Archive for the 'Opinion' Category

Apparently We Don’t Have Enough Fraud at Home; We Import It Too

Clare Baldwin of Reuters ran an interesting article yesterday describing the swagger of two investors attending DealFlow Media’s annual conference, who say they are making a fortune shorting the stocks of fraudulent Chinese companies.  The conference dealt with so-called “reverse mergers” in which a (usually larger) private company is able to become public without going through an IPO by merging with a (usually smaller) public one.  Apparently, according to these investors at least, since the process avoids an IPO, it’s a ripe for fraud.

“It’s not a matter of whether they are fraudulent companies, it’s just a matter of who they are cheating,” 62-year-old Texas-based investor John Bird, who has been very public about his short positions, told a panel at DealFlow Media’s Reverse Merger Conference 2011.

and another:

“The realization I have come to recently is that it’s a giant Ponzi scheme. It’s all going down,” declared Rick Pearson, another investor who holds short positions on some Chinese stocks.

The article continues, pointing out that others at the conference feel like the whole issue is overblown, especially since the Chinese are easy targets:

Some pointed out that highly regarded companies — such as Warren Buffett’s Berkshire Hathaway — were created through reverse mergers.

They also argued that while some U.S.-listed Chinese companies may have had some problems, that is the exception and not the rule, and suggested China is an easy target because of American resentment about its growth as an economic power and its clout as a big owner of U.S. debt.

“I think with China, there’s a total overreaction,” said David Rees, a partner at Vincent & Rees law firm in Salt Lake City, Utah. “It’s an easy target.”

And of course, the motives of those bringing the reports of fraud to the market were called into question:

Most attendees were quick to say that they wanted fraud rooted out, but they became uncomfortable or even angry at the thought that someone could profit even if their allegations ultimately proved false.

“What it comes down to is, is the information truthful and accurate? And, also, do you have an economic motive or an opportunity, assuming it’s false…to profit personally because you’re intentionally putting out this false information?” asked Perrie Weiner, international co-chair of DLA Piper’s Securities Litigation practice.

Whether you are tempted to believe the shorts or the longs, this article reminded us of our general attitude towards the markets: it’s hard to know what is going on with any of these companies unless you are close to the deals.  Let the buyer beware.

Insight: For short sellers of Chinese stocks, it’s time to reap | Reuters

Thumbnail Photo Credit: Carmela Songer

Great Job, GE!

I love it when a company does what they say they are going to do.

My wife and I are remodeling our house and putting in a new kitchen.  We bought GE appliances, and at the time of the purchase they had a pretty good rebate deal – $500 back if you buy 4 appliances (which we did).  The forms to claim the rebate were pretty simple, but we had one problem.  The rebate forms had to be postmarked by a certain date, and because the kitchen wasn’t ready for appliances yet, we didn’t have the serial numbers to submit.  So, we filled in the forms as best we could and sent them (registered mail) by the postmark date.

A few weeks later we had a few of the serial numbers (but not all of them), and we received an email from GE’s rebate center saying there was a problem with our submission.  So far so good – at least they hadn’t thrown it in the trash.  When I called the 800 number, the person I spoke with was very polite and helpful.  It turns out because we bought the appliances from multiple vendors, they had multiple cases set up for us.  He consolidated all of our submissions onto a single case number and told me to call when we had all the appliances in house and knew the serial numbers.

Last week we got all the appliances and serial numbers, but before I made time to call, we received a $100 card.  I thought this was a bad sign… they decided our submission had gone too long and gave us the 2-appliance rebate amount instead of the 4-appliance rebate amount.  Expecting an argument, I called the 800 number again.  The first woman who answered the phone listened to my story and promptly, without my asking, transferred me to a supervisor.  The supervisor took down the 2 additional serial numbers, told me to feel free to use the $100 rebate we had already received, and promised the remaining $400 would show up in 2 weeks.  No arguments and no issues.

Great job, GE.

If I Had One Financial Do-Over, What Would It Be?

Today, we are taking part in our first Yakezie Blog Swap.  This swap’s topic is:

If you had one financial do-over, what would it be and why?

When I saw the topic, I instantly knew what my “do-over” would be.  My financial do-over is about missed investment opportunity.

Like many bears, I tuned in to the impending collapse of the financial market last decade.  My wife and I sold our home in the fall of 2007 and rented for two years as home prices collapsed.  My family and I also believe strongly in living below our means and as such are very prudent when it comes to spending, debt and investing.  Although I able to see the crash coming,  I was inaccurate on two very important accounts.

The first, the crash happened about 18 months later than I thought it would.  I mistakenly believed that enough people would see the fundamental problems sooner than they did.  This, of course, is the root of the old investing adage “the market can stay irrational longer than you can stay solvent.”

Second, the crash didn’t go as low as I thought it would.  Reflecting back, I got a little too caught up in my own doom-saying.  I was fixated on the DOW going down to around 4,000 and didn’t acknowledge that government was literally going to print trillions of dollars to make sure the price wouldn’t go there.  I thought that since printing all that money would ultimately make things worse, they wouldn’t do it.  Unfortunately, just because the government shouldn’t have done it, didn’t t mean they wouldn’t.  In fact, I should have known from history that the government was most likely to try to intervene in the short term at the expense of the long term.  I was naive to think otherwise.

This leads me to my financial do-over.  While this is a lot easier said than done.  If, I was able to do it over again, when the market crashed in 2009, I would have started to make small investments in the market.  I would have then continued to dollar-cost-average into these investments. Looking at the chart below you can see where, in hindsight, I should have considered “buying the market”.  The chart is of the DOW Jones Industry Index and the trend lines you see are drawn based on key tops and bottoms of the 1930’s.

If I had a do over, stock chart

The reasons I didn’t is that I was convinced of a few things:

  • Any stimulus or bailout plan the government came up with would only make things worse (it has)
  • None of the core reasons that caused the financial crisis would be fixed (they haven’t yet)
  • Ultimately the market will “re-test” (go down) to touch the middle trend line again and may / should go down to re-test the bottom trend line.
  • Only after touching the bottom trend line, will governments resolve to fix real structural issues and hold those responsible for this mess accountable.  From there, we can re-build and enjoy many years of true prosperity.

So there you have it, my financial “do-over”.  Fortunately we live and learn.

Budget with Adaptu and Mint – One Blogger’s Review

With our current Below Your Means Basics focus on Budgets, we thought it would be interesting to comment on a few of the major pieces of tracking and budgeting software in the market today.  The editors at Below Your Means currently use Quicken Deluxe 2011 for all of our personal finance tracking and budgeting.  However, there are cloud-based solution such as or Adaptu.  These have the advantage of having no software maintenance you have to do on your own computer, and they’re free, which makes them a great value.  If keeping track of some very complex financial situations is important to you, or you’re leery of having your data in the cloud, Quicken Deluxe may be worth it.

The Narrow Bridge Personal Finance Blog has a excellent review of these two products. If you are looking to jump into either one products, I recommend giving the article a read first.

Eric, over at Narrow Bridge Finance, reviews each product in the following categories:

  • Interface & Navigation
  • Account Management
  • Analysis and Reports
  • Investment Tracking
  • Community
  • Overall

Based on the review, both and Adaptu are tied for first place, each having their own strengths and weaknesses.

I have used for a long time and have no plans to leave it behind, but I now have two aggregators in my bookmark list. I use Mint for my overall quick view, but I have Adaptu for more in depth looks into my investment and my travel reward tracking.

I would recommend reading the full review to determine which site works best for you.  The Narrow Bridge also has other good reviews of vs. Thrive and vs. Pageonce. Alternative – Adaptu: The Showdown of Mint vs. Adaptu | Narrow Bridge Finance

Read the Fine Print: Lesson in Saving Becomes Lesson in Getting Shafted

A few weeks back, we posted about Youth Savings Accounts, which can be a great way to get above market rates for relatively small amounts of money.  Personally, I have set up one for my son and it allows him to earn 6.17% on $500, which is much better than the national average savings account rate.  Of course, leave it to Bank of America to find a way to screw people and their kids.  This case over at The Consumerist caught my eye:

In 2007, a mother of three thought she would introduce her kids to the world of banking by having them each open up passbook savings accounts at the local Bank of America branch. But rather than learning how savings earn interest over the years, the kids found themselves schooled in the finer points of bank fees and the need to check your statement.

The big issue was that the account started out as a “free” youth account, but quietly turned into an “anything-but-free” account in 2008.

The mom tells San Francisco’s KGO-TV that when she opened the accounts for the children, she had believed there wouldn’t be any fees associated with them because they were all tied to her existing BofA account. Alas, starting in 2008, each account was hit with a monthly fee of $3. In 2009, that fee went up to $5 per month.

Banks change terms and conditions all the time.  These changes are often buried within pages and pages of fine print.  As far as I know, all the recent laws such as the CARD Act only apply to credit cards and not deposit accounts.  Additional, the new overdraft protection rules only apply to overdraft fees.  This means banks can continue to add fees to savings, checking and other such accounts with little notice.  If you are going to take advantage of Youth Savings Accounts, be sure to read the fine print and be on the look out changes to the terms including:

  • Monthly Fees
  • Changes to minimum balance requirements
  • Changes to maximum balance that earns bonus interest rate
  • Changes to interest rates (this is a big on, because savings rates can change without notice)

I  do not bank with Bank of America.  Here are just a few reasons why:

Why anyone would bank at Bank of America is beyond me.  Jump over to The Consumerist to watch a video and to read more.

Mom Tries To Teach Kids Value Of Saving, Kids Learn Lesson About Bank Fees Instead | The Consumerist

Peter Diamond Withdraws – Partisan Politics and the Federal Reserve

Economist Peter DiamondOver the weekend, Federal Reserve Nominee and Nobel Prize winner Peter Diamond withdrew from consideration in an op-ed column in the New York Times, citing strong Republican opposition.

… I am unqualified to serve on the board of the Federal Reserve — at least according to the Republican senators who have blocked my nomination. How can this be?  The easy answer is to point to shortcomings in our confirmation process and to partisan polarization in Washington. The more troubling answer, though, points to a fundamental misunderstanding: a failure to recognize that analysis of unemployment is crucial to conducting monetary policy.

The question of whether or not senate approval committees know enough about the field of policy for which they approve is an interesting one.  One thing is certain, however.  The state of economy, the skyrocketing of the national debt, and the devaluation of the dollar are the central political questions of our time.  We can expect a more dogmatic approach as experts from different schools of thought or political affiliations are discredited out of hand.

We believe that rising government debt and continued destruction of the dollar has to stop.  Honestly, we’re not so sure the Federal Reserve is a good idea to begin with.  If there is going to be a Federal Reserve, though, we’d prefer it be stocked with economists that don’t think we can print our way out of the current problem.  The interesting question for anyone in a time of crisis: do we believe it enough to reject, without consideration, the merits of any argument (or in this case, nomination) that is embraced the position we oppose?  More on this subject, and on the Fed in general, in the weeks to come.

When A Nobel Prize Isn’t Enough | The New York Times

Photo: Donna Coveney/MIT

When did McDonald’s go upscale?

I don’t go to McDonald’s very often.  The other day however, I was out driving around to drop off some old electronics I couldn’t sell but wanted to recycle, and I got that special kind of thirst that soda manufactures love to tell you about.  I wanted a Diet Coke.   Because overpaying for what is already an exceptionally high profit margin item is one of my pet peeves, I headed over to McDonald’s for a $1 “any size” drink.  This was a good $0.50 to $1 less than I would have paid at a convenience store, and I was hungry.  McDonald’s is certainly not the best food around, but it has one major quality – you know what you are going to get.

Upon arriving, a greeter opened the door for me and welcomed me to the store.  The restaurant was perfectly clean and the entire staff was well groomed and in what looked like brand new uniforms.  Each register was manned by a two person team, with one taking the order and the other instantaneously building my tray of goodies.  This system kept the line short; my total wait time was easily less than a minute.  I got my two $0.89 burgers, a $0.50 apple pie and a $1 soda and turned to enter the dining area.  This is where things got interesting.  The area looked like a slightly upscale lounge.  The seats were sofa like, comfortable, leather and in calm red, white and brown colors.  People were working on their laptops, making full use of the free WIFI and a McDonald’s associate was walking around with a tray of free smoothie samples.  It was nice.  I finished my meal, snapped a few pictures, asked a few questions and left.  On exiting, I was thanked and the door was opened for me.

It turns out that this location was a corporate owned store and it appeared that there was some extra management around for “national hiring day” – so all of this extra special treatment may have been a fluke; but the décor, prices and WIFI were certainly not.  

Though I don’t plan on increasing my intake of fast food, I do think McDonald’s, and in particular this location, will make it a little higher on my list the next time I do.