Best of blog posts for week of November 4th

Every Friday afternoon I share some of the more interesting or notable posts that I have seen in the personal finance blogs and other sources for the past week.

fivecentnickel points out an easy way to Get 1,000 Delta SkyMiles for Free

MyMoneyBlog talks about Supply and Demand: Technical vs. Humanities College Majors

Which is something I've pointed out in the past myself when I looked at What Majors Graduates Get Bachelors Degrees in

GetRichSlowly  takes A Closer Look at Bonds

-

The Muni Bond Armageddon that Didn't Happen

Hey do you remember how all the municipal bonds were supposed to start defaulting in mass?    It was around 11 months ago that Meredith Whitney made a prediction that we'd see massive defaults on municipal bonds because governments simply couldn't afford their debt levels.   She was on the show 60 Minutes and declared that

"There's not a doubt in my mind that you will see a spate of municipal bond defaults,"  ... "You could see 50 sizeable defaults. Fifty to 100 sizeable defaults. More. This will amount to hundreds of billions of dollars' worth of defaults." and later "' It'll be something to worry about within the next 12 months,"


The prediction seemed to make sense to many people at the time given how our economy and state of municipal finances have been.   But its been nearly a year and we've seen nowhere near the amounts of defaults she predicted.  

In fact in the first half of 2011 the amount of defaults dropped significantly from what was seen in 2010.   see : Meredith Whitney Loses Credibility as Muni Defaults Fall 60% from Bloomberg.

They say : "Standard & Poor’s counted 28 municipal-market defaults totaling $511 million in the first six months of 2011, compared with 53 totaling about $1.55 billion in the first half of last year, according to a report from the New York-based credit- rating company."  

The Bloomberg article also pointed out that the record for municipal bond defaults was $8.15 billion in 2008.  Note that Mrs Whitney was talking about sizable defaults in the order of 100's of billions of dollars.    

Not only did muni's not fail in mass in some sort of Armageddon, the article Time’s Up Meredith Whitney, Muni Prediction Was Wrong points out that muni. bonds performed well as an investment.   They say : "the ML Muni Master Index is up 9.5 percent this year"    You can verify that muni's are up yourself by seeing the performance of the ETF iShares S&P National Municipal (MUB).

Default rates on municipal bonds have been historically very low.    So far this year the default rate is only 0.03%.    Thats not much at all and its actually lower than the historical rates.

When you hear these kinds of dooms day predictions you need to be critical of them.   There are a lot of financial pundits and alleged gurus out there who make drastic predictions.   These predictions don't often pan out.  Next time you hear such a prediction from Meredith Whitney you should know better.


-

Lottery Odds and an Odds Calculator

Do you know the chances of  winning the multi million jackpot prize in the lottery?     The obvious answer is 'very small'.    However I'm talking about the actual mathematical probability. 

I would assume that most if not all state lotteries publish the odds of winning their lottery games on their website.   If you want to know the odds of your state lottery then I'd check out their website.    It should probably be posted there somewhere.   You could also do a google search for keywords including "odds winning" and your state lottery.   e.g. for the Wisconsin state lottery search for "Wisconsin lottery odds winning".

The odds for the multi-state Powerball lottery are published on their site.  The odds of winning the Powerball jackpot are 1 in 195,249,054.   They have smaller prizes with crappy odds too.   For example the odds of winning $4 is 1 in 123.   Clearly the Powerball is a poor gamble if you look at the odds.

If you want to know the odds of any lottery style game then you can figure them yourself using the lottery odds calculator.  

You can verify the odds of the Powerball jackpot yourself by using the calculator.   The Powerball is a 'multi-pool' lottery game since the bonus powerball is from a separate group or 'pool' of balls.   There are 59 balls in the main number pool and you need 5 of 5 to win and then there are 39 balls in the secondary pool and you need 1 to win. Here's what it looks like using the calculator:

Of course I don't think its really necessary to verify the odds that the lottery program quotes.  Its hardly something they'd lie about since its easily verified and such blatant fraud would serve nobody.  

Why do lottery odds matter?   Well for one you should realize how very high the odds against winning really are.   Hopefully we've all heard by now that winning the lottery is very very very rare occurrence and you're more likely to be hit by lightning.    Another reason to know the odds is so that you can pick the lottery games with the better chances.   If you're going to play the lottery (for fun only) then you should at least pick the one that has better odds. 

-

SaveUp : Reward Your Saving with Free Prizes

A new financial rewards site named SaveUp is starting Beta today.   SaveUp gives people rewards for saving money and beating down their debts.   You can use this link to sign up for the beta and get 100 free bonus credits.   



Here is what they have to say about it :

'SaveUp is a new FREE way to reward you for your responsible financial actions. Earn credits by depositing in your savings accounts and making payments to reduce your debt. Use these credits to play for real prizes like new cars, vacations and a $2,000,000 grand prize. Over time you can earn badges, take challenges and accomplish goals which make you more financially fit.'

I was able to check out SaveUp in a limited early test run.   Its easy to get setup and the site is simple to use.



You can gain credits through several ways.   You get a certain amount of credits for connecting SaveUp to a savings account or credit card account.    You can get more credits by meeting certain challenges or by doing things like watching educational videos.  One challenge presented was to not use my credit card for two days.  Watching a 2 minute educational video will get you credits too.  All of the various ways you get credits help you facilitate or build on your saving.  

There are three ways to play for prizes on SaveUp.   You can do an instant win, a raffle or the jackpot lottery.   

Instant play is kind of like a scratch off lottery ticket or a game of Keno.  The instant play prizes can be big items like a new car or an expensive vacation.  You pull a random number and see if your digits match the winning number.  If you get enough matching numbers then you can win a prize.    The game is played instantly.   The instant games have a grand prize if you match all the digits or smaller value prizes for matching only some digits.  For example, matching 6 out of 10 digits might win you a $25 value prize and matching only 2 out of 10 digits would get you 5 of the SaveUp credits.

The Raffle games work like any other raffle.   You spend your credit to get a raffle ticket.   Then periodically the drawing is held and a winner announced.   Typical prizes are $100 gift cards or things like a iPad valued at $500.  They have various major merchants like Macy's.

Jackpot play is like getting a lottery ticket for the power ball.   The chances of winning are low but the prize is huge.   They have a $2,000,000 jackpot prize.  I've mentioned before that I actually enjoy playing the lottery.   I think its a fun way to fantasize about what you'd do if you won the millions.   Of course I don't expect to win and its not part of my retirement planning.   Playing the SaveUp jackpot is a free way to satisfy my lottery enjoyment.

The only 'negative' I could come up with personally is that they limit the number of times you get to play each day.   So you can only enter drawings, lotteries or do an instant win game a certain limited number of times.   I would have liked more plays in a given day.   But this setup has merits since it keeps you coming back more often to get your daily plays.    The fact that I wanted to play more is not really a bad thing.  

I would certainly recommend SaveUp.  Its FREE and it certainly doesn't hurt to play free raffles or enter a free lottery game.   I think SaveUp can help incentivize some people to save more.   Thats its overall goal and I like the idea.

Bottom Line : SaveUp is an innovative new free program where users can win prizes and help encourage their personal savings habits.

-