It’s been nearly a year since my post “On my Death, Please, Take a Breath.” In that post I relate a story about how a fellow who inherited an IRA within a trust panicked, and lost nearly 25% of it to taxes. Instead, he could have taken limited distributions and paid little to no tax at all. I don’t know who advised this person, but all the work his sister put in to the planning of her estate evaporated.
Recently, I received a comment on my “Suze on Variable Annuities” article from last July. A woman wrote that she was advised by her bank to put the money in to an annuity. Now, whether you like or don’t like annuities isn’t really the issue. I’d be just as angry if she said she was put into an S&P ETF, but then went on to state she had no idea what that meant. I do feel that bankers are drifting (have already moved?) into the same category as most other scam artists preying on the uninformed. I am still waiting for her reply to tll me what, exactly the product is so I might take the time to read the prospectus and explain to her what she now owns. The fact that her ‘banker’ did not do this is criminal.
I recall a number of years ago, I was making a deposit at my local bank, and as I stood to write out the ticket, I heard an old person ask about T-bills vs CDs, the T-Bill happened to be slightly higher that week. The banker sitting at his desk told her, “The CD is a little lower, but it’s FDIC guaranteed. There’s no guarantee on the T-Bill.” And another sale was made. I don’t know on what planet the “full faith and credit of the US treasury” doesn’t trump the FDIC, but I thought better than to disrupt the place, and provoke a fight.
Joe
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We are now over 28% above the March 9 bottom in the S&P, one of the best run ups since the depression. A bear rally? Maybe, but obviously, all data appears in hindsight, and only when that bottom is well behind us and we are obviously in a growth cycle, will it be clear. On one hand, Lawrence Summers declared the free fall is likely to end in the next few months, but Thomas Lee chief US equity strategist at JP Morgan Chase is predicting an 8 to 10 percent drop from here.
Rates on 30 year mortgages have dropped to a record low 4.61% and it appears that credit is starting to free up. Freddie Mac and Fannie Mae securitized nearly $145B in mortgages in February, a $1.7T annual run rate. That kind of money has to have an impact on the funk we are in. I remain cautious, myself, but guardedly optimistic.
Joe
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With the time demands of tax season, for today I’ll offer one bit of advice on the Money Merge Account. Just Pass Over it.
Back next week with some more substantial MMA observations.
Joe
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I received a credit card offer this past weekend from Discover for “Zero Interest for for life = No Worries”. Wow! But then I read the fine print which started with a 3% transfer fee, not too bad if the minimum payments are 2% of the balance, it still seemed okay. Then I read more and started to worry. If I made a late payment (you know, sometimes the mail is late, or two envelopes stick together), the default rate jumps to 29.99%, ouch!
From there, it only gets better. The way to keep the zero percent rate on the transferred balance is to charge a minimum of $50 each month that will be subject to a 15.99% rate. Of course, payments are made to the zero rate balance first so the balance at 15.99% just continues to increase. In the very fine print further down, they offer “if more than 90% of your balance consists of special rate balance transfers, we may increase your minimum payment due to a maximum of 4% of the new balance. So, if I am approved and receive a credit line of $10,000, and immediately use it to pay down a higher rate card, not only do I risk impacting my FICO score by maxing out new credit, but my minimum payment will start at $400, along with the requirement that I charge $50/month at the higher rate. There’s also a nice warning that merchants don’t always post charges immediately, so that required $50 purchase may sit at the merchant and miss your billing cycle, in which case your zero interest rate evaporates for good.
Sorry, too many rules, too many ways to screw me over. I can beat the mail risk by making direct payments on line, but that last risk isn’t one worth taking, I’ll thing this offer goes right into the shredder.
Any other crazy deals like this in your mailbox? Drop me a comment.
Joe
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