AMO Contact Lens Solution Recalled
If you wear contact lenses and you use the AMO Complete Moisture Plus solution, please note the product is recalled for possibly causing eye problems. Here's an excerpt of the press release:
"SANTA ANA, Calif.–(BUSINESS WIRE)–May 25, 2007–In response to information received today from the U.S. Centers for Disease Control and Prevention (CDC) regarding eye infections from Acanthamoeba, a naturally occurring water-borne organism which can contribute to serious corneal infections, Advanced Medical Optics (AMO) (NYSE:EYE) is immediately and voluntarily recalling its Complete® MoisturePlus(TM) contact lens solutions. … … The CDC estimates a risk of at least seven times greater for those who used Complete® MoisturePLUS(TM) solution versus those who did not."
Payday Loans, Anybody?
No, I'm not talking about borrowing a payday loan. We all know it's very expensive for the borrowers. If you treat the fee as an interest charge, the rate often reaches several hundred percent APR. You know, what's bad for the borrowers must be a good deal for the lenders, right? What about owning a piece of the action? Wouldn't it beat lending on Prosper ten times over?
Before you accuse me of being a cold blooded capitalist lack of morality or ethics, let me get this straight. Payday lending is a legit business regulated by the states. There are payday loan companies publicly traded on the stock market. Chances are you already own them through your mutual funds. For example a company called Advance America, Cash Advance Centers, Inc. (ticker symbol AEA) operates 2,900 payday loan centers in 36 states. The company is traded on the NYSE and it's worth more than $1 billion. Vanguard is a top institutional shareholder of that company.
Second, payday loan transactions are completely voluntary. The lenders provide a service which the customers use by their own choice. If there is a cheaper, better service, the customers will use that instead. If the customers don't seek out the best deals for themselves, it's not the vendor's fault, is it? The value of a product or service is in the eyes of the customers. I may not think a particular pair of shoes is worth $300, or a car is worth $40,000, but a lot of other people apparently disagree. The same goes for payday loans. The customers think the service is worth the price or else the lenders wouldn't be in business.
Patent on Roth IRA Conversion
If you have a Traditional IRA, perhaps as a result of rolling over a 401(k) plan balance, should you convert it to a Roth IRA? I heard on the radio program Marketplace (link to transcript) that someone got a patent on the thought process. I looked it up and lo and behold it's there. U.S. Patent 6,058,376 "Process for evaluating the financial consequences of converting a standard form I.R.A. to the Roth form I.R.A." Here's a quote from the summary of the patent:
"Disclosed is a computer-implemented process for evaluating the financial consequences of converting a standard format IRA to a new Roth form IRA. The process includes computing and disclosing the substantial federal income tax consequences involved in converting the standard form IRA to the Roth form."
More Hurdles and Breakage in Rebate Prepaid Debit Card
When I switched my prepaid wireless phone service, I was offered a free phone after rebate by prepaid debit card. That got me curious. What's wrong with plain ol' check? Isn't printing a paper check easier and cheaper than producing a prepaid debit card? There must be something in it for the company to issue a prepaid debit card instead of a check. What's good for the company issuing the card is likely bad for the consumers receiving the card. What's the catch?
I started my research with Googling vendors that offer prepaid debit card services to companies who issue rebates. Their pitches reveal what's behind this new phenomenon. For example, here's what Springbok Services said about why companies should use prepaid debit cards. From what I gathered, here are the benefits to the companies and potential pitfalls for consumers.
1. Consumer Spending Tracking. The company which issued the prepaid debit card gets to see what the consumer purchased with the card. I'm not sure whether they track it on an aggregate or individual level, but because they know which card is issued to which consumer, they *can* track it by individual if they want to. Data on consumer spending pattern can be used for marketing purposes.
401(k) Committee Chasing Performance
I received an e-mail from my employer's HR department this week announcing some changes to our 401(k) plan. Here's what they said (emphasis added by me, fund names masked).
The 401(k) Committee decided to remove the ABC Fund from the Plan due to poor performance for several quarters. The committee closely monitors all funds in the plan for the best interest of our plan participants. ABC Fund will be replaced by XYZ Fund. XYZ Fund's 10-year performance is in the top 10% of its Morningstar category through 12/31/2006.
Wow, the 401(k) Committee is tough and impatient. ABC Fund's managers had several quarters of poor relative performance and they were fired by the committee! What happened to investing for the long term?
Successful Business Strategy: Selling Hope
While reading newspapers on a plane, I discovered a winning business strategy: Selling Hope. The products you sell don't have to work as advertised. They may or may not. That's not the point. All you have to do is selling the hope that they will work.
There are plenty of examples for this strategy. Airborne is a popular vitamin and herb pack that allegedly helps people avoid common cold. Does it really work? I don't know. Some say it does. Some seriously doubt it. The uncertainty didn't prevent from it becoming popular though. It sells for about $1 per tablet while the regular multivitamin sells for 2-3 pennies per pill. Airborne does a good job selling the hope it will work.
Another example. Anti-wrinkle creams are much more expensive than regular moisturizers. Do they really work? I doubt it. But when you put it in a nice small container with an anti-wrinkle label, it starts selling at a much higher price. Nobody wants wrinkles, right?
China in Stock Market Bubble Madness
I browsed headlines on the Financial Times website last weekend. In case you don't know, Financial Times is the business newspaper published in Britain, similar to Wall Street Journal in the United States. I like Financial Times and The Economist magazine, also published in Britain, because they provide a global perspective which publications in the U.S. often lack. Anyway, I digressed.
What caught my attention was this article: Chinese investors in share-buying frenzy (Financial Times, April 18, 2007). The Chinese stock market sky rocketed last year and the rise continued this year. Everybody in China came out of the woodwork opening up brokerage accounts buying stocks. Here's a quote from the article. Emphasis is added by me.
» Read more …
Tax and Inflation Penalize Savers
I bought some EE savings bonds in May 2002. Today is the first day I get to redeem them without penalty. Each $100 saved back then is now worth $118.40. This is one of my worst investments in the last five years. My return on these EE savings bonds is 3.44% a year over the last 5 years. Inflation, measured by the Consumer Price Index, averaged 2.81% a year in the same period. So it looks like I came out slightly ahead of inflation. But wait, I have to pay tax on the interest. After tax and inflation, I lost money. I loaned my hard earned money to the U.S. Treasury for 5 long years. Now they paid me back less than what I loaned them. How sad. Tax and inflation penalize savers. No wonder Americans are said to have low savings rate. I think taxing inflation is wrong.
I-Bonds Fixed Rate for May 1, 2007
The Treasury Department announced today the new fixed rate for I-Bonds sold between May 1, 2007 and October 31, 2007. I previously guessed that the fixed rate would remain unchanged at 1.4% and I thought any change would be on the down side. Someone on the old Vanguard Diehards forum guessed it would go up to 1.8%. And alas, we were all too optimistic. The Treasury Department reduced the fixed rate on I-Bonds to 1.3%. The composite rate, including the inflation adjustment, will be 3.74% for I-Bonds sold in the next 6 months. Neither the 1.3% fixed rate nor the 3.74% composite rate is attractive relative to alternatives such as TIPS, T-Bills, money market funds or bank savings accounts. Goodbye, I-Bonds, don't call me until your fixed rate reaches 2.0%.
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