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Three Tips to Keep Your Wits About You
This is a post by Gary Bonner, a regular contributor on Blueprint for Financial Prosperity. We all are confronted with doubts about the future that we have all been working so hard to ensure. Suddenly many forward looking people are caught in the reality of today and are both frustrated and depressed by the crisis [...]

This is a post by Gary Bonner, a regular contributor on Blueprint for Financial Prosperity.

We all are confronted with doubts about the future that we have all been working so hard to ensure. Suddenly many forward looking people are caught in the reality of today and are both frustrated and depressed by the crisis in the financial markets. Everyone is buzzing “what are we going to do?” and “this is the way I want it.” We will learn that everyone will have to walk away less than satisfied to realistically find our way through.

We have an avalanche of information to absorb. Some leads to clarity, more often it leads to confusion. Over the next few days and weeks I offer 3 simple points to keep in mind as we ride through the storm:

On the Present Crisis

From Rod Dreher,a Dallas Morning News editorial columnist, printed at Real Clear Politics:

“We’ve come to prefer comforting lies to hard truths born of observation and experience, thinking that in our brilliance we had somehow escaped the iron law of necessity. Rudyard Kipling satirized this arrogance nearly a century ago in his poem, ‘The Gods of the Copybook Headings’ (a copybook was a primer in which British schoolchildren learned handwriting by copying familiar proverbs).

Here’s a verse rather relevant to the current moment:

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew,
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more”

On politics and elections

“A democracy cannot exist as a permanent form of government. It can exist only until the voters discover they can vote themselves largess out of the public treasury.

From that moment on, the majority always votes for the candidate promising the most benefits from the public treasury, with the result that democracy always collapses over a loose fiscal policy, always to be followed by a dictatorship.”

… Attributed to Alexander Fraser Tytler, Professor of History, College of Edinburgh, Scotland (but that’s been disputed).

On how to conduct our daily lives:

God grant me the serenity
to accept the things I cannot change;
courage to change the things I can;
and wisdom to know the difference.

… The Serenity Prayer

$50 Tradeking October Promotion
For the month of October, TradeKing is running a $50 promotion where you can get $50 by opening a new account, fund it with $2,500 or more within thirty days, and then make one trade within 180 days. It’s just like the promotion they had for National Friend’s Day but for the entire month of [...]

For the month of October, TradeKing is running a $50 promotion where you can get $50 by opening a new account, fund it with $2,500 or more within thirty days, and then make one trade within 180 days. It’s just like the promotion they had for National Friend’s Day but for the entire month of October.

To take advantage of the promotion, you’ll need to click a TradeKing link on this site so they can track your sign-up. You should see a special sign-up page with this graphic:

If you’re curious about TradeKing, I’ve written a TradeKing review. They have also received numerous awards including #1 in Customer Service in Smart Money Magazine’s 2008 ranking of brokerages as well as four stars by Barron’s.

Here’s the fine print:

To qualify for this offer, new accounts must be opened and funded with $2,500 or more. Account opening and funding must occur within 30 days from the date this email was sent, and one trade must be executed within 180 days of account opening. Offer is not transferable or valid in conjunction with any other offer. Open to US residents only. One offer per household. TradeKing can modify or discontinue this offer at anytime without notice. A minimum balance of $2,500 is required in the account (minus any trading losses) for the first six months or the credit may be surrendered. Other restrictions may apply. Offer applies to new non retirement accounts funding for the first time. Click here for Promotional Rules.

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How To Sell Your Gold Jewelry
If you’ve considered selling some of your unused gold jewelry for some cash at $900+ an ounce, you might be in for a very rude awakening. Selling gold jewelry is pretty easy, even if you spend the extra time to avoid the scam artists and rip-offs, but the reality is that whatever you sell will [...]

Ring Display at Jewelry Store If you’ve considered selling some of your unused gold jewelry for some cash at $900+ an ounce, you might be in for a very rude awakening. Selling gold jewelry is pretty easy, even if you spend the extra time to avoid the scam artists and rip-offs, but the reality is that whatever you sell will be melted down and the gold will be reused. Since it will be melted and reused, you will only be paid for for the gold in the piece minus whatever markup and fees that the buyer has. $900 an ounce sounds pretty good, but you won’t get anything near that for typical pieces of jewelry.

How Much Is It Worth?

Well, you basically are getting the spot price of gold minus a cut if you go the gold route. 24-karat gold is pure gold. You’ll get the full weight of the piece if it’s 24K gold. 18K is 75% gold, etc. Anything with 10-karats or more will have a stamp on it, anything less and you’re probably out of luck in terms of selling it as gold.

If the piece is especially ornate or shows craftsmanship, it may be worth more than its weight in gold. In those cases, you’ll want to get it appraised and try to sell it as a piece rather than as gold. It requires more time and more effort but you might get a lot more.

Where To Sell It?

Here’s where it pays to shop around, just as if you were buying it in the first place. Think of it as comparison selling. You’ll likely get the least at pawn shops and probably the most at jewelry stores. Try to go with someone with a reputation, that way you know you won’t get cheated on the scale or something else. Reputation in the jewelry business is everything.

One thing about all those infomercials or magazine advertisements of companies asking you to ship them your gold pieces for cash, avoid these unless you can verify their reputation. Sending anything through the mail is risky, sending hundreds of dollars to a stranger is simply foolish. As you can expect in any industry dealing with high dollar items, there’s plenty of fraud so you always have to be on your feet.

Selling Process

There’s some lingo involved in selling gold and here’s a primer so it doesn’t fly by you in a rush. Precious metal jewelry is measured in either pennyweights (DWT) or in grams (GR). An ounce of gold is a troy ounce and there are 20 pennyweights or 31.1 grams per troy ounce. When you go to sell, the buyer will tell you the price in dollars per pennyweight (that’s their daily price) as well as the weight of the piece prior to the transaction. So, if you bring something in that weights 10 pennyweights and they’re paying $45 per pennyweight, then the 10.0 DWT piece at $45/DWT is a $450 sale. They may also have higher daily prices based on volume and avoid buyers who won’t tell you this beforehand.

That’s basically it!

Here are some useful resources if you’re considering selling gold jewelry:

(Photo: Pink Moose)

Bribes, Subprime, and Lottery Sales Roundup
Ever wondered what it’s like to grease a palm or two? Wondered whether it would actually work? I know I did and I’ve never greased a palm in my life but story about “bribing” maitre’ds of high end restaurants in New York makes me want to. Here’s a gem of a story by Michael Lewis about [...]

Ever wondered what it’s like to grease a palm or two? Wondered whether it would actually work? I know I did and I’ve never greased a palm in my life but story about “bribing” maitre’ds of high end restaurants in New York makes me want to.

Here’s a gem of a story by Michael Lewis about moving to a huge house they can’t afford in New Orleans (don’t worry, he’s renting). “When Michael Lewis and his family move into a house they can’t afford, he gets a taste of the new American nightmare.” (BTW, Portfolio is a great magazine, I flipped through one issue the other day at the dentist’s waiting room and I think I’m hooked. Unfortunately, my local library doesn’t carry it but I have put in a request for it. It might join the only other subscription I pay for, Wired, which is also another Condé Nast publication, if they reject the request)

The wealth effect is related to lottery sales too. As the economy sinks, lottery sales are soaring. “Given that the fortunes of our state-run lotteries are inversely proportional to the state of our economy, it’s no surprise that America’s lotto kiosks are currently reporting heretofore unheard-of earnings.”

MoneyAisle: Banks Bidding On Your Money?
The New York Times had an article about MoneyAisle.com, a new website in which “banks bid in live auctions for your business.” The site offers to find you the best rates on Certificate of Deposits (CDs) and high yield savings accounts based on the amount you can deposit and your geographic area (state, zip), [...]

The New York Times had an article about MoneyAisle.com, a new website in which “banks bid in live auctions for your business.” The site offers to find you the best rates on Certificate of Deposits (CDs) and high yield savings accounts based on the amount you can deposit and your geographic area (state, zip), and the duration in the case of CDs.

Certificates of Deposit

For CDs, you enter in your deposit amount, CD duration, state of residence, and zip code (optional). Oddly enough, they can’t offer CDs in the District of Columbia, Georgia, Hawaii, Idaho, Maine, Mississippi, North Carolina, Ohio, Vermont, West Virginia, or Wyoming. Everyone else is available. There are also advanced options to remove or add excluded banks.

I entered a deposit amount of $1,000 for 12 months in the Great State of Maryland and watched as the screen showed 89 banks bidding in round one drop all the way down to 4 in round 2. By round 6 only 3 remained and by the 8th round only 2 were left. Those two clawed and fought until the 12st round when one bowed out. In total, 109 bids were submitted from 89 banks and the winner was…

UmbrellaBank.com! (They offered a 4.10% APY 12-month CD, which is worse than seven other banks on my list of best CD rates)

Never heard of you! But that’s OK, after the bidding screen the site shows you a wealth of information.This information includes their address, website, year founded, FDIC number (all banks are Member FDIC), total assets, number of branches, customer service contact information, and a brief description of the bank. UmbrellaBank is the internet banking division of New South Federal Savings Bank, a bank with one branch in Birmingham, AL.

I now have 29 minutes before the offer expires, but I’ll politely decline because ING Direct offers a 12-month 4.25% APY CD and I already have an account open there.

Increasing the deposit amount changes the offers? As you might expect, the more you offer to deposit, the better the rates. When I upped the deposit amount to $10,000, I was offered an E-LOAN CD at 4.35% APY but that’s in part because E-LOAN CD’s have a minimum deposit amount of $10,000. Increasing the deposit amount to $50,000 had no effect but I expected pumping it up to $100,000, which is Jumbo CD territory, would have an effect. It didn’t, E-LOAN still was the top offcer at 4.35% APY.

High Yield Savings Accounts

The high yield savings account bidding was more subdued with fewer banks (66) vying for your business with less fanfare. All you provided was how much you could deposit and your state of residence (zip optional) and the banked duked it out in the very same manner as with CDs. Remember one important distinction between savings accounts and CDs - savings account rates are variable, CDs are fixed. You could sign up for an awesome rate today and the bank could lower it tomorrow.

Results of the auction for a $10,000 deposit amount for the Great State of Maryland was a 3.63% APY rate from Community National Bank, a bank located in Morristown, TN. Much like the CD screen, all of the bank’s information from founding year to customer service contact information is made available. The offer is pretty good though as it tops many of the best online banks (current leader is FNBO Direct with a 3.50% APY high yield savings account now that WaMu is kaput).

Increasing the deposit amount changes the offers? I increased my deposit amount to $100,000 and Community National Bank’s rate increased to 3.80% APY (they still won though). I looked on their website to see why and it appears that their savings account offers tiered rates based on the account balance.

Live Auctions? Really?

You might be thinking that there’s a bank person happily bidding away behind the scenes but there isn’t, it’s probably a computer setup with auction rules and bidding rules marrying up the bids to give you the highest rate it can. All the site asks for is deposit amount, deposit duration, and your geographic location - there’s no need for human intervention. Of course, whether a person is involved is entirely irrelevant but it does play into the “suspense” aspect as the number of banks left to bid ticks down. Save me some time MoneyAisle and just give me the rates.

Closing Thoughts

The live auction bit is a little gimmicky but it is in the spirit of LendingTree (though far faster and without as many phone calls and emails!) and it does a fairly good job of identifying deals for the average consumer. I think the savvier saver who is up to date on rates can find a better deal on their own but this isn’t a bad place to start.

Why bread is more expensive and who is to blame?
Sir Alan Sugar may be right to describe the current economic crisis as a "mad financial Disneyworld" but to optimistically suggest that the Tesco value finacial managment is over is perhaps taking things a bit far. The worst might be behind us but the full brunt of the headless chicken's actions is yet to be felt. The headless chickens of course being panicking governments whose answer is to throw money at the groups that caused the problem in the first place.

Let us be quite honest here the only way to solve the current World Economic Crisis (oh wait that was 1920's to 1930's) the Global Economic Crisis is to slap down the abusers and lend a hand to the victims.

We are all used to people crying "doom, all is doom" like a dodgy, third rate, stereotype of an end times prophet (or is that profit?) but there are some facts behind all this.

The value of money has fallen, is falling and will continue to fall. We see this in the increase in prices. How does this work?

Money can be considered to be like shares in a company but rather than a slice of the profits you own a slice of the country's value.

Let us imagine Blogarus PLC which has issued 100 shares to Bob and Fred. Bob has 75 shares and Fred has 25 for which they paid £10 per share. When Chairman Bob issues ten thousand pounds (£10,000) of dividends he gets to take home £7,500 and Fred gets £2,500.

Now Bob thinks that Geekoblog PLC could be purchased for £100,000 and so issues 10,000 new shares at £10 each. Fred purchases 1,000 and a consortium of faceless names take the other 9,000. Quite aside from how the market might react t all this let us assume that for some reason a share remains at £10 - perhaps the company is too small to notice.

Sadly Bob's plans for Geekoblog fall through and so to cheer himself up he issues £50,000 of dividend so he can take a holiday. Bob is therefore a bit shocked when he finds that his shares only grant him £371.29.

This is why in all honesty the value price per share would have crashed to an all time low.

The exact same thing has happened to the US and UK currencies. By issuing billions of new money in aid the natural trading has caused the value of the individual pound to plummet. Naturally we see this as a rise in food prices and our leaders blame the housing crash for it.

Let's take a different illustration. On the imaginary island of Fanasticon live a peaceful village of assorted people. They are ruled from a building called the Matticon by the local Lord. They have no outside contact and as far as they are aware they are the only people in existence.

They use for purpose of trade a rare bean shaped stone called the bean. For as long as anyone can remember the price of a loaf of bread was two beans. Farmer Bob buys a cow each year from Farmer Fred for twenty-nine beans, Farmer Bob pays Mr Butcher six beans to cut the animal into meal sized slices and pays George Iceman sixteen beans to keep the meat fresh.

There are known to be six hundred and twenty seven beans in use. Tax is one bean a year (less than a loaf of bread).Everyone is reasonably content.

One day Farmer Jones is digging in a disused part of his land when he uncovers his great great great grandfather's bean mine. In just a few weeks Farmer Jones is fantastically rich. He pays whatever his friends ask to have them work for him and he thinks life is good.

Now the amount of ice space available from George Iceman is limited and when Farmer Jones and his friends start buying it all to keep their food in George realises he can make a profit and raises the price to meet the new demand. This causes a problem for Bill the Baker who has to start charging three beans for bread to cover his new costs.

With the price of bread gone up Farmer Bob, Farmer Harris and Smith Smithy all realise that they might as well fill their space of reserved ice with fresh cow. Farmer Fred was not expecting an off season rush and charges first forty and then sixty beans per cow.

This causes a rush on the remaining ice and the price of bread rises to six beans while the average price of cow reaches ninety beans. The ice space now costs seventy beans causing people with spare capacity to start renting it out.

Mean while Farmer Grainman finds that he can't afford to keep eating meat from Bud Butcher because the price of meat is very high. So he starts charging two beans a sack instead of one. This causes the price of bread to go up again to cover the new costs.

Farmer Fred starts selling cows that have yet to be born yet for a third of the price of current cows and people rush to buy them before the price goes up again. Soon all the savings have been raised and people are buying and selling beef futures and speculating in ice space.

The Matticon raises the tax to nine beans which is just over one half the price of bread. Farmer Jones, George and Farmer Fred now have more money than they had ever dreamed of but now the bubble bursts and people are going hungry unable to afford bread, ice or beef. There is a food shortage and worse still people are having trouble paying their taxes.

The value of ice space starts to fall and Beef futures trading winds down. As it does Farmer Fred discovers that he owes a lot of cows but is not getting enough beans to cover his basic costs. He sells off his entire stock and his liabilities and runs away to live in the jungle. The new owner has no interest in honouring the promises of the other guy and the Matticon has a difficult case to arbitrate.

Farmer Jones eventually finds that his standard of living is largely unchanged but everyone else is now really poor. To help out Jones donates seven hundred beans to Matticon to buy bread for the hungry.

It's no good and eventually people stop trusting the bean and start swapping things directly. Later that year the bean is dropped as a tool of trade and replaced with photographs of the Matticon.

The same thing has been happening to us but because the world is so much bigger than the imaginary village of Fanasticon we may be unaware of the connections that creating a few billion in local currency has with the fact that a loaf of bread is now 89p to £1.60 when is was once £0.40p to £0.90p.

Our leaders did that to us by trying to help out by paying the guys that caused the problem. That's why we have Tesco value financial control rather than a quality brand. Things are unlikely to change and we the common folk will now pay directly for the trading and profit that some very rich people will get to keep.

Every time you go to the pumps to fill your car, every time it hurts the wallet to buy food - you are directly paying for the money that some fat cat has been licking up into his fat bulging wallet. They get the wealth and we pay for it. We are like Farmer Bob and his friends just trying to keep our heads above water while the Farmer Jones's of this world leach all the value from our cash without us even noticing.

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Your Take: Applaud the FDIC on WaMu & Wachovia Deals?
The bailout bill and its failure to pass the House, coupled with the 777 point fall of the Dow at the beginning of the week, has really dominated the headlines recently so it’s not surprising that not many people have focused on this bit of news - the FDIC managed to broker the sale of [...]

WaMu Sucks The bailout bill and its failure to pass the House, coupled with the 777 point fall of the Dow at the beginning of the week, has really dominated the headlines recently so it’s not surprising that not many people have focused on this bit of news - the FDIC managed to broker the sale of Washington Mutual to JPMorgan Chase and parts of Wachovia to Wells Fargo (link) ~~Citigroup~~ and they didn’t bankrupt themselves (or go to the government for more money).

For weeks (if not months), people have talking about how the failure of Washington Mutual, the largest thrift with $307 billion in assets, and the failure of Wachovia, who had a loan portfolio of $312 billion, would bankrupt the FDIC. The FDIC isn’t entirely off the hook though, the FDIC is backing some of the downside loss on the bad debt, but as it stands right now they managed settle two big issues without much loss.

If you’re curious as to the details of both deals, here’s an article about JPMorgan Chase acquiring WaMu assets and here’s an article about Wells Fargo buying up Wachovia’s deposits and banking business. While it still remains to be seen whether everything involving these banks is OK, it definitely two headaches off the radar for now.

Do you think we should applaud the FDIC for dodging a huge bullet (at least for now)? Or did we just shuffle the deck chairs?

(Photo: Sërch)

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Testing the Top Five Car Insurance Myths
When I first started driving, I was amazed at how much car insurance cost. I, like many other newly-minted drivers clutching our licenses, was put on my parents’ car insurance policy, which I’m sure made my parents nervous, and didn’t really feel the full brunt of new-driver-car-insurance-rates. However, when I finally left the nest and [...]

Geico Wall at Nationals Ballpark When I first started driving, I was amazed at how much car insurance cost. I, like many other newly-minted drivers clutching our licenses, was put on my parents’ car insurance policy, which I’m sure made my parents nervous, and didn’t really feel the full brunt of new-driver-car-insurance-rates. However, when I finally left the nest and had to insure myself, I finally started hoping that 25 would come sooner because everyone says that car insurance rates drop significantly after you turn 25. (I spent all my <21 years waiting to be 21, then my <25 years waiting to be 25... now I'm waiting for retirement... the waiting never ends!)

A few years ago, when I turned twenty-five, I had a great opportunity to test a few car insurance myths empirically and I'm happy to report the 25 year old rate drop myth is in fact very true.

Myth #1: Rates Drop Significantly After 25

This myth is true.

I requested car insurance quotes before I turned 25 and after I turned 25. The results were a little mixed but Geico, my current car insurance company, dropped my rate by about 15% after I turned 25. However, in each year after my 25th birthday, my insurance rates have been going down by a significant amount as well. While there were other factors involved (perhaps Maryland drivers became cheaper to insure, I hadn’t gotten into any accidents, etc), I believe each year after 25 is marked with lower premiums as long as you stay out of trouble. It just so happens that 25 is the first of the big drops, which explains its top billing.

Myth #2: Married Couples Pay Less Insurance

This myth is true, but probably not for the reason you expected.

The logic behind this myth is that once the male in the married couple gets married, he’s a safer driver and thus cheaper to insure. However, when I got married earlier this year (and told Geico), our rates dropped more so because there was a safer driver listed on my account. When I added my wife as a driver, the average riskiness of the driver went down and thus the premiums went down. In fact, I couldn’t even indicate marital status in my profile… they didn’t care. (there is also a component of the multi-car discount mixed in but I added her as a driver before I added her car)

Myth #3: Females Pay Lower Pemiums

This myth is true.

All other characteristics being equal, a female paid 18.8% less than a male in my car insurance quote study. The logic, on the part of insurance companies, behind this is that women are safer drivers and that men are reckless. Is that true? Who knows, but male drivers pay their premiums as if it were true!

(Odd factoid: Going to college lowers your premiums by about 7%, though it’s something that I doubt any company will verify, but don’t go too far… a Ph.D or an M.S. won’t give you more of a discount over B.S.)

Myth #4: Comprehensive Claims Don’t Affect Premiums

This myth is partially false.

Finally, a somewhat false myth! Conventional wisdom states that if you file a comprehensive claim, your insurer won’t increase your premiums. That part of the myth is true. The part that’s false is that if you ever leave that insurer, the new insurance company will charge you higher premiums for coverage. Is that fair? Probably not, but that’s how it works. In my car insurance quote study (near the end), I found that a vandalism claim increased rates by 8% and a vehicle theft or loss of belongings totaling more than $10k was a nearly 14% increase.

Myth #5: Your Credit Score Affects Your Premiums

This myth is true.

You might be wondering, why the heck does my credit score affect my car insurance premiums? The answer is more subtle than you might think. The reality is that not every claimable event is claimed (how many times have you been in an accident and someone pleaded to keep the insurance company out of it?) and insurance companies realize this. So they not only want safe drivers but also those who aren’t going to submit claims - a higher credit score usually indicates more sound financial footing, thus more money to pay for expenses out of pocket. Sneaky huh!?

Here are all the referenced articles:

(Photo: afagen