On Growth Track

Fed cuts key interest rate by 0.75 points to improve the liquidity in the market and halting the  the economy from getting into a recession. But This does nothing for the rising inflation seen at the moment. But the fed statement does mention the concerns of inflation, so its keeping an eye on the inflation. We may not expect such steep cuts in interest rate in future if inflation remains at current levels. The real rate of return currently is negative.

This is a link to the analysis video for Feds recent rate cut

Another video link

and this one from Reuters

We are definitely going to see a fall in rate of interest in out saving and money market accounts, and an increase in gas prices. The gains in the stock prices may be temporary. The home prices are still not coming down where buyers would rush in to buy and put an end to the stalled housing market.

Last month my wife had to visit ER as she had severe headache and high fever. The doctors could not diagnose the what’s wrong and wanted a blood test, one of the nurse in ER collecting the blood were so unskilled that they could not get blood from her veins. The other nurse had to come and do it for her. Finally she was diagnosed of viral infection and discharged with some prescription medication. Now we are waiting for the bill but the medical care was not up-to the standard expected in ER which we have told the hospital in a feedback form. Should we complain or contest the bill?

US news article blog by Kimberly Palmer reports more problems with her hospital visit.

The statistics there are startling. Each year billing errors run more than $100 Billion in health-care alone.

Wrong billing in cellphone, Internet, wrong refund, rebates missing …, redeeming airline miles, I can go on what we can expect to be hit with.

A wrong bill on the service providers part is a serious drag on our personal resources and the economy as a whole. Its a hassle to call them and go through the telephone tree and speak with an agent, sending email works may be in two working days or so. Then you have to actually talk with the agent who may not want to recognise the problem or email more redundant information.

But its clear that nothing is going to happen till we call them up or email. Only when we as consumers become vigilant by calling and registering complaint we can get them to work better.

Terry Cullen has a nice article on how to complain effectively . The most important thing she mentions is to be patient in conversation and be armed with all the information.

To bypass the phone tree she recommends gethuman and Bringo for long hold times.

So look at your bills to see any errors, get all the information try the above links if you need to speak to a rep and be patient when talking.

when you want to make a behavioral change you have to do it repeatedly for a lot of days till it becomes a habit. Once it becomes a habit, it remains with you.

 Starting and getting to the point it becomes a habit is most vulnerable part of it.  As Jerry Seinfeld puts it Skipping one day makes it easier to skip the next. So one must use a Bold visual remainder to see if one is on the track every day doing the tough task of undergoing the change.

The most important thing is to focus on one. We all have limited resources to invest, its important to invest more than the critical amount and not dilute the efforts we want to put in for change. So pick one change you want to implement and focus on it every single day. Once we have done one change it will have a slow ball effect on the future change we want to make and change will become easier for us.

These can be very simple things like going out for a walk, exercise, eating the right meal, packing lunch for work the next day etc.

  Another important thing is to do it regardless of the outcome. Change does not happen overnight and its no use measuring the outcome before change happens. It will just make us worry more if its working and keep it away from making the change happen. 

With focus, practice and visual feedback on how are we on track we can change for good.

 Is the feel good factor important in our life? The answer is overwhelmingly yes.

 A lot of time work we seemed to be involved in does not move at the desired pace, it taxes out mood.

 Having a bad day at office can show its effect long after we are out of office. But we must remember that we have a choice, and that’s very helpful. We think of steps to take, think of Plan B … Plan C. Also we can think of getting help from others in future for a similar situations and be more effective then. Just doing this we start having a sense of grounding and control. This can free out mind and elevate out mood, help us feel positive and see the light.

Now when I talk to my spouse, kids, call up my parents, friends, I am in a better mood. The communication becomes more meaningful and so does the relationship.

 Feeling good is also important when we shop. Why? when we feel good and contented we accumulate less unnecessary stuff, we are a better judge of the value and cost involved. Now that’s also very practical as a Penny saved is more than an Penny earned.

 So life is about feeling good by making good choices even when odds are against us.

-PN

These are times of subprime mortgage mess and liquidity crunch. Banks are partly to be blamed for risk assessment along with the Fed.

But new credit scoring information can change things.  These enhanced credit scores will record how good are you with paying your utility bills and rent. Many other things like public records, tax liens, criminal records go into these credit scoring models. Be careful, No bounced checks for bills, it can pull your score down.

These new scoring models will be extremely helpful for those starting on a good Job but with no history.  This is welcome since it gives a better idea of who is responsible with paying bills. Experian is late in this game but TransUnion and Fair Issac are already using these information in their models.

It may take a few years before these new developments trickle down the marketplace of Loans but for immediate credit score solutions with limited history try http://prbc.com.

Believe it or not, high IQ does not translate into a lot of wealth. This is a finding from research at Ohio State University. Each additional point in IQ means $200.00 more income every year, on an average.

So why does high IQ not mean higher wealth?

Its all about habit of saving and not about income. And the good news is any one can save by using simple rules and doing so regularly. Buying what’s appropriate, living in ones means are the basic. IRA, Roth IRA, 401K, must be a part of every one’s saving scheme, if applicable. High yield bank saving accounts, low expense index mutual funds and low cost index ETF’s do not require a lot of research and are good vehicles to start ones personal research for investment.

Consistency is more important in the long run and not the brilliance of moment. Overconfidence and arrogance associated with IQ can lead one to make mistakes while being humble and learning from mistakes of ones and others and following simple rules consistently can lead to growth of investment.  Growth habits keeps one ongrothtrack.

PN

please follow these kinks for the more information on this interesting research

http://researchnews.osu.edu/archive/divwlth.htm

http://biz.yahoo.com/fool/070518/117949647104.html?.v=1

ETF’s Have recently gathered a lot of interest and attention all over the financial world. But what does it mean for the individual investor?

For an individual investor, the most important thing is to preserve capital and reduce cost and tax implications while making regular investment. Overly aggressive investing require lot of time and resources and cost more in trading and taxes.

The basic old school of ETF’s remains attractive because of the following reasons.

• It offers the benefit of indexing at low cost. This can compare with index mutual funds also. The low cost structure comes from the fact that there is no need to keep paying fund mangers to actively allocate stocks. The ETF SPDRs (SPY), which tracks the S&P 500, charges investors 0.09% and the similar index fund Fidelity Spartan 500 Index Fund (FSMKX), charges investors just 0.1% annually.
• Tax structure benefit for ETF’s is because they don’t sell the underlying stocks when investors depart, wile the Mutual Funds sell the stocks to pay the investors and that means a capital gains tax hit for remaining investors.
• Instant pricing offered by ETF’s is desirable over pricing at timing of market closing which is typical of Mutual Funds as one can take real time action instead of waiting for the day to end. HoweverETF prices have Ask-Bid spread (nice analysis @mymoneyblog) at any time and are not traded at NAV as the mutual funds. High ask and bid price difference can mean accumulating trading loss for active traders but even buy and hold investors should be watchful of spread and track the patterns in historic data.
• ETF’s have no restrictions on amount to invest, number of times it can be traded, exit cost and financial penalties as associated with Mutual Funds which ask for minumum investment, front load, back load or early redemption fees.
• ETF’s offer a way for diversification in foreign markets, and commodities. This when linked to an established index is transparent enough and still offers the benefit of low cost.

There has been a proliferation of ETF’s recently, its best for individual investors to stick to established indexes and ETF’s in which the cost is low. A low cost ETF usually means a large investor base so that they can over the expenses of running the ETF easily. This has been a problem for some ETF’s and they had to close down while their long therm investors had to take unexpected tax hit. Also individual investor can look up at the historical data for a longer time for a well established ETF in terms of Ask-Bid Price.

With the brokerage costs coming down the old school ETF’s can be attractive for individual investors. Do your research and let ETF’s or low cost index mutual funds out you ongrowthtrack.

PN

Time and money are the most valuable resources one can have. There will be a series of articles as I get more clarity on these to manage these things better.

The key to best utilization of time and money is being effective. Effective to get the things done in the right way with the minimum of resources.

What does it take to be effective?

We will come to the answer if we understand that all things are created at-least twice. This is really a powerful idea.

First they are created in the playground or the sketchpad of mind, they undergo easy modifications as we muse on. Then takes place the action to actually create it. This is similar to how some advertisements work on us, so there is no doubt its effective.

The good news is that it works, so we can use it effectively for us. This is how we can do it. When we are musing about something desirable we step back a little in time in our mind to trace how we are making it happen. In other words we are going through the stages to make it happen. A lot of stages may not be clear at this time. This unclarity, confusion is a blessing in disguise (more below).

As we go through the steps more to see the details we understand the following:

• What are the steps, what are the different possible correct order of events
• what is absolutely essential, regulations
• what will take the most resources, time / money, getting an estimate if them
• what will take special ability, where we will need help.

But, such helpful thoughts can happen if we allow them to happen, some things are helpful in this regard.

• We have to allow ourselves to be in solitude and not be busy all the time.
• Record our thoughts, this is similar to saving money. We need to benefit from all the good thoughts that come to us at some point later.
• Be comfortable with uncertainty and deal with it. Uncertainty can be uncomfortable, but that does not mean we should avoid it. We must first admit the uncertainty, try to think in different directions, or get inputs from other sources to deal with it better.
• Observing without a reason. If we do everything with a reason, we miss ideas that are not aligned with out reason. To clear out mind, remain nimble and thoughtful we need to look/listen/feel different things without any overbearing thought at leisure and enjoy the experience.

When we have helpful thoughts, we are able to deal with uncertainty. We become more understanding and become more honest with us to make better choices. Making thoughtful choices keeps us ongrowthtrack.

-PN

This week the Business Week magazine has posted an interesting cover story which can be summed up as Being Poor is Costly, Frugality and Discipline paves the way out.

It has a lot of examples of how poor people continue to remain poor. One can blame the industry, but still a real person is making choices (uninformed in most cases).
Why does it cost so much to be poor, its more complicated than we think.

• Lack of access to affordable financial products and services. Any time there is a credit check, either financial service is denied to poor people or comes at very high price. This is true for getting any loan, mortgage, insurance and credit cards.
• Feel rich quick marketing. This really gets people into trouble as the initial cost for financing the so desired stuff seems less but the total cost of ownership is can be as much as twice when compared with someone who has good credit.
• Another aspect of feel rich quick marketing is that it pushes a lot of stuff to people which is something they never need. It takes a discipline, thinking through and accepting frugality as a virtue to say no to stuff one does not need.
• Not Shopping around enough. Shopping the right thing takes effort as well as discipline, its also requires doing homework collecting information and analysing ahead of purchasing. The more one does such kind of homework the better one gets at it. But before one can undertake such a homework people need to know this is indeed possible to do than just relying on the first offer they see jump in excitement.

What is the way out? Its simple but takes time, patience and discipline to follow.
Embracing frugality and appropriateness, discipline of doing the homework and analyzing the details can help one stay out of financial trouble. But these virtues are equally applicable in other aspects of personal growth, may be in slightly different ways. As one gets on the growth track with patience and discipline, moving ahead on the track becomes easier, one finds more opportunities to continue on the growth track and it becomes self sustaining and nurturing as out self-discipline and habits improve.

When we make the correct choice, we move on the growth track.

PN

BusinessWeek

Consider the following for what’s worth your dollar and more:

Do you buy Premium or regular?

Do you buy spring clothes in late winter?

Did you buy the best prosumer camera / cellphone / laptop/ gadget in the market?

Do you upgrade to business class / first class by paying wile travelling?

you deserve the best

Chances are, this message is a seed for an answer of yes to any on the above questions.

While we enjoy the feeling of what feels best and what money can buy we loose sight of whats appropriate and how appropriate is the best.

By Appropriate, I mean what gets the job done with the minimum extras, just like most of us would choose regular fuel if premium is not strictly recommended.

However things may get complicated when we perceive a deal as in the airline upgrade, and there is a bit of us that deserves the best to complicate it. How does one deal with such a situation? There is no easy way out, but personal experience or information from other’s experience. When we are ready to do a even headed comparison of value and cost regardless of MSRP and our feel good feelings, we are making a good choice.

To start with

Prepearation ahead of time.

Shopping around and having the data recorded.

documented experiences from other sources (good blogs are great) are your best guide.

Next

when we have the data and armed with knowledge we will know what are the key questions to ask and what are the considerations for getting what’s appropriate. This will certainly help you deal with the most pushing sales person face to face or on the phone.

Don’t give me more, don’t give me less, don’t give me the best, let me get what’s appropriate for me after I have done my homework.

PN