Charlie Rose - Sandy Weill / Anthony O'Reilly

I decide to start a series of collection of educational/informational clips I found online. The first one is an interview of Sandy Weill.

Brokerages' Fraud Protection feature

Let me continue my discussion on the selection of brokers. One recent incident illustrated that while the cost is very important in the selection of brokers, we can never omit the quality of the service provided. Just FYI, although this is not required by the SEC or Fed (unlike that of checking/FDIC or credit card), but the following brokers do offer some sort of fraud protection for brokerage accounts:

• Fidelity
• Ameritrade
• Etrade
• Schwab

Please check with the broker for details.

Checking, high yield savings and trading (II)

OK, let me finish this post before it gets too old. So if you follow my last post, and park the precious 25 grand green in your cash equivelent accounts at BoA in order to get free trades, here comes a bonus. In most states, BoA offered a souped up package for these cash rich customers. It is called "Advantage Checking", and the minimum to qualify without monthly fee is exactly 25 grands. I did not intend to run a commercial for BoA, so I won't copy the whole promotional material from BoA's website. But I personally enjoyed the following service offered by advantage checking:

1. Free checks -- this becomes less and less attractive due the fact that the new online bill pay are becoming more and more practical and efficient.
2. Free cashier check. This comes in handy sometimes. I suspect that you've got free money orders as well, but I never tried.
3. Free domestic wire transfers. This is indeed very help if you need to pop money into some brokers with slow ACH clearing. You will never miss another big surge on the market...
4. Free overdraft protection. With this feature, I will make a direct deposit in my high yield money market savings. Bravo!
5. This is really not a feature of *advantage* checking but all BoA checkings. But I still list it here in case that you don't know. BoA has entered into a lot of exclusive deals with overseas banks and you can actually withdraw money from a lot of foreign ATMs commission/exchange fee free! They called it Global ATM Alliance. For the full list, see BoA's website.

OK. Enough is enough. I really don't want to run a commercial for them for free. But now if you think this advantage checking is even more attractive than the brokerage free trades, you actually don't need to pop $25k cash to get this account for free. The balance counting toward the advantage checking is different from that of the free trades. In fact, both checking, savings, credit cards and brokerage present value in BoA brokerage count. For example, if you have $10k SPY ETF in BoA investments, $10k balance transfer on a BoA credit card and $5k in a savings account, you actually qualifies to get this service for free. Not bad, huh?

See Part I:
Checking, high yield savings and trading (I)

Wikipedia could shut within 3-4 months?

Well, I have to admit that this is not exactly a post talking about how to make money, but suggesting you to spend money. But after the astonishing news that wikipedia could close in 3 to 4 months due to financial hardship from digg, I was first really shocked. I am not sure if it is just an extreme method for them to raise money, but I really feel obliged to reach my pocket and make my share to have this gem float on the internet. After all, I have benefited immensely from this project and I certainly believe that by donating a small amount of money will benefit me in the long run, not to mention that at least you can get a tax break after april 2005 (Last time I wanted to donate to them, they were still not a 501(c)(3) corp).

Read

Fox viewers are more Chevy buyers...

Quote from a news report that Fox will start a business channel:

• A major advertising exec I know once confided that "Fox viewers are more Chevy buyers than BMWs." Hence, the lower ad rates for Fox than CNN. A business channel could be seen as an attempt to go upmarket.
  

Lol! I for one am not a fan of Fox-style programs.

Second Thoughts on Firstrade

I grumbled a little bit on Firstrade's price change yesterday. However one relief is that I just saw a post on their blog. At least they are willing to hear our complaints. So here are mine:

1. 1. As I said yesterday, I don't blame them for raising the fees. I am a firm believer that nothing is free and it has to be beneficial to both parties for any deal to last. However they need to improve their services. From my experience, their CSRs are not as helpful as Fidelity; funds transfers are rather slow at Firstrade, again it is instantly via Fidelity's moneyline. I can go on with this list, like that their website is not that user friendly; the portfolio feature has been broken for a couple of months already; they don't provide too many third party research...
2. Their NTF fund list is quite limited. Many excellent fund families, such as Third Avenue, Kinetics, Oberwise, IIRC, TRP etc, are not NTFs there but are free at a lot of their competitors.
3. There is no announcements on any automatic investments. If it is $10 as well for that, it is really a bad bad news for dollar average investors.
4. Last but not least, I hope that they can give a break for IRA accounts holders. $10 can be a substantial amount for a $4000 investment.

Still overall, I don't think it is a bail-and-switch strategy. I have been a happy customer and they have a great choice of funds. At least I have until April 2nd to watch and make my decision.

Firstrade changed their mutual fund price structure!

I just received this email 5 minutes ago from Firstrade. Quote:

Starting on April 2, 2007*, please be advised of the following changes to our mutual fund policy at Firstrade:

• A $9.95 commission will now apply to No-Load mutual fund trades. This allows us to maintain the lowest mutual fund rate in the online brokerage industry.
• No Transaction Fee (NTF) and Load funds will remain commission free. For an updated mutual fund list, please click here.
• The early redemption period has been decreased from 180 calendar days to 90 calendar days.

I am so sad to see that they followed what Scottrade did in 2004. I know it is hard to blame them since it is a business and they have to make money. However this will definitely change my brokerage preference since I don't think that Firstrade have many advantages other than their fee structure. I'll re-examine all discount brokerages and post my thoughts later.

From WSJ: The Surprising Borrowing Habits of the Rich

The following are copied from today's WSJ, I will come back and make my comments later:

Link

Excerpt:

• Today's rich are more comfortable with risk. In a world awash in cash, many of today's wealthy made their fortunes by leveraging and making big bets with their businesses. They're applying the same principles to their personal wealth.

Full text:

Most news about the "indebted consumer" focuses on the middle class. As the rich bask in record incomes, those in the anxious middle are borrowing heavily to bridge the gap between their incomes and rising costs of living.

Or so we're told. A closer look at the nation's personal borrowings shows that the rich are piling on debt faster than the middle class -- though for very different reasons.

According to the Federal Reserve Board's Surveys of Consumer Finance, the nation's richest 1% loaded up on $342 billion in new debt between 1998 and 2004, the latest year for which data are available. (The 1% represents households with net worths, including primary residence, of at least $6 million.) Economists say that debt number has probably continued to grow since 2004, because interest rates remain low by historical standards.

Disproportionate Shares

Just as the rich control a disproportionate share of national wealth, they also account for a disproportionate share of debt. The richest 1% now hold 7% of the nation's debt, with a total of $650 billion in borrowings, up from 5% in 1998.

Debt for this group grew faster than for any other group in the Fed survey. Total debt held by the top 1% increased 150% between 1998 and 2004, compared with growth of about 100% for those in the 50th-to-90th percentile wealth range. The rich, in short, have joined the great American borrowing binge. Call them the leveraged elite.

After buying up second (and third and fourth) homes and funding ever-more lavish lifestyles, today's risk-friendly rich are embracing debt as a way to expand fortunes and fund increasingly acquisitive lives.

There are, of course, some differences in how the rich use their borrowed funds. Unlike many lower-income Americans, who rely on credit cards and home-equity and other loans to meet living costs, the rich often use debt as a financial tool. Most of their debt is for mortgages on their primary or nonprimary residences, according to the Fed data. They may have plenty of cash to pay for that $20 million mansion, but they'd rather keep the money in higher-returning investments or businesses.

This "strategic debt" involves taking out a loan at, say 7%, and investing the money in the financial markets for a return of, say, 10%. Debt may be a necessity for the middle class, but the wealthy are "making a sophisticated economic decision," says Arthur Kennickell, an economist with the Federal Reserve.

And on the whole, their balance sheets remain healthy. According to the Fed, the debt held by the top 1% amounted to only 3.7% of their total wealth. That compares with 24% for Americans ranked in the 50%-to-90% groups.

Today's rich are more comfortable with risk. In a world awash in cash, many of today's wealthy made their fortunes by leveraging and making big bets with their businesses. They're applying the same principles to their personal wealth.

Eric Hadar, owner of a New York private real-estate investment firm, borrows from U.S. Trust for both his real-estate business and his personal finances. "Real estate is really about leverage," he says. "So I apply some of the same principles to my personal finances."

'There is a drive by the merely rich to keep up with the obscenely rich.'
Whether it's buying a house or other personal asset, Mr. Hadar first calculates whether a loan makes economic sense. "It's an arbitrage. I won't just go out and borrow money to buy a boat, because there's no economic justification for using debt for that," he says. "But if I can make more than my borrowing costs from a loan, I'll consider it."

For instance, he's thinking about buying a jet for business and personal use and says he may borrow up to 80% of the purchase price, since the jet saves him time and adds value to his business. He adds, "My litmus test is, if I can't pay it back in a worst-case scenario, I don't borrow."

Beyond Mortgages

With some measures showing prices for high-end goods outpacing the broader inflation rate, the wealthy are increasingly looking beyond mortgages to use debt for buying beachfront homes, yachts, cars and other collectibles. Private bankers say loans for jets are among the most popular.

In fact, some sociologists and economists say the rise in wealthy people's debt stems in large part from the growing pressure among the elite to keep up with richer peers. The biggest disparities in wealth today are among the rich, with mere millionaires getting shoved aside by decamillionaires, centimillionaires and billionaires.

So the haves are borrowing more to keep up with the have-mores. Those in the 95th percentile to 99th percentile of wealth have almost twice as much debt as the top 1%, as measured against assets. Economists and wealth managers say it's the single-digit millionaires who are becoming the most stretched, as they borrow to match the lifestyle of even-wealthier people.

The result, says Dalton Conley, a sociologist at New York University who studies status, is even more debt. "What we're seeing is the top 1% struggling to keep up with the top 1/10th of 1%," he adds. "And those people trying to keep up with the top 1/100th of 1%. There is a drive by the merely rich to keep up with the obscenely rich."

Checking, high yield savings and trading (I)

It seems that I am too ambitious by trying to talk about some many things in a single post. It is a little bit but it is forced by the often cross promotion of financial products. Therefore I decide to talk about it in two installments.

Late last year, Bank of America's brokerage branch got instant famous for offering 30 free trades to clients with $25k in their cash and equivalents accounts. This idea evolves from here. So to qualify, one have to put $25k in their BoA savings, checking and CD accounts. 30 free trades definitely sounds sweet, however savings and money market accounts' yield at BoA aren't that heart warming. Last time I checked, it is a pesky 1.5% APY or so. However, there are two particular high yield MM at BoA that is not so shabby, both yields around 5% and comparable to the online competitors. Here are the links:

NEA Account
AAA Promotion

So this serves perfectly for the balance requirements. You gotta have some cash/savings in hand anyway. And since you can get comparable yields in these accounts, why don't we park here to get some free trades?

See Part II:
Checking, high yield savings and trading (II)

Risky Journey?

There are a lot of uncertainties in life, to some extent, it is a risky journey. Fortunately, we invented tools to combat, share and hopefully reward from this inherent risks. Imagine what the world will be like if there is no insurance, equity or mortgages.

This blog will be devoted to the record of my pursuit of alpha in this risky world. Due to the nature of a personal blog, I will mostly focus on simple financial products, such as banking, credit cards, mutual funds, vanilla equity trades and so on. However, as a professional-to-be, I will from time to time post some *exotic* ideas and introduce some alien products and I hope this could be fun.

The goal, after all these endeavors, is so that one day I can leave all this behind and embark on a new era of life journey.