the same stack of 500-euro? Can't knock the hustle.

Performance Pay, Irregardless of Performance

The New Yorker's latest Financial Page article, Performance Pay Perplexes, looks into the obscenely large amounts of pay market movers and shakers are raking in. A quick glance at the headlines will let you know that performance pay isn't quite working right now.

    The havoc on Wall Street following the collapse of the subprime-mortgage market boils down to a simple truth: for years lots of very smart people took lots of very foolish risks, betting borrowed billions on dubious mortgage derivatives, and eventually the odds caught up with them. But behind that simple truth is a more surprising one: the financial whizzes made bad decisions in part because that’s what they were paid to do.

The article is interesting because it breaks down just how things get paid out. Hedge fund managers, for example, get 2% of asssets under management as their fee, plus they get to keep 20% of the profit (above a certain benchmark). Problem is, their bonuses are obviously not exactly return to sender, and so the next year when the fund tanks they're sitting pretty on forty million. He also breaks down CEO compensation pay.

    Not surprisingly, a recent study of almost a thousand companies by the management professors W. Gerard Sanders and Donald Hambrick found that C.E.O.s whose compensation was made up mostly of stock options tended to “swing for the fences,” making investments and acquisitions that were riskier than those made by other executives. As a result, the performance of the companies run by the risk-takers was far more volatile, and not for the good of the companies: the risky strategies were more likely to end in a big failure than a big gain.

Essentially, the payoff for hitting that big score is so astronomical, and the chance of financial risk hitting their own pockets is pretty nominal. Hello, market cluster f*¢k. In this day and age, I'm sure we would all love those odds.

Tuesday, November 6, 2007

DRIPs- Buy Stock Direct (for free?)

I posted yesterday about my forays into buying stock. One of the cheapest ways to do so through a company's dividend reinvestment plan (DRIP or DSP). It's how I bought BP, and I own Johnson & Johnson, Pfizer, Costco, and my personal favorite, the Cubes- the NASDAQ 100 index (QQQQ). Direct reinvestment plans are not for market timers or short term investing. It's great for people who only have a little chunk of change at a time and want to build wealth over the long haul. If I don't think a company won't be around when I retire, I'll buy it through a broker, not a DRIP.


You are buying directly from the company- so you bypass the broker fees. Not all dividend reinvestment plans are free, but the one dollar or so fee per purchase is still cheaper than a broker (even Sharebuilder, which is $4). Fees eat up your returns. Think of it like your savings account. Would you rather pay ING, or whomever, no money or a buck or two every time you made a deposit, or ten dollars? Same deal. Fees for any investment, mutual funds, stocks, etc., should not exceed the 2% benchmark. Frankly, I think it should be closer to 1%, especially if you don't have a whole lot of money to begin with.

You can buy stock with only a little money at a time. Most plans have a minimum investment of $25 or $50, oftentimes you can buy online. Note that you are usually buying in whole dollar amounts, so it will be fractional shares.

Dividends are reinvested every quarter to help your money grow. The max 15% tax on dividend earnings is encouraging other companies to start paying them out. Costco just paid its first dividend a couple years ago.

You can invest automatically. Most plans let you invest at least once a month directly from your checking account. Dollar cost averaging will boost your returns, forcing you to buy even when the market is low, thereby decreasing the average cost you paid for the stock. Like all savings, dividend reinvestment plans can become a habit that you don't even feel pinching your pocket. Well, at least not too much.


Fees. There is often a start up fee. Because companies almost always require that you already own a share in order to participate, there is a fee for the use of services to put that stock in your name. The links to the stock I mentioned is for Moneypaper, the service I used to get that first share and then enroll me in the company's plan, but there are others out there. Some plans even have fees to purchase dividends! Again, the fees are not usually high, and certainly not as high as a broker. But dividend reinvestment plans speak to the little guy and gal, and our returns get squeezed by any fee, no matter how small. Fifty bucks a month on a plan with no fee is ideal. Fifty bucks a month on a two dollar plan is not so ideal. It means the stock has to increase 2% just to break even. Of course, you could counter it by increasing how much you invest by another fifty bucks, but an easy way to invest each month might then make you pause.

Buying that first share or meeting the minimum. For the most part, it is easy and relatively affordable to purchase that first share. However, some plans require several shares, or even $500 and up worth of stock. Just make sure you read the plan's minimum requirements.

Record-keeping. You need to declare things like taxable gains or losses based on your cost basis. In other words, keep every monthly, quarterly and year-end-statement, and look out for your 1099-DIV from the company at the end of each year. If you do your own taxes, you will need to figure out your own cost basis, which can be a headache. I hand mine off to an accountant, and if I sell a lot of stock, it's usually an extra ten bucks for him to figure it out.

RESEARCH. Dividend reinvestment plans are a great low-cost way to buy stock automatically. You have the freedom to start or stop an automatic purchase plan, and it's an accessible way to increase your net worth. You can search for participating companies through Moneypaper, Computershare (formerly Equiserve), AST, and Mellon, or here for the Cubes. And while Sharebuilder is not officially a DRIP, they are philosophically best friends. At $4 a trade, you purchase dollar amounts (ie fractional shares) and dividends can be reinvested for free. At $4 a trade, however, it would be best to aim for a $400 purchase. The obvious benefit is that they are an online broker and you can buy virtually any stock. Even Berkshire Hathaway, or at least fractions of it.

See, it's not so bad. And it's kind of fun to go shopping for stock. Check out the lists of available companies, whittle down the free and no cost plans, research a company's financials before you purchase, and buy and hold to your heart's content.

Monday, November 5, 2007

PetroChina and my IRA

A few years ago I was buying stock. Not a lot. I was mostly doing a hundred bucks here or there through Sharebuilder. Sharebuilder is an online broker that buys dollar amounts of stock, as opposed to number of shares. Because they buy stock in "street name"- as opposed to Ms. PiggyBankBlues, you end up with fractional shares. After the tech crash I was buying up internet stocks, etc. and after a year or two I would sell them. Because I had an emergency without an emergency fund, I ended up using that money. Thankfully, I didn't touch the stock held in my Roth IRA. Eventually, I switched to Scottrade after Sharebuilder began to charge annual fees for IRA accounts. And then I forgot about it.

Recently Warren Buffet sold off his shares of PetroChina. I sort of remembered that I had bought some shares a few years ago. Because I only sort of remembered, I was like you really need to get your crap together and figure out what stock you own and don't own, ya numbnut. But that was last week and this is this week. And then I saw this morning that PetroChina is now the wealthiest public company in the world.

    On PetroChina’s first day of trading on the Shanghai Stock Exchange, it surpassed the combined capitalization of Exxon Mobil and General Electric, the world’s next two most valuable companies.

Because I was buying such low amounts of stock, I knew that if I still had it I probably only owned one share. So after hunting around for my Scottrade file with my account number, I logged on to my account and found out that indeed I owned a single share. I bought it for $53.69, and it is now worth $227.07. And for what it's worth, during the time I started writing this post and the time I'm writing this sentence, the price went up two dollars. Which leads me to my question, now what???

I will be the first to admit I am just an average to considerably below average stock picker. In fact, any misconstrued-as-advice I give or tales I tell in relation to stock you should never ever take as sound advice for purchasing said stock. You should be entertained by my efforts, at most. Which is why, I might point out, my Roth IRA has only been invested in mutual funds over the last few years.

I am not a fan of oil stocks. They are profitable, but they throw my moral compass off a bit. It's an unreliable compass and I don't venture on its sole direction, but still. I made a decent amount, a couple thousand dollars, off of BP stock two years ago. I sold it in order to go away for a month to a writer's colony. So while BP has refinery fires and oil spills and god only knows what else, I still drive a car and bought and sold its stock. But that writer's residency was an experience of a lifetime, and I would not have been able to afford to take the time off at the time had I not bought the stock. So I draw the line and the line moves. For now, no war profiteering stocks.

And PetroChina? Well, I think I'll revisit that stock in another five years. I've never had any stock quadruple in value! In the meantime, I have $205 I forgot about in available funds to buy stock. Hmmm, Apple?

Friday, November 2, 2007

Finding an Apartment in Manhattan for Elvis

A good friend of mine, who shall be called Elvis, recently told me she was curious to know what it would take to buy in Manhattan. She co-owns her own fashion line, is married, and currently lives in a studio rental apartment in the East Village. The thing is, because she has lived there for a very long time, her rent is around a grand. Also, because she has a businees that's profitable relatively recently, I'm going to assume that she doesn't have a whole lot of cushion. So it got me thinking, is it even possible for those with piggy bank blues to be able to buy an apartment in Manhattan?

So the non-negotiable thing is location, she won't move to Brooklyn. She also stated that she wants to remain at $1,000 a month. I used Bankrates's mortgage calculator and if she found an apartment for under $150k she could pay close to a grand in monthly mortgage payments. Elvis, I love you to bits, but this is not realistic. As you know. But not to fear, all is not lost!

Option #1, Buy a 2 BR and rent out one bedroom. If Elvis got a 2BR for $440,000 (yes, it's possible, but not easy to find), put $40,000 down, and took out a $400,000 mortgage, she would pay around $2660 a month. And I'm telling you right now, you're living so far uptown you'll get nosebleeds. So for the love of god, will you just get over your disdain for the subway, and recognize that a commute from Inwood to midtown is no better than a commute from Brooklyn. The difference in quality for your price range is significant. But fine, okay, I'm talking to a wall. At least the food is good. So moving along, then she should rent out the other bedroom to her sister. Or some other sucker. This seems a little high for Elvis, and $40k down is nothing to sneeze at, but if she could increase the downpayment and lower the mortgage, this is an ideal situation. Nobody buys an apartment thinking it's going to be the only one they ever own. But there is something to be said for buying something and being able to grow into it as your life grows. What if there's baby Elvises? What if Mr. Elvis wants his own music studio? While you don't ever want to buy more home than you can afford, you want to buy as much home as you possibly can.

Option #2- Stay in a studio. Studios can be had in Manhattan for $300k. I don't like this idea, frankly. It drops your monthly payment by less than a thousand, it's still a studio, and while it is an investment it's not like you're exactly moving on up. It may even be one of those cases where it is cheaper for you to rent than to own, given your particularly low rent.

Option #3- Stay where you are and save for option #1, without having to rent out the second bedroom. Hopefully by then your business will have flourished to the point where you can afford to carry the whole mortgage. Use a savings calculator to determine how much you can save in 2 years. For example, $500 a month at 4% is over $12,000. Of course, to get that $40k downpayment, you'd have to save $800 a month at 4% for three years.

And last but not least, just like getting an apartment isn't just paying first month's rent, buying an apartment isn't just about the mortgage. New York City has the highest mortgage fees, $3830 for $200k, so if you doubled that you're looking at $8,000 in closing costs. Also, you must include maintenance in your monthly mortgage calculations. Which means it matters what the maintenance is when you're looking at places to buy. And obviously, the 10% down is an ideal situation, it's not always the norm. All in all, just research up the wazoo while you're dreaming big. One place to start- even though she's an occaisional nut job, Suze Orman has an informative piece on Rent vs. Buy.

So short answer to a long post- it's possible. It may not be easy or quick, but it is defintely within your grasp.

Learn a Language for Free

Well, okay, so you won't really learn it, as in you'll be fluent. However, there is a way to learn for free. It's through the BBC and while you won't be reading Proust in French, you will be able to be a decent American tourist. You can learn online or by email over 12 weeks. You can even download MP3s.

I'm already working on my Urdu to charm taxi drivers into taking me to Brooklyn (um, like they're legally bound to do but, like driving within a lane, simply refuse. Not that driving within a lane is nearly as important as going to Brooklyn...). Check me out!

    Assalam-o-Alekum. Bara-e-Meherbani Brooklyn, Shukria.

Thursday, November 1, 2007

October Net Worth

I was resistant to posting my net worth, not for reasons of privacy (or lack thereof), but because I thought it would be too depressing. Then I realized, what they hey, everybody else is doing it! And now I kind of like it. I like that I have a little reminder once a month to track my progress. So I bring you October's net worth to the tune of $29,012.

But here's the sad part, I only started saving six years ago. Before that I was pissing away my money on food and fun and cleaning up a shattered credit score. For the first two years I slowly increased my monthly contributions until I was able to contribute the $4,000 maximum. All of my retirement savings are wrapped up in a Roth IRA because I've never worked in a place that offered 401Ks and matching contributions and paid vacations. Ah, the good life. I am soooo jealous of your matching contributions! I would guess that most bartenders and wait staffers have no clue that such a thing exists. Not only do employers pay you, they help you save money too. Weird.

I think that by the end of the year I'll hit thirty grand, woo hoo! A note about my calculations. I'm admittedly lazy and so there's some stock that isn't listed, which is why it's stuck at $3,000. Also, it is standard to put the value of your home's equity into a net worth equation. I left it out because it would dramatically skew my net worth and give me a false sense of savings. Also, while M and I save together, I only included my own retirement savings, stocks, and land. Oh yeah. The land. That was a very, um, irrational late night purchase on eBay years back. It's a piece of desert in Arizona. According to google earth it looks pretty. Not that I've ever been there... And you all thought I was financially astute!