Office Depot Rebates

I have usually had good success with rebate offers for products that I buy. I estimate that I participate in maybe two dozen rebates a year, and have not had any problem 80-90% of the time. However, over the past year, I have sent in three rebates for products that I bought at Office Depot and had a problem receiving each one. If a problem happens with receiving a rebate, I usually consider it a fluke or coincidence. But since a problem happened three times in a row with the same retailer, I think that there a definite problem.

In each case, the rebate got "stuck" in their system. I am still waiting for a rebate on blank DVD media that I bought the day after Thanksgiving. I have talked to their customer service (at Web-Rebates.com), and they said that they would try to expedite the rebate, but it is still in the "Required Validation Period," after almost five months. In any case, Office Depot is now officially off my list of places of where I will shop for rebate items. Curiously, I have not had problems with other retailers who also use "Web-Rebates.com" for rebate submissions. Does anybody else have a similar experience with Office Depot?

On a different note, I will give credit where credit is due. One retailer that I have not had any problem with is the drugstore Rite-Aid. They have a system where you can submit your receipts online instead of by mail. You do have to sign up for an account, and they keep a running total of your combined rebates for the month. Once I've requested a check, I have always gotten my rebate within three weeks of submitting it.

PF Stock

NetBank Revisited

On the morning of September 20, 2006, I posted here that I was about to begin the process of withdrawing my money from NetBank and close my account with them. In that post, Sayonara NetBank, I referred to this process as "evacuating my money." There and in subsequent posts on PFStock, I cited deteriorating financial conditions at NetBank as one of my prime reasons for closing out my account. Even then, I conceded that NetBank was not likely to be forced into bankruptcy, but in the event that they did declare bankruptcy, it would be a hassle for depositors to get their funds back from the FDIC.

Let's take a look back six months (almost seven months now) at NetBank (Nasdaq: NTBK). On September 20th, the stock closed at $6.10. Today, NTBK trades at a mere $1.74 (a 71% decline). And, NTBK reached an all-time low of $1.48 this past week. This decline is not surprising considering NetBank's deteriorating financials. From NetBank's previous press releases and other information available at their website, we can clearly see a series of quarterly losses over the past year. And early last year, NetBank stopped paying its shareholder dividend saying that they needed "to protect the company's capital base and tangible book value from further erosion."

Then on October 3rd, NetBank announced that it would be replacing its CEO. Even before this event, I had speculated that something fishy was going on at NetBank. A worst-case scenario could be that NetBank customers would need to recover their funds from the FDIC if NetBank becomes insolvent. However, I noted that while this is certainly possible, it is not the most likely case. Nevertheless, I asserted that NetBank could no longer remain competitive with other banks in its market space.

According to a more recent NTBK press release dated February 21, 2007, NetBank recorded a net loss of $202 million or $4.36 per share for 2006. This loss of $4.36 per share over the 12-month period is absolutely staggering when you consider that the entire company is only valued at $1.74 a share. Unfortunately, what is really lacking from NetBank's report is any type of good news. To further exacerbate the already existing problems, NTBK has received a notice from the Nasdaq Stock Market that the company's common stock is subject to delisting. NetBank has been delinquent in its regulatory filings because its former independent auditor resigned as of November 9, 2006. Since then, NTBK has been having difficulty bringing a new auditor on board. Again, this cannot be construed as good news.

For NTBK shareholders, I think that there are better investments out there. Taking a loss may be a difficult thing, but so is watching your remaining investment dwindle to practically nothing.

For NetBank customers, you haven't yet suffered a loss, and you won't due to FDIC insurance. But just the same, there are better banks out there that offer the same FDIC insurance, and significantly higher interest rates.

Further reading:
The Decline and Fall of Internet-only Banks
Unprofitable and Unstable, NetBank Ousts its CEO
More on NetBank

PF Stock

Ameritrade SPAM Again!

I have written about getting SPAM at my Ameritrade Email address before. (See Ameritrade's Unimpressive Site Upgrade.) Toward the end of that post, I described a method where I use a unique Email address for my different bank and investment accounts. This is accomplished through Yahoo's "AddressGuard" feature. If I get spammed at one of these unique addresses, I can delete that Email address and create a new one.

Well, it has happened again! Two days ago, I started receiving spam at both my Ameritrade and Waterhouse Email addresses. The Waterhouse address has never before been compromised. This is now the fourth time that it has happened with Ameritrade! In addition, I have been getting correspondence from other bloggers who are experiencing the same issue. Their Email addresses were compromised as well. And, some are frustrated enough that they will begin moving their money out of Ameritrade as a result. This is a quote from one of the comments that I received:

Today, I have received four "pump 'n' dump" spams at two separate addresses -- one associated with Waterhouse which has been around for several years and another associated with Ameritrade which is only a few weeks old. These are the only two addresses out of the hundreds of vendor email addresses which I've created to be spammed in the last couple of days. If a trojan horse had stolen email addresses from my emailbox, I would have been receiving similar spams at many other addresses as well. The probability that ONLY these two Ameritrade addresses would have been selected for spamming is minute. One two real possibilities exist, in my opinion. 1) The addresses were sold. 2) The addresses were stolen. I believe that #2 is far more likely and worrisome since who knows what other personal data might have been stolen as well. Even more worrisome is the refusal of their "Tech Department" to consider the possibility that they have a problem.

I have received a similar response from TD Ameritrade's customer service people. So, is anybody else in the same boat as us?

PF Stock

Money Market Fund Options for TD Ameritrade

The series of posts that I made about my experiences with TD Ameritrade have been very popular at PFStock. Perhaps the most popular of my posts was the one where I exposed Ameritrade's "Hidden" cash sweep account. I have recently come across another cash (money market) option for TD Ameritrade account holders. This is another fund offered through "The Reserve" (website: ther.com).

The fund is called the Reserve Yield Plus Fund Class R (symbol: RYPQX), and is classified by The Reserve as an "enhanced cash fund". Currently, this fund pays in the neighborhood of 5.4% APY. This rate is much better than the default TD Ameritrade cash option which puts you in a sweep account that pays less than 1% interest.

However, unlike the other Reserve funds (offered through Ameritrade's Total Asset Plan) that I've talked about before, this fund is not available as a sweep option which automatically places your uninvested cash into a money market account. Instead it is traded like a No-Transaction Fee (NTF) mutual fund. You would need to put in a mutual fund order each time that you want to buy or sell the fund.

Now I have a few questions for my readers. Has anybody invested in this type of enhanced cash fund before? Do you need to report each mutual fund sale (each time you take money out of the fund) as a broker transaction on Schedule D of your tax return? Presumably, the fund tries to maintain a $1/share valuation, and each transaction would represent $0 in capital gains. And, does anybody know if TD Ameritrade would count each NTF transaction toward qualification for their premier (or APEX) trading status?

I suppose that I would be remiss if I didn't add that The Reserve Yield Plus Fund contains the following disclaimer:
This Fund is not a money market fund. Achievement of the Fund’s objectives cannot be assured. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Yields may vary.

PF Stock

Dividend Yields

One of my investment strategies is to buy dividend-paying stocks. When making investment decisions on dividend-paying stocks, it is important to know what the dividend yield of the stock is. Basically, a dividend yield is the sum of the regular dividends that a company pays over the course of a year, divided by the current stock price. In the United States, most dividend-paying stocks pay out every three months (quarterly). In a previous post, I stated that Pfizer (NYSE: PFE) had a dividend yield of 3.43%. Currently, Pfizer pays 24 cents per share in quarterly dividends, for a total of 96 cents in dividends per year. At the time of my post, Pfizer was trading at 27.96. If you take the annual dividend divided by the price, you get 0.96/27.96 = 0.0343 or 3.43%.

[Note that PFE has fallen in price to 25.84 and Pfizer recently raised its dividend. The yield is now 1.16/25.84 = 4.49%. It is important to know that when the stock price goes down, the yield goes up. On the other hand, if the stock price went up, the yield would go down.]

When researching a stock at a financial website such as Yahoo Finance, the dividend and yield is listed with the company quote. I estimate that 95% of the time this number is correct. However, sometimes this number is inaccurate or outdated. This can be the case if a dividend has been reduced or eliminated. For example in another post I mentioned that NetBank has sustained a series of quarterly losses, and its management has decided to suspend their dividend. So the yield for NetBank (Nasdaq: NTBK) is actually 0%, but the Yahoo stock information still indicates that it pays a dividend.

Another case is when a one-time special dividend is paid by a company. This will make you believe that the dividend (and thus the yield) is greater than it really is. Unfortunately, it is not always obvious whether a dividend payment is a regular dividend or a special dividend. So be careful when looking only at the dividend yield statistic on financial sites.

While dividend yield is an important criteria used for selecting stocks worth buying, it is not the only criteria. Dividend yield is not the most important criteria either. In future posts, I will cover some of the other criteria that I use for selecting stocks to buy.

This article was originally posted on September 27, 2006. It is being republished today to complement my post about dividends and ex-dividends.

PF Stock

About Dividends and ex-Dividends

One of my investment strategies is to buy companies that pay dividends (i.e. dividend paying stocks). I want to talk about the mechanics of dividends. Basically, stocks could be classified into two categories: those that pay dividends, and those that don't. A lot of smaller, growth companies do not pay a dividend. Companies are not required to pay dividends, and each dividend must be declared by the company (usually at a board of directors meeting) before it is paid.

In the United States, most companies that pay a regular dividend do so every quarter. There are exceptions, however. For example, Eastman Kodak (NYSE: EK) pays its dividend twice a year. When looking at a finance site such as Yahoo Finance, the dividend is listed with the company stock quote. I estimate that 95% of the time this data is correct. However, sometimes it is inaccurate or outdated. For example, a current quote of NetBank (Nasdaq: NTBK) still indicates that it pays a dividend. However, NetBank has sustained a series of quarterly losses, and its management has decided to suspend that dividend early last year. So, its dividend is actually 0.

Typically, when dividends are announced, the company will usually issue a press release that says something like this:

The board of directors of Pfizer Inc today declared a 24-cent fourth-quarter, 2006, dividend on the company's common stock, payable December 5, 2006, to shareholders of record on November 10, 2006.

Let's dissect this statement. For 2006, Pfizer (NYSE: PFE) paid dividends of 24 cents per quarter or 96 cents for the year. The dividend was paid on December 5 to "shareholders of record" on November 10. In order to be a "shareholder of record" one has to own the stock 3 business days before the record date. In this case, that date is November 7. On November 8, the stock goes ex-dividend. What that means is that if you buy the stock on November 8 or later, you are not entitled to this particular 24-cent dividend. The term "ex-" in this case means "without". So as of November 8, the stock trades without the current dividend.

A common question about dividends is "What happens if you sell the stock on November 8 or later, but before the December 5 date when dividends are paid?" In this case, you would be entitled to the dividend, even though you don't own the stock on the pay date. This has happened to me several times where I've received dividends on stock that I no longer own.

PF Stock

Calculating Rate of Return

What rate of return are you earning? For a bank account (savings, money market, or CD), figuring this out is usually pretty straightforward as the bank tells you what the APY and nominal percentage rates are. But what about the annual rate of return on your investments? If you know how much you put in an investment account and when, you can calculate this return using a computer spreadsheet (i.e. Microsoft Excel).

MS Excel has a function called XIRR that calculates the Internal Rate of Return (IRR) of an investment. You must supply the date and amount of each deposit to or withdrawal from the account. Each of these deposits and withdrawals is called a cash flow. Each deposit is considered a negative cash flow, and each withdrawal is considered a positive cash flow.

I was thinking of writing a detailed post about how to calculate your return using the XIRR function in MS Excel. However, I found a very good post that already describes this method in some detail. The blog is Fat Pitch Financials, and the post is here. Look for the link to the file: "Annualized rate of return.xls".

The original blog writer, George, is an actually an economist, so his description is quite involved. By contrast, I'm just a rank amateur on these matters. Nevertheless, I did take six economics/business classes in college, so I will offer you my additional commentary.

First of all, if you are having trouble using the XIRR formula in your spreadsheet, you might need to install what is called the Analysis ToolPak. A symptom of this is if you see "#NAME?" where you use the XIRR formula on your spreadsheet. To add in the Analysis ToolPak (in my version of Excel, at least), go to Tools, Add-ins, and select the Analysis ToolPak. You might need the original Excel (or MS Office) installation disks for this one-time operation.

The other thing that I want to mention is that in addition to the initial value, deposits, and withdrawals, you need to know what the current (or final) value of the account is. Don't forget to include "accrued interest". This is interest that is accrued, but not yet paid to your account. Money market savings accounts usually pay you monthly or quarterly. In the interim between the last time you were paid interest and now, interest accrues, but is not reflected in the balance. You have to estimate the amount of accrued interest, or your results won't be accurate past the last date that interest was paid.

Lastly in the example XL spreadsheet, George includes a line for taxes. Your account value may not include taxes, and you might pay your taxes out of another account. However, in the example, taxes are deemed to be paid out of the investment account. Taxes are, of course, a negative cash flow.

Now you have a general tool that can help you figure your rate of return on investments. In addition to brokerage accounts, this same formula can be applied to CDs, money markets, Prosper.com loans, and just about any other investment that can be valued.

PF Stock

Blogroll Update

Since my first post about The Blogroll, I have added links to six very good personal finance blogs. Through these link exchanges, traffic to PFStock has increased somewhat. However, I have found that most of my blog traffic comes from repeat visitors, or from people who are searching for specific personal finance and investing topics.

In any case, I am still looking to exchange links with other PF bloggers that write useful, original content. If you have a legitimate personal finance or investing blog, please send me an Email, and I will consider including a link to it here on PFStock. (Note that my Email address is listed on the right side column of my blog.)

Please note that I reserve the right to remove links to any PF blog for any reason. Also, from time to time, I will receive comments to posts on PFStock that are off-topic or contain only advertising links. As a matter of policy, I regularly remove inappropriate comments.

PF Stock

Crude Oil vs. Cruise Line Stock Prices

In September 2006, I wrote a post about investing in the cruise line industry. In that post, I asserted that the price of fuel, which is one of the biggest expenses of cruise lines, is a key factor in the price movements of cruise line stocks. I said that there is an inverse relationship between the cost of fuel and the price of cruise line stocks. To review, I have reproduced the graph that I posted of Carnival Corporation (NYSE: CCL), which is represented by the blue line below. The red line is the U.S. Oil Fund ETF (AMEX: USO). USO is an exchange-traded fund that tracks the price of crude oil. Back in September, the price of oil was dropping in price. If you pay attention to what you're paying at the gas pump, then you are attuned to these movements in crude oil prices. As you can see in the graph, the price of oil was dropping, while the price of CCL was soaring.



Fast forward six months to today, and you will notice things have changed. I was recently at the gas pump, and noticed that regular gas costs over $3 per gallon for the first time in a while. (Note that I live in Silicon Valley, California.) Below is what that same graph of CCL vs. USO looks like today.



Do you see the inverse relationship? It might be a little hard to see in the chart, but USO reached a low of 42.56 on 1/18/07. Only one day later, on 1/19/07, the price of Carnival Corporation (CCL ) reached a peak of 52.73. Since January, these two charts have reversed course. Oil and gas are increasing in price, while the cruise lines have dropped in price. The North American cruise line industry includes Carnival Corporation, Royal Caribbean (NYSE:RCL), and Norwegian Cruise Lines.

To a lesser extent, the increase in oil prices affects the stock market as a whole as well. So, knowing this relationship is something that you can use to help guide your investments. At this time, I would predict that the cruise lines will drop in value until oil reverses course, or at least until oil prices start to stabilize.

Note: My posts about the cruise line industry are among the most popular posts here at PFStock. Many visitors were searching for information about how to get the shareholder onboard credit benefit offered to cruise line (Carnival Corporation and Royal Caribbean) stock holders. If this is what you are searching for, please read the details in my post about cruise line shareholder benefits for RCCL and Carnival stock holders.

PF Stock

Daylight Saving Time Reminder

As a reminder, Daylight Saving Time starts this coming Sunday, March 11. I would be interested to know if anyone's VCR automatically adjusts since DST starts early this year.

PF Stock

Still Waiting for Windows Vista

A while ago, I had mentioned that I bought a new computer in order to secure a copy of Microsoft Windows Vista. The computer, which I bought back in November 2006, is a Compaq Presario SR2050NX and included the Windows XP MCE 2005 operating system. As part of the deal, I am supposed to receive Microsoft Windows Vista Home Premium from Hewlett-Packard (the parent company of Compaq) after Vista's release. Well, Windows Vista was released back in January. So, where is my free upgrade?

The last time that I checked the status of my Windows Vista order, it said that Vista would be shipped in March 2007. It seems like a while to wait, since I can already go out and buy a new computer with Vista running on it now. On the other hand, compared to the old Dell computer running Windows 98, this new desktop computer is a big improvement. My old computer used to crash on a daily basis.

Is anybody else (who bought a new computer in the last 3-4 months) still waiting for their free Vista upgrade?

PF Stock

Telephone Tax Refund

Something new that I noticed on 2006 tax forms is a credit for the federal telephone excise tax. You can get back $30 to $60 as a credit depending on your number of exemptions. This is only available in 2006 to taxpayers who paid for long-distance telephone service between March 2003 and July 2006.

Although it seems like you are getting free money, the refund is due to a court decision which found that the excise tax (which has been on the books since 1898 to fund the Spanish-American War) no longer applies to telephone service today.

If you choose to you can actually add up all the federal excise taxes that you paid based on your old phone records. But, most people will take a standard refund amount, based on the number of personal exemptions that you claim. On Form 1040, this credit is claimed on line 71.

PF Stock

Volatility

Volatility is a integral part of the stock market. It is on days like these that we are all reminded of this fact. In actuality, the stock market has done well in the past year. The Dow Jones Industrial Average reached an all-time high of 12,845 only last week. The other major indices (S&P 500 and Nasdaq) have also posted respectable gains over the past year. For the Dow, this new high was followed by a drop of 416 points in one day.

What is a warning sign that the stock market is overvalued? In a word: exuberance. In the past few months, we have seen a constant growth of optimism among financial professionals and analysts. This optimism extends into the realm of personal finance blogs as well. Recently, there seems to be a constant new crop of enthusiastic new PF bloggers out there. Over the past few months, some bloggers have been writing that their portfolios have increased by 4-7% per month. These are quite impressive numbers indeed!

I can't help but get the feeling of deja vu when I compare what is happening now to the hi-tech (dot com) boom of the late 1990s. One blogger, who admits to not having a stock picking philosophy, tell us that he will turn $100k into a cool million over the next ten years. Another blogger scaled back the initial estimate of his net worth growth rate to only 30% per year. Even so, he'll be a millionaire in a little over 4 short years.

Early on in this blog, I wrote a post about me. In that post, I said that I feel the economy is much better now than it was in 2002. But I've learned not to get too overconfident, and to plan for the worst while hoping for the best.

In fact, during the last few months of 2006, I had sold off much of my stock holdings. And I found it very difficult to find new investments to buy. These are the ones that I think have a much greater chance of going up rather than of going down. While there are some exceptions, I think that most stocks are overvalued at this time.

Note that these are my views on the stock market. But regardless if the market goes up or down, it does not make me feel nervous or worried. Indeed, it used to. I imagine that most people who are invested in the stock market would feel a little queasy these days. But I now feel that either direction presents a new, different set of opportunities.

PF Stock

Stock Pick: Whole Foods Market Inc (WFMI)

I have a new stock recommendation. I am now recommending Whole Foods Market Inc (Nasdaq: WFMI) for purchase. This company is a retailer that operates the largest U.S. based chain of natural and organic food supermarkets. WFMI recently announced its agreement to acquire a competitor, Wild Oats Markets Inc (Nasdaq: OATS). The truth be told, I've been following WFMI for a while. The recent price history of WFMI is a bit rocky. In November, there was a sharp price decline in WFMI after they reported below-expected earnings. It was after this price drop that I started looking into the company. The stock proceeded to drop as low as 42.13.

WFMI stock price had begun to turn around even before they announced the merger with OATS. Immediately after this merger announcement, Whole Foods stock rose $6.41 (14.03%) in one day to close Thursday at 52.11. On Friday, WFMI gave back some of its gain and closed at 50.47. However, the company is still well below its 52-week high of 74.00 for WFMI.

Whole Foods is a member of the Standard and Poors 500 index. Some of the reasons that I have picked WFMI are because of the following:

• WFMI has been consistently profitable for several years according to the S&P Stock Report. I do not generally recommend investing in unprofitable companies.
  
• WFMI has a current dividend yield of 1.6%. I like to know that if the stock price stagnates, that I will still receive some income for having my money tied up.
  
• Whole Foods acquisition of Wild Oats expands the chain's market share in several regions.
  
• I consider the Wild Oats acquisition to be a long-term positive as the stock price has moved up for both WFMI and OATS. Typically when a larger company acquires a smaller rival, the acquiring company goes down in price and the takeover target goes up.
  

I firmly believe that WFMI has reversed its downward direction since November, and that the worst is over for its stock price. So Whole Foods Market Inc (WFMI) is now my latest stock pick.

PF Stock

Discover Card Cash Back at Supermarkets

Get cash back when using your Discover Card. I am not talking about the Discover Card Cashback bonus that you earn for making purchases on a Discover Card. Rather, I'm talking about using the Discover Card in a supermarket, and then choosing cash back as a option during checkout. Here in Silicon Valley, California, I have gotten cash back from Safeway and Nob Hill Foods. You can get up to $50 from Safeway, and $30 from Nob Hill. This works out to be a nice interest free loan, as I pay off the card every month. It also saves me a trip to the ATM. And, I earn cashback on the cash back since it goes on my statement as being a purchase.

Of course, I do not recommend this strategy to people who run a balance on their credit card, and end up paying interest charges on the money.

Does anybody know of other supermarkets that allow you get get cash back on a credit card purchase?

PF Stock

TurboTax and TaxCut

I have been using tax software to prepare my taxes since 1996. For the first several years, I used TurboTax exclusively. There was one year (I think it was 1999) that Microsoft came out with a program called TaxSaver, but that product has disappeared. Even though I bought TaxSaver, I ended up using TurboTax for 1999. (Note that in this post, I will be referring to the tax year version of the software. The current tax products are for tax year 2006, even though it is already 2007.)

In 2002, I switched to using TaxCut from H&R Block. This was also the year that TurboTax introduced its short lived product activation scheme. To make a long story short, one was not allowed to install TurboTax on more than one computer, and this cause a lot of discontent among TurboTax users. Also, TaxCut is usually cheaper than TurboTax. I stayed with TaxCut until last year when I switched back to TurboTax. I feel this was a mistake, as TurboTax 2005 initially did not allow you to import tax files from TaxCut. Intuit cited "security reasons" as their excuse for not allowing data imported from TaxCut. Intuit later corrected this flaw, but not until after I had already manually re-entered all of my data into TurboTax. I guess that it wasn't really a security issue after all. I could still import my old TaxCut data to TurboTax, but that would wipe out all of the new data that I already entered.

I'm now back to TaxCut for 2006. I mentioned before that I bought this software over Thanksgiving weekend. The import of my TurboTax data from last year worked without a hitch. Going forward, I will probably stay with TaxCut, since I'm pretty much feed up with Intuit TurboTax's shenanigans over the past few years.

Another reason for my choice of tax software is the associated rebate for financial software. TaxCut offers a rebate on Microsoft Money, and TurboTax offers a rebate for Quicken. I suppose that I should cover what I like about Microsoft Money vs. Quicken in another post.

I have always used the Deluxe or Premier "desktop" version of the tax software, which includes a copy of the state version of the tax preparation software. However, an online version is available for both TurboTax and TaxCut, which I have not used. I also haven't tried using e-file yet, but I might consider it.

So, what tax software does everybody else use?

PF Stock

The 1099 Form You Have is Wrong

By now, you should be receiving the last of your 1099 forms from banks and brokerages for tax year 2006. I have all the data that I need to prepare my tax returns. Unfortunately, if I were to do my taxes now I'd only have to do it over later when the CORRECTED 1099 forms arrive. It is a running theme lately, but I can't remember a year when I haven't had to re-figure my taxes due to updated numbers on my tax forms.

For me, the usual suspects are mutual funds (especially foreign funds), Exchange Traded Funds (ETFs), tax-free bonds, and dividend paying stocks. This year, the Internal Revenue Service (IRS) added two new boxes on the 1099-INT form that report tax exempt interest, and the amount of tax exempt interest that is subject to the Alternative Minimum Tax (AMT). For mutual funds, there are four categories of distributions: long-term capital gains, short-term capital gains, dividends and non-qualified dividends. Mutual funds sometimes classify their distributions incorrectly and need to re-classify them properly. ETFs will sometimes declare a distribution in December, but not pay you until January. Unfortunately, you need to pay taxes on these funds in your prior year's taxes. Sometimes, foreign mutual funds need to calculate the foreign taxes paid by the fund. This calculation usually takes a couple of months for them to figure out. Foreign taxes paid can be taken as a credit on your U.S. taxes. And, I've had instances where the broker listed tax-free interest as taxable interest. For dividend paying stocks, I've sometimes seen the dividends characterized incorrectly as non-qualified dividends when they were actually qualified dividends (which have preferential tax treatment).

The corrected 1099 forms are sometimes further corrected. In one case, I didn't get my last 1099 corrected until April! Some of my brokers have already informed their clients that corrected 1099 forms are not expected to be mailed until March. In another case, I can already predict that one of my 1099 forms is incorrect, and I'm already waiting for a correction. These issues are usually resolved by themselves by the brokers or banks, but it often takes them a while. I owe taxes this year, so I probably won't be finishing my taxes until April anyway. For people expecting a refund, it can be a hard call. You want to get your refund back quickly, but you wouldn't want to have to file an amended tax return later...

What do you think?

PF Stock

SogoInvest?

I have recently been seeing ads for SogoInvest, an online discount brokerage. They have advertised brokerage commissions as low as $1 per trade, for the first 90 days. Their regular commission pricing is a bit confusing to me, but I think that the bottom line is that their commissions vary from $1-3 depending on whether you pay a "subscription fee" and whether your trade is automatic or real-time.

I don't intend to go over the SogoInvest commission chart in detail here. But, from what I see, stock trading commissions are continuing to go down. In my previous post about comparing online brokers, I talked about the E*TRADE and TD Ameritrade brokerages that I use. I stated that when commissions dropped significantly below $20, I stopped paying attention to commissions. But, it is nice to know that there is still competition in this arena.

What does this all mean to individual investor? I'm not 100% sure. In addition to the brokerage commission, brokers make a profit on what is known as the spread. When you buy a stock, you pay the ask price, and the seller receives the bid price. This difference is usually only a few cents per share, and may be as low as a penny. My assumption is that this difference is divided up among the different brokers and the stock exchange.

In any case, I would like to know if anybody has opened an account with SogoInvest? How does it compare against the other brokerages that you've used? How is their customer service, and what sort of special services do they offer? I'm especially interested to know if anybody had a bad experience or other problem. I would like to hear your opinions and input.

PF Stock

Early Retirement Housing

In October 2006, I wrote about Billy and Akaiska Kaderli, a couple who retired early, while they were still in their 30s. Over the years, the couple has been able to keep their expenses very low -- about $24,000 annually. So, in my post, I posed a question to my readers, "do you think that you could live off $24,000 a year?"

One of the ways that Billy and Akaisha are able to cut back their expenses is through their choice of housing. A couple of months ago, the Kaderlis sent me a link to an article on their Retire Early Lifestyle website where they wrote about active adult communities. I believe that the residences depicted in the article are similar to the type of accommodation that the Kaderlis have in Mesa, Arizona. Formally, their home would be referred to as a manufactured home, but it is also commonly called a mobile home. In this article, they show one mobile home that cost only $7,000.

Personally, I don't think that my wife and I would ever choose to live in a mobile home. On the other hand, Billy and Akaisha can say that their house is paid for. And, I don't think that the majority of us could say the same thing about our housing situation...

In the October 2006 Kiplinger's Personal Finance article "Extreme Early Retirement" which profiled Billy and Akaisha Kaderli, one statement stood out as being confusing to me:

Sixteen years after they retired, they are now both 54 -- almost old enough to satisfy the minimum age requirements of the active-adult community in Mesa, Ariz., they call home (when they're not traveling around the world).

I presumed that the minimum age for their active adult community is 55 years old. So, I asked Akaisha to clarify this point. She said that they bought their home when they were about 39. At that time, there were no age restrictions for their community. Later, their place became an "age restricted" community, as some active adult communities are. Since they already lived there before that age requirement became a rule, they were grandfathered in.

One question that I did not have the opportunity to ask the Kaderlis is "How do you think your lives would be different if you had children?" The rules concerning active adult communities generally require that one occupant be at least 55 years old, and generally prohibit children under 18 from residing permanently in the community. So, I suppose that their choice of housing would be one significant difference.

PF Stock

Prosper.com?

A while ago, I heard about a website called Prosper.com. This is a marketplace for individual consumer loans. The concept is like eBay where you have borrowers asking for and lenders bidding on small personal loans. It works like this, a borrower requests a loan. Lenders then compete on some or all of the requested loan amount. The attractive part of this exchange is that potentially higher interest rates can be found than in a regular savings or CD account. For borrowers, it provides an opportunity to apply for loans that they would not usually qualify for using traditional avenues. In exchange for the higher interest rates, the lenders bear the risk that a borrower may default.

I have not signed up for a Prosper account, and probably won't do so in the near future. Since I'm not in the market to request a personal loan, I would be looking at this venture from the lender's prospective. I don't have a problem with the Prosper.com concept. However, it does take time to review and vet each of the loan requests. This is akin to the type of stock research that I do before I before I invest. With a typical loan bid running about $50-$250, this can quickly become a lot of research to do for even a small investment. Of course, one is welcome to offer larger loan amounts, but this also increases the risk in the event that one larger loan defaults.

I'm not saying that Prosper is a bad thing. Quite the contrary; I think that it may work out for a lot of lenders and borrowers. However, in order to invest the same amount that I would in a typical stock transaction, investing in Prosper loans would end up using a disproportionate amount of time for me. It is fair to say that Prosper is not necessarily right for everyone. My philosophy, when considering an investment, is to either invest a lot at once or not at all. Thus, small little loans are not consistent with my investment strategy.

All said, I invite others to share their experiences with Prosper.com. I guess that I'm interested in know if you've had any bad experiences, and whether or not you feel that the extra boost in interest rates is worth the extra effort (and risk).

PF Stock