December 31, 2010
fivecentnickel suggests Donating Appreciated Stock or Mutual Fund Shares via a donor-advised fund
Consumerism Commentary says Don’t Get Ripped Off By Auto Mechanics
Dough Roller explains hedge funds a bit with Hedge Fund This and Hedge Fund That …
My Money Blog does a nice comparison of gift card resale sites in Selling Unwanted Gift Cards For Cash: Price Comparison
About a year ago I showed some data on foreclosure activity rates in the article Foreclosure Trend For Past 24 Months. But that data only showed foreclosure filings and didn't say how many of the foreclosures actually ended in people losing their homes.
I found the chart below in a report from the Congressional Oversight Panel. The full report is available at the COP site.
I don't have more information on the data than that graph but you can get the basic idea from the chart.
As you can see the number of foreclosures started in a month are much higher than the number closed. I take that to mean that most foreclosure proceedings don't end in actual foreclosure. People may pay the due amount or find alternative solution like a short sale. But this is mostly just my guess / assumption.
December 30, 2010
Lets take a look at these 10 Retirement Myths from US News via Yahoo. Here is the list from the article:
2. You need a large income to become wealthy.
3. You will earn 11 percent in the stock market every year.
4. Your money is safer out of the market.
5. You can do better by investing on your own.
6. You need to be debt free before you can invest for retirement.
7. A 401(k) is the best place to invest for retirement.
8. Social Security benefits will be enough to retire on.
9. You have to retire at age ___.
10. You won't ever be able to afford to retire.
This is a pretty good list and most of these are myths that are not true that people should be aware of.
I agree with most of the items entirely. #3 and #8 are especially true and people need to realize those.
On three of the items I slightly disagree with their take:
4. This one I don't totally agree with. Your money IS safer in cash than in the stock market. But the point is that you are saving it to grow it long term. Long term you'll be safe enough in the market and you'll benefit from higher returns.
5. Most people can't do better investing on their own. Its safest and most practical to buy an index fund or a target date fund. Trying to beat the average in the market is like gambling for most people. This doesn't stop me from trying it myself, but I know I'm taking a risk when doing it.
7. Sometimes your 401k is the best place for your retirement. If you have matching employer contributions then your 401k should be your #1 priority for retirement investment at least up to the point of the employer match.
December 29, 2010
I saw someone recently make a claim along the lines that someone buying an expensive house is basically forced to pay AMT or the Alternative Minimum Tax. I've seen this kind of statement before. I wasn't sure how much impact expensive housing would have on AMT so I decided to find out.
AMT is pretty complex and I don't think most people really understand how it works. I only have a basic understanding of it myself. I decided to work through an example of a relatively high income household with an expensive home. Below I figure the regular tax and the AMT and see how an expensive home impacts AMT.
Here's the example situation : Lets say you make $200,000 a year and are married with no kids. Your ONLY deductions are your mortgage interest, your property tax and your state income tax. You live in San Francsico and own a tiny house that cost $800,000. Your mortgage interest is $40,000, your property taxes are $12,000 and your state income tax is $10,000. You also have two exemptions for you and your spouse for $7,300 total.
Figuring your taxes normally :
Income = $200,000
Itemized deductions = $62,000
Exemptions = $7,300
Taxable income = $130,700
Normal TAX = $25,038
Now lets figure your AMT. This is more complex. To figure AMT you use Form 6251 and Instructions for Form 6251
Start with form 6251.
Line 1 is the taxable income without exemptions from form 1040 line 41, which is $138,000
Line 2 doesn't apply
Line 3 $22,000 for the state and property taxes
Line 4 the mortgage interest deduction is $0 in this case because the mortgage is entirely eligible mortgage interest used to buy the house.
Line 5 doesn't apply
Line 6 maybe around $400
Lines 7-28 don't apply
Line 29 alternate minimum taxable income is sum of lines 1-28 = $159,600
Line 1 in form 6251 is your income less the deductions. Then you add back some deductions and other things. For example in line #3 we add back the state and property taxes of $22,000. Line #4 would add back any mortgage interest on things that are not eligible like a HELOC used to buy a car. But in this case the mortgage is an eligible mortgage on a primary residence so it does not add back the mortgage interest. However the AMT does not remove your state and local taxes from your income to figure the alternate minimum taxable income. So AMT does not consider local or state taxes as deductible.
The interest on the mortgage is not taxable by AMT but the property tax bill for the house is taxed by AMT.
Line 30 is $70,950
Line 31 is 29 minus 30 = $88,650
Line 32 26% of line 31 = $23,049
Line 33 is $0
Line 34 tentative minimum tax is $23,049
Line 35 normal tax from 1040 line 44 $25,038
Line 36 AMT line 34 - 35, if zero or less = 0. So the AMT is ZERO
Line 30 is the exemption which in this case is $70,950 since its a married couple. The exemption is subtracted from the alternate minimum taxable income to get us line 31. The tax rate is then figured by multiplying 26% times the figure in line #31. In lines 35 we insert the normal tax rate figured above. Line 36 subtracts the normal tax from the AMT. In this case that would be less than zero. In other words the normal tax rate is more than the AMT rate so the AMT tax is ZERO. If on the other hand the AMT tax rate was higher than the normal rate you'd add the difference and effectively pay the AMT rate.
Follow all that? I did say it was complex. If you don't follow the details of how I calculated the AMT then thats OK.
So this family has a high income $200,000 and a very high cost home worth $800,000 that they spend $40,000 in interest and $12,000 in property taxes on. Yet they do NOT owe AMT tax.
The interest they pay on their eligible home mortgage does not hurt them for AMT taxes. However the property tax they pay does hurt them.
One key to this is if the mortgage interest is eligible or not. An eligible mortgage is defined as :
"An eligible mortgage is a mortgage whos proceeds were used to buy, build or substantially improve your main home or a second home that is a qualified dwelling. A mortgage whos proceeds were used to refinance another mortgage is not an eligible mortgage."
That bit about using proceeds to refinance another mortgage kinda sounds like refinanced loans don't count. However what they mean is that you can't pay off a mortgage on some other property and have it count. If you refinance a mortgage it is eligible if you simply refinanced an existing eligible mortgage. If you take cash out and didn't use the money to improve the house then that portion is not eligible. The IRS clarified this point that refinanced mortgages are eligible.
Bottom Line: High mortgage costs should not contribute into pushing you into AMT. High property or state taxes can make a difference for AMT. Generally expensive housing alone is not going to 'force' people into AMT.
December 28, 2010
The article Cash Value in life Insurance: Whats it worth to you? on the insure.com site has a good examination of cash value insurance. One detail they point out is "according to LIMRA International, 12.7 percent of whole life insurance policyholders will lapse their policies in the first year, 8.1 percent will lapse in the second year and another 5.5 percent will lapse in the third year." 12.7 + 8.1 + 5.5 = 26.3% So that means that 26.3% of cash value insurance policies are canceled within the first 3 years. I was curious on the LIMRA data so I did a search and found this older document from the 90's that cites similar figures.
The insure.com article cites annual return rates based on each year. The 1st year your loss is 100%. The 2nd year they cite a loss of 97.4%. If you hang on to the 3rd year the loss is "only" 19.3%. They also say the average annual rate of return for the first 5 years is -10.7%.
If you add those two facts together than about a quarter of people who buy whole life insurance cancel their policies within the first three years and lose a significant amount of their investment.
One in five people who invest in whole life policies lose over 90-100% of their investment due to lapsing within the first two years.
Thats a pretty big deal. One in five is a lot of people. Losing 90% or more of your investment is also a very big deal.
Term policy holders also lapse at high rates in the first 5 years. So this is not something unique to whole life insurance. But with whole life insurance you have a cash investment involved that has negative return within the first few years. Lapsing on a term policy only costs you nothing more than the insurance premium which provided you insurance. Lapsing on a whole life policy can lose up to 100% of your cash investment.
I should point out that lapsing on a policy is something that the holder of the policy does themselves so its within the control of the policy holder. If you don't lapse the policy then this won't hurt you. But stuff happens in life so you may end up lapsing due to things outside your control. If you buy an expensive policy and then face a financial catastrophe in your life the next year then you may not be able to afford the premiums any longer.
December 27, 2010
My Money Blog pointed this out : Free PDF of Unveiling the Retirement Myth by Jim Otar
You can get it via the direct download link until Jan 9th.
Little over two years ago I wrote an article asking Will a Chevy Volt be a good buy? I concluded then that a Volt would not save me a ton and that a Prius would be a better buy financially.
I only had preliminary information on the Volt when I wrote that first article. Now that the Volt is actually a real car theres more concrete information. An article Hyped hybrid: The Chevy Volt gets average mileage, for a hybrid via Yahoo from Consumer Reports looked at the fuel efficiency of the Chevy Volt.
This is the meat of the article as far as I'm concerned:
"Over numerous trips, our collective average for electric-only range was 33 miles. Once the battery is depleted and the car is essentially using only gasoline as its fuel, we averaged 30 mpg overall in mixed driving"
Electric fuel cost
They got 33 miles off a battery charge and charging the battery takes 12.5 kWh of electricity. At 10¢ per kWh thats $1.25 cost in electricity to drive about 33 miles. So each mile costs about 3.8¢ If gasoline costs $2.75 then thats equivalent to a car that gets 72 MPG as far as fuel cost/mile.
Gasoline fuel cost
When the Volt is running on gasoline they saw fuel efficiency of 30MPG average and thats a easy comparison to standard gasoline cars.
The purely electric fuel cost is great. The gasoline fuel efficiency of a Volt is OK but nothing special.
Hows it compare to a Prius?
I'm going to assume electricity costs 10¢ per gallon and that gasoline costs $2.75. If electricity is cheaper then that favors a Volt but if its more expensive that puts the Volt at a disadvantage. The more expensive gasoline is then the more it costs to drive a Prius and the better the Volt favors.
Lets say you drive 30 miles a day every day of the year. That would be pure electric driving. You'd be driving nearly 11k miles a year and your cost would be about $456 per year. If you drove 11k miles a year in a Prius at 50MPG and gas costs $2.75 then you'd be paying $605 in gasoline. So you're saving about $211 a year in fuel on the first 30 miles per day of driving with a Volt over a Prius. However after the first 30 miles a day you'd be getting only 30MPG with the Volt compared to 50 MPG with a Prius.
Lets say you average 40 miles a day. Your electric cost for the Volt is still $456 but now you've got another 10 miles a day or 3650 miles a year driven on gasoline. The gasoline miles are 30 MPG so you're buying about 121 gallons of gas. At $2.75 a gallon that would cost $333 roughly. SO 40 miles a day on a Volt is about $789. 40 miles a day on a Prius is 14,600 miles. With 50MPG that would be 292 gallons of gasoline. The cost of $2.75 per gallon means total cost of $803. If you drive 40 miles a day then the Volt saves you only about $15 a year over a Prius.
Lets look at 50 miles a day. The Volt drives 30 miles on electricity for a cost of $456. It drives 20 miles on gasoline for a cost of $669. Total cost for 50 miles a day over a year would be $1125. The Prius gets 50 MPG so you're looking at $2.75 a day if driving 50 miles a day. Thats an annual cost of $1003. Now if you're driving 50 miles a day on average the Prius is $120 cheaper than the Volt.
Here's the summary of annual fuel costs:
Again this assumes arbitrary fixed electric cost of 11¢ per kWh and gas at $2.75 per gallon.
The more you drive the more a Prius beats a Volt.
Now of course we should keep in mind that people don't drive the same exact amount every day of the year. Your driving will vary from day to day. You might drive 30 miles round trip to work Monday through Friday and then drive another 25 miles on Tuesday to go out to dinner, 10 miles on Saturday to go to the store and and 40 miles on Sunday to go to church then visit a friend. Then 2 times a year you might take a 500 mile road trip to visit family out of state.
I'm assuming the Consumer Reports data is valid and accurate.
Bottom Line : Based on Consumer Reports findings it really appears to me that a Volt is not more efficient financially than a Prius. My original verdict is reinforced: A Prius is a better buy than a Volt.
December 26, 2010
The changes in spending from 2009 to 2010 are as follows sorted from most expensive category to least :
|Grocery / drugstore||-0.5%|
|Phone / internet||20.4%|
Sorted by the amount of change from last year to this :
|Grocery / drugstore||-0.5%|
|Phone / internet||20.4%|
Large reductions : Eating out and electricity were both down over 20% this year compared to last. I'm happy with these two reductions. Eating out and electricity are major expenses.
Little changed: Our mortgage, grocery / drug store spending, garbage bill, water utility and cell phones were changed by less than 4%. Thats not bad and I can figure it as inflation kind of changes.
Largest increases: car other, ADT, gasoline, Netflix, Auto Insurance and phone/internet were all up over 20% and cable was up over 10%.
Car Other : There were charges of about $190 for the DMV. We also had a $315 charge to work on the brakes on my wife's car. Those two expenses accounted for the huge increase. Reason for increase : high annual variability
ADT: Our rates were not much changed. I looked back through the 2009 and 2010 records and I realized I didn't accurately record all the ADT charges for 2009. Reason for increase : clerical error.
Gasoline : Gas prices averaged around $2.40 a gallon in 2009 and $2.80 in 2010. Thats about 16.6% increase which accounts for most of the cost increase. Reason for increase : inflation & increased usage
Clothes: I bought a suit and a sport jacket. That purchase swung the category into an increase. If I hadn't bought those then the category would have been down about -20%. Reason for increase : one time purchase
Netflix: We decided to increase the number of DVDs we get late this year. Reason for increase : Chose to spend more
Auto insurance : Like the ADT category I missed at least one month of cost for 2009. Otherwise I'm not sure why this cost changed from year to year. Our monthly rates are not much changed.
Phone / internet: Our old rate expired and the rates went up. I thought about switching to a bundle deal with either Comcast or Verizon but never acted. Reason for increase : Rate increase
Cable : Its cable TV so I'm not surprised it went up. Our rates keep going up all the time. Unless I call them and complain. I've said before that we're OK paying for our cable expense even though its not cheap. Reason for increase : Rate increase.
Most of these categories I don't have a problem with the increases given the details. Our car expenses will fluctuate based on when DMV licensing bills are due and given the random nature of car repair needs. ADT and auto insurance really aren't much changed but I didn't do a good job tracking those bills in 2009. Gasoline costs will fluctuate and we don't drive significantly more in 2010 than on 2009. The clothing costs for my suit and the Netflix charge were deliberate.
Problem areas: Phone/internet and cable both went up over 20%. That accounts for around $400 increased spending. Thats not a good trend at all. We do value these services and use them enough to justify spending money on them, but at the same time I don't like seeing bills go up 20% year over year. These are the two main areas that I want to watch and see if I can reduce further.
December 24, 2010
Yahoo Travel ran an article titled "What Not To Do In... "
Here are the things they recommend that you do NOT do in five major tourist cities.
In Los Angeles Don't...Bother with Venice or Santa Monica Beaches or Shell Out for Star Maps
In London Don't...Hop on a sightseeing bus or Visit Madame Tussauds
In Paris Don't...Spend all day at the Louvre or Musée d'Orsay or Seek out bohemian ambience on the Left Bank
In Las Vegas Don't...Use the Casino ATMs or Arrive at the Airport 30 Minutes Before Your Flight
In New York City Don't ... Take a twilight carriage ride in Central Park and Eat at a restaurant in Times Square
I'm not familiar with most of these things. I've been to LA, London and Las Vegas. I definitely agree that Venice beach is not worth the time. My wife and I went there and it was a total waste. Parking nearby is a giant hassle and very expensive to pay for. The beach itself is extremely over crowded with little useful attractions. The two items for Las Vegas are very true. Casino ATMs are very over priced and the Las Vegas airport can be one of the busiest and slowest to get through.
December 23, 2010
- Unemployment will remain high but drop under 9% by the end of the year.
- Stocks will be up over 10% The S&P 500 will end the year over 1400 and the Dow over 12,500.
- Gold will likely go up more in 2011 by may peak and drop. I'm guessing we'll hit $1500 within 2011. But I'd put it 50/50 chance that it drops down under $1000.
- Real estate prices in the US will mostly stabilize and may return to slow growth. I'm guessing the median home price will be up 1-5% for the year.
- GDP will be up 3.5% to 4% for the year.
Photo by Mrsminifig
December 22, 2010
Right now mortgage rates are very low. 30 year fixed mortgages are around 4.25% give or take. This allows people to buy more house than they could if the mortgage interest were higher. Lets say for example that you can afford a payment of $1200 a month. At 4.25% rate you'd be able to finance a loan of about $244,000. But if interest rates went up 1% to 5.25% then you'd only be able to get a $217,000. So logically we could imagine that people are buying more and paying more for houses now than if the rates were higher.
If interest rates go up then we might assume that home prices may fall as a result. Seems pretty logical.
But is that what happens normally? Has it happened in the past? How much impact do mortgage interest rate changes actually have on home prices?
I figured I'd look at old data and compare the two numbers to see how they correlate. The theory is that if interest rates go up then home prices will go down. If that is true in reality then we should be able to see a direct and repeated inverse relationship between the two numbers.
The home values are using the S&P / Case Shiller index. I got the mortgage rates from the Federal Reserve FRED database. Here is a graph showing the home price index versus the 30 year fixed mortgage rate from 1987 to 2010:
I do not see any real relationship between those two lines. The interest rates bounce up and down at times and the home price values don't change much and other times interest and home prices go up at the same time. If there were a clear relationship between the interest and the prices then you should see a clear trend.
But lets zoom in to a few years and look at the numbers a little closer. Here I show the trend between interest and home prices from 1992 to 1996.
Now there seems to be more of a correlation. But oddly they seem to be going in the same direction. Interest rates go down and home prices go down too. It is possible that this is simply a seasonal pattern, but I'm not sure.
Bottom Line : I don't see any reliable or visible relationship between changes in the mortgage interest rates and home prices.
December 21, 2010
I took a look through all my articles this year and picked out a few that I like most. These posts I consider interesting or noteworthy in various ways.
Is it Worth It To Pick Up a Penny?
- Do you stop to pick up a penny?
Living on a Cruise Ship : Is it Practical?
- Living full time on a cruise ship is a novel way to retire. But is it actually financially practical?
Why I Pay Over $100 a month for TV
- Many if not most personal finance bloggers seem to have 'cut cable' on their short list of financial advice. There are plenty of great reasons to cut cable, #1 of which is if you don't watch much TV. Personally though I feel paying for cable is worth it to us.
Don't Buy A Suit Like I Do
- This is my story of how I bought a suit the wrong way, shopping last minute without a plan.
Retiring In Luxury Overseas For Cheap - Bargain or Bogus?
- It seems that several times a year there will be some sort of article in the mass press about living cheaply overseas. You have to wonder though, if it was that great then why doesn't everyone want to live there?
Money Can Buy You Happiness
- Yeah thats right. I said it.
Social Security About to Go Bankrupt For 7th Decade
- A lot of people are convinced that Social Security is doomed. In that respect nothing has changed in 75 years.
Safely Build Your Own Pension with Bonds and Annuities
- I like the guaranteed income of a fixed defined benefit pension. But most employees do not have traditional pensions. Its actually quite easy to create a fixed pension on your own.
DVR's Can Save You Lots Of Time
- I loooooooovve my DVR.
I Like DIY A Little Too Much
- My first inclination when something breaks is is to get out the toolbox. Sometimes thats not the best choice.
Don't Waste Money On Overpriced Infrared Heaters
- These heaters are often advertised on TV. I don't think they're nearly as good as they're made to sound.
December 20, 2010
Early this year I wrote up a list of my Key Financial Goals for 2010
To be totally honest I virtually forgot about that set of goals. Oops. One key element in meeting your goals is to actually remember that you have them. Oh well. Anyway, I figured why not go ahead and look at the goals and see how well I did.
Here is the list of goals for 2010 that I had in January:
- Fully fund Roth IRAs by $10,000
- Pay $20,000 towards Home Mortgage principal
- Earn 10% return on 401k & Roth IRA accounts
- Keep Household Spending flat
- Cut Discretionary Spending by 5%
This is how I did on each of the goals:
1. Fund Roth IRA's : DONE. My wife and I both fully funded Roth IRAs to the maximum.
2. Pay down house $20k : Half done. We made extra payments and cut our mortgage by
3. Earn 10% on 401k & Roth : DONE. Between my 401k and Roth IRA my investments grew about 17% total which is fairly good.
4. Keep spending flat. FAIL Overall our household spending on the 'needs' items increased from 2009 to 2010. I figure it was up about 6%.
5. Cut discretionary spending 5%. DONE. Actually our 'wants' spending was down 33% from 2009 to 2010. That was basically due to a large bill for landscaping our yard in 2009.
If I gave myself 1 point for success then I'd count that up as 1 + 0.5 + 1 + 0 + 1 = 3.5 = 70%. I don't think 70% is a bad grade for meeting goals. If your goals are so easy you can hit 100% without much effort then the goals are too easy.
1: Easy success
It wasn't very hard to transfer $5000 into my IRA. Having the $5000 in cash in the first place is the only hard part about it.
2: half done by choice
While we only got 'half done' on this one that was by choice. We could easily put more cash into our house but we've recently decided to stop extra payments on the house for the time being. So we decided to not reach for this goal on purpose.
3: good success
Getting >10% return on investments is a good goal and I hit well over that. This one I'm actually happy with my performance.
4 & 5 : fail + success = success
If I combine the 'wants' and 'needs' categories then overall our household spending was down from 2009 to 2010. So while I failed to keep 'needs' down having the 'wants' drop so much more than made up for it. I call that a success overall. Maybe thats a cop out. I will look further at the increase in our spending in the 'needs' categories and see if we have any real problem areas or if it was essentially due to unavoidable inflation or one off expenses.
Overall I think we did OK. We could have done a better job keeping household spending low.
December 17, 2010
Bargaineering suggests that you Skip Fuel Saving Gimmicks, Alter Your Driving
Dough Roller answers the question What is Tax Form 1040 Schedule SE?
Pop Economics talks about the amount of trust we give with When placing trust in someone, defaults matter
Wisebread posted an interesting Cheat Sheet: Retail Markup on Common Items
Back in the late 1990's I first got interested in investing in the stock market. I read about stock investing on the internet and first learned about things like P/E ratios. In 1998 and 1999 I set up several mock stock investments on My Yahoo. You can track your stock portfolios over time in My Yahoo. I still have those old mock stock investment portfolios in My Yahoo account. I don't know why I kept them exactly. I guess I was just lazy and didn't bother to delete them. Now its 11-12 years later and I thought it would be interesting to examine exactly how those stock picks have performed.
Notes : Keep in mind this is all pretend money and I did not buy these stocks. I just setup mock stock portfolios. For simplicity sake I'm ignoring dividends. Most of these stocks do not pay dividends. Some do pay dividends though so that would improve the performance a little bit.
Portfolio #1 : "Investment Challenge"
This portfolio was based on some sort o stock picking game or contest.
I spent $100,000 and had three holdings:
Ebay : 250 shares @ $206
Dell : 100 shares @ $64.75
WEBB : 3169 shares @ $13.25
Ebay split 2:1 three times and 3:1 once. That would give you 250 x 2 x 2 x 2 x 3 = 6000 shares. Dell split 2:1 one time so you'd have 100 shares. Looks like WEBB died.
Ebay 6000 shares at $30.69 = $184,140
Dell 200 shares at $13,89 = $2,778
The total present value would be $186,918.
Performance : Thats an 86.9% increase in 12 years which works out to a 5.35% annual increase.
Portfolio #2 : "Telecom stocks"
I don't know much more about this portfolio other than what the name implies that it was telecom related stocks. The portfolio was :
Qualcomm (QCOM) : 11 shares at $47.62
Var-L (VARL): 54 at $9.06
Celltech (CLTK): 45 at $10.94
Total investment $1,505.36
Var-L : is now defunct a "Poster Child of Dot-Com Woes", CellTech : appears to be basically worthless
Qualcomm split three times, twice 2:1 and once 4:1. Resulting in 11 x 2 x 4 x 2 = 176 shares.
Current value of telecom portfolio : Qcom 176 shares x $49.48 = $8,708.48
The portfolio had 478% growth or a 15.7% annual rate.
Portfolio #3 : "Smart$ Best"
I think this one was from Smart Money in some way. I'm not sure if Smart Money recommended these stocks or if I used some stock valuation process they defined to find them. Its dated : Jan 1 1998
JMED 16 @ $30.88 = $494.08
MAT 12 @ $41.25 = $495
LEN 25 @ $20.06 = $501.50
DIGI 21 @ $23 = $483
ADI 16 @ $31.31 = $500.96
JMED and DIGI appear to be defunct. Mattel is at $25.48 so 12 x 25.48 = $305.78
LEN had a 2:1 split in 2004, so 25 shares x 2 = 50 shares currently at $17.69 = $884.50
Analog Devices also split 2:1 one time giving 16 x 2 = 32 shares. It is s at $37.74 so 32 x 37.74 = $1207.68
Total current value = 305.78 + 884.5 + 1207.68 = $2,397.96
Total loss for Smart$ Best was 3.1% for annual performance of -0.28%
Portfolio #4 : "Smart Test"
This portfolio was also from Smart Money in some way.
CMVT 13 @ 38.25 = 497.25
MPP 31 @ 16 = 496
MWY 25 @ 19.75 = 493.75
RCII 22 @ 21.88 = 481.36
RON 9 @ 51.75 = 465.75
Total original value $2,434.11
CMVT is OTC but trading at $7.79 so its worth $101.27, MPP, RON both appear to be dead
Midway games is at $0.16. It looks like they declared bankruptcy in 2009.
Rent-a-center is at $30.33 It split 5 for 2 in 2003 which would give me 55 shares today. 55 x 30.33 = $1,668.15
Total current value $1769.42.
Thats a loss of 27.3% or -2.8% annually.
Portfolio #5 : "My Foolish"
This portfolio was based on a Motley fool stock picking strategy. I remember this one clearer than the other mock portfolios. If I recall right the stock picking strategy was a version of the 'Dogs of the Dow' system of picking the Dow Jones stocks with the highest dividend yields. The portfolio is dated Jan 6 1998
KFT 6 x 0 = 0
MO 10 x 45.88 = $458.8
XOM 16 x 30 = 480
DD 8 x 59.13 = 473.04
DAI 17 x 34.68 = 589.56
Total original value $2,001.4
Exxon split 2:1 in 2001. So that would be 32 x 30 = $960
DAI is OTC as DDAIF.PK at $72.76 so thats 17 x 72.76 = $1,236.92
DD is at $48.62 and 8 x 48.62 = $388.96
MO is at $24.85 and 10 x 24.85 = $248.5
The KFT stock was spun off from MO if I recall right and had a cost of $0. It is now worth $30.75 and 6 x 30.75 = $184.5
Total current value = 184.5 + 248.5 + 388.96 + 960 + 1236.92 = $3,018.88
Growth of 50.8% which is 3.48% annually
Performance summary by portfolio :
Investment Challenge = +86.9% or 5.35% annual
Telecom = +478% or 15.7% annual
Smart test = -3.1% or -0.28% annual
Smart best = -27.3% or -2.8% annual
My foolish = 50.8% or 3.48% annual
Lets say I put $10,000 of my money evenly split between these five portfolios. That would be $2,000 into each.
Investment Challenge = +86.9% = $3738
Telecom = +478%= $11560
Smart test = -3.1%= $1938
Smart best = -27.3% = $1454
My foolish = +50.8% = $3016
Total = $21,706
So that would mean that If I had put $10,000 spread evenly across the five mock portfolios then today the investment would have grown to $21,706. Thats117% total growth or 6.66% annual growth over 12 years.
Comparatively the major benchmarks were up less. From 1998 to today the S&P 500 grew about 28%, Dow Jones rose around 44% and the NASDAQ was up about 66%.
However you may notice that QCOM performed exceptionally well and brought up the average substantially. If you remove QCOM then I'd have actually lost money on these stocks on average. If I invested equal amounts in the other 15 stocks then overall I'd have turned $10,000 into $8,310. That would be a loss of 16.9% total or annual loss of -1.5%.
Performance of each stock
I have 16 stocks in the mock portfolios. Of the 16 stocks only 5 are worth more now than what they were in 1998-1999. Eleven of the stocks have lost money and half of those are worthless. Half the stocks I picked are now worthless.
Here's a graphic showing the change in value of the stocks:
Stocks that grew in value are in green and stocks that lost money are red. Theres a lot of red stocks there. The Qualcomm stock sticks out as it obviously grew substantially more than all the others.
I don't know if this means anything at all. On one hand I picked Qualcomm stock which since grew fantastically and if I had bought all these stocks I'd have very solid growth over the past 12 years. On the other hand half the stocks I picked went bankrupt.
December 16, 2010
A while back I wrote How Not To Handle a Windfall where talked about a family who had gotten $10 million after taxes twelve years ago and who are now borderline broke. They spent millions on real estate and toys. I counted it up and they had spent over $7 million. There are numerous stories of people who come into large wealth and then end up broke. Whether its a lottery winner, a professional athlete or a rock star the phenomenon is fairly common.
Of course most of us would love the opportunity to manage millions of dollars. But doing so may be harder than you realize. Its easy to spend money. But making sure that millions will last a long time is not simple at all. I thought it would be fun to talk about what I would do if I had millions of dollars in order to ensure that my wealth wasn't squandered and that it would last my lifetime.
Ensure future income
One of the major problems with instant wealth is that people get the feeling that this large amount of money will last them forever. But it won't last if you keep spending money and quit your job. You have to make sure that you have income in the future. Theres two key ways to ensure you have enough money to support yourself in the future. 1) keep your money and spend it very slowly or 2) invest the money so it makes you an income.
If you have a large pile of cash you can't simply live off that money forever unless you spend it very slowly. For example if I have $1,000,000 and I spend $20,000 a year then I'm sure that it will last me 50 years. There is also the 4% rule that people commonly cite. This is the idea that if you spend 4% of your money every year then it should last you your life. However this rule is based on probability and assumes your money is invested in a way that it gets some return. There is no guarantee that a 4% rate will last forever. To be more conservative you might chose a slower 2-3% spend rate.
Investing your money so it makes you money is a good idea. If you buy dividend paying stocks, bonds or simply make interest in a savings account your money is making money for you. But you have to be careful with it so you don't lose it.
Keep Your Money Safe
A lot of people who end up blowing their fortune have lost their money because they invested it unwisely. Its not hard to lose a lot of money: buy Enron ten years ago or make leveraged purchases of large residential real estate developments in Las Vegas 4 years ago. If you have millions you really have no reason to take unnecessary risks with the money in the name of making piles more money. Play it safe with your investments and don't take risks that could lose your fortune.
Don't over spend
If you had a large windfall then you might be tempted to go buy all the fabulous things you could ever want. I think this is what happened to the Martin family. They simply spent too much. Of course you'll want to spend some of your new pile of money. The key here is to make sure you put away enough money to ensure your future first.
Expect New Costs
If I win the lottery I'm going to go buy a new house. I don't need anything super fancy. It will be bigger and nicer and will have a little land. Buying this house will come with a lot of new and bigger bills. My property taxes will be much bigger and all our utilities will be bigger. If you win the lotto jackpot and end with $10 million you might reasonably go buy a nice $1 million home. But that new $1m home may very well have a $10,000 to $20,000 property tax bill. You might go buy new cars for yourself and your wife. Those cars may cost a lot more to insure and maintain. If someone handed me $10M tomorrow I would quit my job so fast the chair in my office would spin around after I leave my office and the burst of air stirred up by my rushing out the door would cause papers to be caught up in the back draft just like in a cartoon. (I think about that image entirely too much). Anyway after I quit my job it would not take long at all for me to realize that I'm now responsible for paying for my own health insurance, dental care, getting independent life insurance and disability insurance. Its important to account for these costs before they happen. Don't run out and buy a $2.5M house and then figure out after the fact that you never accounted for the $50,000 property tax bill. Make sure you can afford that tax bill, the increased utility costs, extra maintenance costs, etc BEFORE you make a purchase.
If I Had a $10M Windfall
Off the top of my head this is how I might budget a $10 million windfall:
$1m set aside for "hobby" spending$1m for a nice house
$1m set aside for charity$1m for family and friends
$5m in safe investments, primarily high rated bonds
$1m in a trust to ensure future income no matter what
I would then count on the $5m in investments to generate a reliable $150k annual income. The $1m in the trust would also give another $30,000 of income. Hobby spending would be set aside to fund our spending on our more frivolous interests.
What would you do with $10 million?
December 15, 2010
This is just a reminder to a promotion on Amazon going on where they have a new free MP3 download every day this month through December.
You can get the free MP3's at the Amazon.com site : 25 Days of Free
I ran across a SmartMoney article via Yahoo titled 5 Things Your Landlord Won't Tell You
Here are their 5 things:
As a landlord myself here are my thoughts on each:
1. Yes they may not tell you that. I think it would be unethical for them to do so but it happens. My properties are not in foreclosure or anywhere close to it so this does not apply to me. The vast majority of rentals are not in foreclosure so this really applies to a very small % of people. For the people it applies to it is a serious problem but there are recent new laws to help tenants.
2. My first reaction to this was that it is an asinine thing to say. It seems like telling someone "I'd like you to waste my time and give me a headache." But there is actually some truth to it. As a landlord I would actually like tenants to complain more in certain situations. If theres anything that can cause damage to the property then I want to know sooner rather than later. If a tenant or other neighbor is breaking the lease terms then I'd like to know that too. If your facet is leaking then tell me. If there are very funny chemical smells coming from the other apartment then please tell me. If the neighbor is parking on my lawn then please tell me.
3. This one is true but I won't tell a tenant that explicitly unless they want to haggle on rent. I mean why would I tell people that they're free to negotiate? That just opens the door to them negotiating stuff they wouldn't otherwise. I'm open to negotiation but I'm not going to give you a written invitation to do it.
4. This one is half true. Sometimes I can't do a darn thing about your neighbors. Just like I can't do much about my own neighbors. As a landlord I don't have some sort of dictator authority to make everyone do whatever I want. I have to obey laws and follow the rules of the lease. If you suspect a neighbor has a dog and you hear it barking, I can't simply kick them out. I have to prove that dog is there in violation of the terms of the lease. Sometimes thats easier said than done. On the other hand bad neighbors and bad tenants are always a problem for a landlord.
5. Tenants may have a lot of rights in some places and very few in others. It varies by state and city. You need to learn your own rights.
December 14, 2010
Every month I track and post updates on my net worth. I don't think I've ever written anything in detail on how I track net worth or how it can be figured.
What is Net Worth?
Your net worth is the total value of your property and money. Say you could 'cash in' everything right now and walk away with a check. Your net worth is the amount of money you'd get for that pretend check.
Simply put the formula for net worth is :
Net worth = Sum of Assets - Sum of Debts
So to figure your net worth you have to account for all your assets and liabilities and you have to know what they are all worth currently.
Add up Your Assets
Adding up your assets is a process of inventorying everything you own, determining the value of the assets and then adding them up.
Your assets will include anything of value that you own such as : your home, other real estate, businesses, cash, stock funds, retirement accounts, bonds, personal property, cars and 'other'. For some of your assets the value is obvious. $100 in a checking account is worth $100. However for other assets you may not have an easy or accurate estimate of the value. For those I would do the best you can to estimate the value. For real estate you can use a site like Zillow. For cars you can use Edmonds to estimate value. Most of your personal property you wouldn't want to figure values for if they are household items. If you have a collection of significant value then you may want to add those. Other items that you might count as assets would include things like debts owed to you from others or paycheck or other compensation that you're due to receive but haven't yet. If you own a business or have a stake in a private business then that may be difficult to put a value on. Finding an accurate value for a small business is an entirely different topic, so here I'll just say that you should estimate the value to the best of your ability by including the assets such as inventory and property values owned by the business.
Add up your Debts (Liabilities)
Adding your debts should be easier than your assets and simply takes summing the outstanding balance on any debts you owe.
Your liabilities will include any debts you owe people. Mortgages on real estate, student loans, car loans, credit card loans, personal loans, business loans, IOU to your uncle Bob, etc.
Your liabilities should be stated in your loan documents. Your mortgage statement will have a principal balance which tells you how much you owe on the mortgage. To find your liabilities you can simply look at the monthly statement for each account to find the outstanding balance.
Figuring the Net worth
Once you have summed up all your assets and liabilities its a simple matter to calculate the net worth total. Subtract the debts from the Assets.
Deciding What to Include
Some people decide not to track certain things in their net worth. What you track exactly is up to you. Figuring a net worth is for your own information so how you do it is up to you. You may or may not want to include things like your car or your home.
Lets Look at an Example
Bob Smith is 25 years old and single. He graduated college a couple years ago and bought a house.
Bob's assets: His home, retirement account at work, 2007 Honda Civic with dent in fender, checking account, savings account, Roth IRA, US savings bonds Nanna gave him when he was 8 years old.
Valuing the assets:
Home : Bob goes to Zillow and looks up his address. The Zestimate price from Zillow says his house is worth $185,000.
Car : Bob goes to Edumonds and uses their used car appraiser to look up his Honda. Edmunds says that if he sells his Civic as a private party it should fetch $13,702. However he knows that dent would cost him $800 to fix so he counts the car as worth $12,902.
Retirement, Checking, savings account, Roth IRA, Savings bond: These items are easy to value. Just look up the current balance in the account. Bob has $23,105 in his 401k at work, $8083 in his Roth IRA, $10,605 in his cash accounts and that savings bond is now worth $1,146.
House : $185,000
Car : $13,702
Roth IRA : $8,083
Cash : $10,605
Savings bond : $1,146
Total assets : $241,641
Bob's debts include a mortgage on his home, student loans and a car loan. Bob's mortgage balance is at $179,286 his student loans total $23,000 and he owes $4,000 on his car loan.
Bob's Debts :
Mortgage : $179,286
Student Loan : $23,000
Car loan : $4000
Total debts : $206,286
Net worth = total assets - total debts = 241641 - 206286 = Bob's total net worth = $35,355
December 13, 2010
Have you ever gotten a gift from someone that is clearly something they really appreciate or value and are giving the gift to you to share their values with you? I'm thinking of something like "we donated $50 to the [charity] in your name" where the charity is some cause that the giver appreciates but you've never even heard of. Or gifts where the gift is educational about a topic that the giver really values. An uncle who is an accountant may give his niece a book about accounting. Another example is someone who supports a cause and then gives gifts that are about their cause. If your friend is really into environmentalism and being green and then they give you gifts that are green in nature like reusable water bottles with filters.
These gifts are for the giver and not the person receiving the gift.
Such 'activism by gifting' is about sharing (pushing ) your views on your friends and relatives.
I personally don't like this kind of gift at all. Gifts are supposed to be about something that the recipient wants and appreciates.
I'm not saying its bad to give money to charity or give educational gifts or gifts that reflect a cause. In fact those can be great gifts. But the charity, educational topic or cause must be one that the gift recipient highly values instead of one that the gift giver values.
One clue that a gift is your own activism is if you have to explain to the recipient what the gift is and why it is a good thing. The recipient should appreciate and value the gift when they receive it and a gift should not require you to tell them why its good. Thats a clear sign the gift is not something the recipient really values. THis may not apply to all gifts, cause sometimes you give someone a 'thing' that is new item or new invention that they may not be familiar with so if you have to explain what the 'thing' is for then thats not necessarily bad. For example a gift of a new kind of wine bottle opener may require an explanation but that might be a great gift for a wine lover. On the other hand a gift of a cow given to an impoverished village in the third world may require explanation and if the recipient is confused why this giving someone else a cow is a good thing then thats not a great gift. I think giving a cow is a nice idea by the way, so if you want to give a cow in my name then go right ahead.
Heres some examples of when I think is good or bad activism giving:
Good : Giving a charity donation to a pet shelter in the name of someone who is a huge pet lover.
BAD: Giving a charity donation to your favorite art museum in the name of someone who does not appreciate art because you want to share your enthusiasm for art with them.
Good: A book on accounting given to a high school student who is planning on going into accounting as a career and has been decided on it for some time and talks about it a lot.
Bad: A book on accounting given to a high school student who is undecided on their future career but might go into music as a profession because you want to give them a subtle shove in the direction of what you think is a right career direction.
Good : Reusable water bottle filter for your hippie cousin who is always talking about the environment and lecturing everyone on reducing waste.
Bad : Reusable water bottle filter for your cousin who drinks a lot of bottled water because you want them to stop being so wasteful.
Gifts are about the person who is getting the gift. Trying to push your values and interests on someone is not a very considerate gift. Don't use a gift as an opportunity to impose your tastes and values on people. A better gift is one that reflects the tastes and values of the recipient.
December 12, 2010
The article Estate Taxes an Historical Perspective from the Heritage foundation has a brief history of estate taxes. The document Estate Taxes : Ninety Years and Counting from the IRS has lost of information as well.
Estate taxes date back to the 700 B.C in Egypt. The first estate tax in the USA was passed in 1797. It was in the form of a stamp tax on wills. That one only lasted a few years before it was repealed. Later in the 1800's there were estate taxes imposed temporarily to fund wars. In 1916 the modern version of the estate tax was started. Since then it has been changed and revised numerous times to get to where it is today.
As of today in 2010 the estate tax is repealed for this year. The exact nature of the estate tax in 2011 and later is currently being debated. Below I look at the history of the estate tax from 2009 and before.
Here is a graph showing the top estate tax rate from 1916 to 2009
As you can see the top rate rose from 1916 to 1940's. From 1941 to 1976 the top rate was 77%. Since the 1970's the top rate has been dropping. Note that this is the TOP rate and did not apply to the entire estate.
There is an exemption for the estate tax and estates do not owe any tax on amounts below the exemption. The Exemption has gone up over the years. Here is a graph showing the value of the exemption from 1967 onward:
As you can see the exemption has been going up. But of course $100,000 in 1967 was different than $100,000 today due to inflation. SO to see a better idea of how that exemption translates I figured it would be good idea to plot the ratio of the exemption / personal income. Heres a graph of the exemption / personal income:
During the 1980's and 1990's the exemption was mostly flat around $600,000 to $675,000 so inflation eroded it. But then in the 2000's the exemption grew drastically to far outpace inflation or wage growth. In 1976 the exemption was 11 times the average personal income. The $2M exemption in 2008 was about 74 times average personal income and the $3.5M exemption in 2009 was over 130 times personal income.
Another way to look at the estate tax is the percent of estates that actually end up paying the tax. The IRS publication has that data in a graph form in Figure F on page 8. I reproduced it here:
You can see that the % of adult deaths resulting in an estate tax bill peaked around 7% in the 1970's but then dropped down under 2% by 2004.
December 10, 2010
Get Rich Slowly links to these neat Three Posters About Personal Finance
US News article via Yahoo on Why "Recession-Proof" Jobs Are a Myth makes a very good point. No job is really guaranteed as safe.
Dough Roller answers What is Tax Form 1040 Schedule R? and What is the Prime Rate?
FreeMoneyFinance has a trick for How to Get a Minimum of 2% Cash Back When Shopping at Costco or Sam's Club
Around two years ago in Sept. 2008 I first figured out My Current Asset Allocation at the time. I then posted a follow up on May 2009. Its been a while so its about time that I revisited that topic and look at our asset allocation again. I figured out the asset allocation by using the net work information that I collected at the end of Nov. 2010.
Here is how the asset allocations compare from 2008 to now:
Graphically our current asset allocation for end of Nov. 2010 looks like this:
Changes in each category from May 2009 to Nov 2010:
The biggest difference is that the real estate has gone down. As you might have guessed the value of our real estate has gone down. Plus our other assets have increased so the % shifts. The amount in stocks has gone up both because we've put more money into stocks via Roth IRA investment and our equities have performed well.
Quick definition of the different categories.
Real Estate -We own our house and some rental properties. We have a mortgage on our house and a couple of the rentals. The rental values are the equity after the mortgages. We have about $147k equity in our house and about $208k equity in our rentals.
Cash - This is cash assets held in checking accounts, savings accounts and retirement plans.
Pension plan - I have an employer provided pension plan. That money is managed by my employer so I have no say in its allocation. I'm 100% vested in the pension.
Equities - These are mutual fund and stock holdings in our 401k and IRA retirement plans. These investments are relatively high risk.
Bonds - A portion of our retirement funds are invested in stable income assets.
Employer Stock - I sold off my employer stock shares. Now the only stake I have in my employer stock is some old stock options that are work a bit right now.
December 9, 2010
My wife and I finally stopped procrastinating and bought our Christmas gifts. We thought about buying via Amazon but ended up just making a trip to Toy's R Us. One key reason was that we were worried the items wouldn't get to us in time if we bought them online. Of course that problem could have been avoided if we hadn't procrastinated.
I figured we probably paid a bit more for the convenience but I figured it was worth it in this case. However I wasn't sure how the prices would compare exactly. To find that out I decided to do a small pseudo random sample of toys and compare the prices on Amazon and Toys R Us. I decided why not compare to Walmart too. The toys I picked were kind of randomly selected but picked based on what I thought would represent a different set of popular toys for kids of different ages and interests.
Call of Duty Black Ops for PS3 = $54.96
LEGO Ultimate Building Set - 405 Pieces (6166) = $27.99
Barbie I Can Be A Cheerleader 2 Pack Doll Set - Barbie & Teresa = $42.99
Justin Bieber Justin Bieber Concert Kit 31050 = $29.99 (pre-order)
Toys R' US :
Call of Duty Black Ops for PS3 = $59.99
LEGO Ultimate Building Set - 405 Pieces (6166) = $31.99 (out of stock)
Barbie I Can Be A Cheerleader 2 Pack Doll Set - Barbie & Teresa = $21.99
Justin Bieber Concert Kit = $16.99
Call of Duty Black Ops for PS3 = $54.54
LEGO Ultimate Building Set - 405 Pieces (6166) = $29.97
Barbie I Can Be A Cheerleader 2 Pack Doll Set - Barbie & Teresa = not available
Justin Bieber Justin Bieber Concert Kit = $17.99 (pre-order)
The results are pretty mixed. The Call of Duty and Lego items are a bit cheaper at Amazon and Walmart than Toys R Us. The Barbie set and Justin Bieber items are cheapest at Toys R Us and way overpriced at Amazon. The Barbie item isn't even available at Walmart. I suspect the Barbie item is an older item that is now obsolete. Looks like the Justin Bieber item is new and may not be shipping yet but Toys R Us seems to have it. For both of the high priced items on Amazon they are being sold by 3rd parties rather than directly from Amazon.
Totals all 4 items : Amazon = $155.93, Toys R Us = $130.96
Totals for 3 available items: Amazon = $112.94, Toys R Us = $108.97, Walmart = $102.50
Who's the winner?
Overall Toy's R Us wins since they have all four items for the cheapest price but they lose because the Lego set is currently out of stock. Walmart wins on the 3 items they have but they are a loser since they don't have one item at all. Amazon since all the items are available but they lose since they are the most expensive any way you cut it. I see no clear winner here. Each has pros and cons. In the end I'd probably go with a combination getting the video game and Legos off Amazon and the Barbie and Bieber items from Toys R Us.
Of course this is just a random sample of 4 items and really doesn't prove anything. If I picked 1000 items I might find that the 2 high priced items on Amazon are a fluke. But this does at least demonstrate that you can't make a blind assumption that one retailer is cheaper than another in general.
I did not count up shipping costs. Amazon shipping is generally free if you buy $25 or more, but there are exceptions. Walmart will generally ship items to your local store for pick up for free. Toys R Us shipping is more expensive so they lose on that one but they have many local stores where you can get the items without paying shipping.
I also didn't figure sales tax since those very in every state. Amazon often wins on this one as they are an online merchant and you not charged sales tax usually (with the exception of Kansas, Kentucky, New York, North Dakota, or Washington). If you buy locally at a retail Walmart or Toys R Us you'll pay local taxes. The sales tax issue really depends on your state and how its charged.
Bottom Line: I don't see a clear cut winner. It depends on the items you buy and how shipping and sales tax works out for you. Be careful with some 3rd party items on Amazon.
December 8, 2010
The other day I talked about New Car Prices. When I made that article I also ran a chart of the prices monthly without seasonally adjustment. That chart is below:
In this chart I've added vertical gridlines to help show the regular annual pattern. Every year the prices start at a low point in August and then go up and then go back down.
Looking at the charts it would appear that August is the best time to buy a new car based on the seasonal cyclical change in prices. I wouldn't conclude it as a fact, but just an interesting pattern I observed.
The site Car Buying Tips says that there are two "best" times to buy new cars. They say that December is a good time to find end of year bargains while most people aren't shopping. They also say that July to October when "as new car dealers sell off cars at low prices to clear space for new car models". That second time period coincides with the low point in August.
Its also possible that the prices go up and down based on peoples buying patterns. Maybe people buy cheap cars in the summer for some reason and expensive cars in the winter. I don't know for sure that the prices of the cars are lower in August, but the amounts people pay are at least lower.
December 7, 2010
Back in Nov. 2008 I took a look at History of new car costs and average inflation At that point I showed that prices for new cars were fairly flat at the time and in the 2000's they were on a downward trend. The annual change in the 2000's up till 2008 was -0.4%. I figured I'd take another look at car prices over history to update it. I got the price index for new vehicles at the BLS CPI page. Below is the index value for the month of January from Jan. 1981 to Jan. 2010.
As you can see the trend since about 1994 is pretty flat overall but has been gradually going down. In 2010 prices went up a little bit compared to 2009.
If we zoom in a little more to show the last 15 years we see a little more detail:
A few things to note here. I'm showing just the January prices. The price month to month will vary some and I arbitrarily picked January just to keep the charts simpler. Also this is just an index so its not exactly representative of what a car will cost. Its more an overall picture of what people are paying for cars.
December 6, 2010
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