NetBank Shuts Down, ING Takes Over
Online bank NetBank was closed by the federal regulator today. FDIC arranged its takeover by ING Direct. This is consistent with what FDIC usually does, as described in my previous post What Happens When a Bank Goes Out of Business.
1,500 unlucky customers have $109 million over the FDIC insurance limit. That's an average of more than $72,000 each! I don't know what these customers were thinking. The trouble at NetBank was known for quite a while. Previously NetBank announced they would merge with EverBank. But the merger collapsed.
iPhone or XO Laptop, Which Is Cooler?
If you want a cool gadget for $399, would you buy an iPhone or two of these XO Laptops, one for you and one for a child in a developing country?
The XO Laptop is a cool product from the One Laptop per Child project. It is designed from the ground up as a rugged, inexpensive laptop for children in the developing countries. The goal is to get the cost down to $100 each. It's not there yet, but today you can donate one for $200. Starting in November, you can pay $400, give one to a child in a developing country, and get one for yourself.
Subprime Induced Correction Is Over
It's not official yet, but I suspect it will be shortly. The summer 2007 subprime induced stock market correction is over. The emerging markets index already went over its previous peak by about 4%. The S&P 500 and MSCI EAFE indexes are about 1% shy of their previous high. Given the daily volatility, the stock markets can easily reach new highs in a few days. The bottom was made on August 16, on the same day I posted How Low Can It Go? Did I know it was the bottom back then? Of course not. I said
"So far it looks like a garden variety ~10% decline. Is it the bottom yet? Who knows? Can it get worse? Sure."
Cascading Asset Allocation Method
[Updated on October 3, 2007. Added links to follow-up posts.]
I haven't forgot my promise to Ted and Brad to write about my asset allocation and rebalancing thresholds. I wanted to make a wizard but I gave up, for lack of time and programming skills. Maybe some of those days. Better get this out before I leave for vacation.
Here I introduce my Cascading Asset Allocation MethodTM (CAAM). I googled and I found no evidence of anybody else using that term. So I'm claiming a trade mark on it. 
The Cascading Asset Allocation Method involves answering a series of questions. The questions go from the most important to the least important. You can stop anywhere along the way and still have a reasonable asset allocation. The best part of it is that you will understand why you end up with a particular allocation.
Missing Name on Forbes 400 List
Forbes released its annual list of 400 richest Americans last week. There is one prominent name missing on the list.
His name is John Bogle, founder of The Vanguard Group. Mr. Bogle started Vanguard in 1975. Vanguard created the first index fund for retail investors a year later. Today, Vanguard manages over $1 trillion assets. The Vanguard 500 Index Fund (VFINX) is the world's largest mutual fund. Millions of investors benefit from the low cost Vanguard index funds you hear about everywhere. For such an achievement, John Bogle has very little to show for himself. He's not on the Forbes 400 list.
Edward ("Ned") Johnson III and his daughter Abigail Johnson are on the Forbes 400 list. Between the two of them, they have more than $25 billion. They made their fortune from Fidelity Investments, which manages mutual fund assets similar in size to Vanguard's. Charles Johnson and his brother Rupert Johnson Jr. are also on the Forbes 400 list. They have $11 billion. They made their money from Franklin Resources, which manages Franklin Templeton Funds. With about $620 billion under management, Franklin Resources manages 40% less assets than Vanguard.
Reader Survey, Help Wanted
Since I started this blog last October, I wrote about 130 posts, not counting the carnival announcements. I aim to write original and informative content but I'm not sure how I'm doing toward that goal. According to Feedburner, I have a small audience of 250 subscribers. I'm sure some of them are bots. That still leaves me at least 100 human readers. I think my readers are special — whoever can put up with my posts have to be special.
I'd like to take this chance to get feedback from the readership. The fact that you are reading my blog probably means there's something you like. I just don't know what it is. There's probably something you hate as well. I don't know what it is either. Please kindly take a few minutes and let me know what you think on this survey I created using SurveyMonkey. Just 6 multiple-choice questions plus 1 free form question. It shouldn't take long. I'd take the compliments but I'm also more interested in constructive criticism. Of course you are welcome to put your thoughts in the comments to this post as well. Thank you for your help in making this blog better.
Just a heads up. I'm going on vacation to a remote place for 4 weeks starting in the second week of October. I will have *no* access to newspaper, radio, TV, or the Internet during that time. It will be a true getaway. No blogging, but I won't forget about you. I will post more frequently than usual in the next week and half, to make up for the lack of posting when I'm gone. If you have something in mind you'd to see before I leave, please let me know in the comments. Thanks.
I-Bonds Fixed Rate Pre-Guess for November 2007
I have written off I-Bonds as an attractive investment or even as a substitute for a 1-year CD. In case someone is still interested in I-Bonds, here is my pre-guess for the fixed rate to be announced on November 1, 2007.
For the inflation adjustment part, we have 5 out of 6 months of inflation data. If the September CPI comes out on October 17 at the same level as in August, the semi-annual adjustment will be about 1.25%.
For the fixed rate part, I use the 5-year TIPS real yield as reference. The current 5-year TIPS real yield is about 2.2%. It was 2.06% on April 30, right before the previous announcement. My guess is that the I-Bonds fixed rate will stay the same at 1.3%, or go up to 1.4% if the Treasury department feels generous.
Fidelity mySmart Cash $100 Bonus Received
[Update: Fidelity is no longer offering $100 bonus for opening an account.]
I forgot about the $100 bonus when I opened the Fidelity mySmart Cash Account, which I think is the best checking account . I registered for the bonus over the weekend, not sure if I will get it after the fact. I received an e-mail yesterday saying the bonus was approved. Today the $100 bonus showed up in my account. That was fast! In addition, new customers to Fidelity may also qualify for up to 25,000 United MileagePlus miles or American AAdvantage miles .
* Don't worry. None of the bonus links are referral links. Just posting as a happy customer.
When Are Free Stock Trades Not Free?
[Updated on October 3, 2007. Zecco requires $2,500 minimum after Jan. 1, 2008. Added links to related posts.]
Zecco and WellsTrade (a subsidiary of Wells Fargo) offer commission-free trades. Zecco requires no $2,500 minimum balance. Only stock and ETF trades are free. Mutual fund trades are not free. Wells Fargo's PMA Package requires $25,000 minimum which isn't too hard to qualify. Its free trade offer includes mutual fund trades too.
Free is good, right? To the extent you are going to make the same exact trades, yes, free beats not free. But have you bought on impulse stuff you don't really need simply because it was a good deal? I have, many times. The stuff I bought ended up being a waste. I just collected more junk. I can see I'm not alone. Same thing may happen when the trades are free. Speculation is human nature. We want to prove we are right. Not having a transaction cost makes the urge for speculation stronger. Trading simply because of free trades is not a good idea.
Carnival of Personal Finance #119
Carnival of Personal Finance #119 is up at Blunt Money. My entry was Best Checking Account Which Is Not a Checking Account. The host did a very interesting crossword puzzle. I skimmed through the articles. Here are some of the topics I'd like to comment on.
Loonie at Parity with the USD? at Million Dollar Journey. The Canadian Dollar already traded above 1.00 USD on some days. I asked on the Bogleheads forum whether it is unprecedented. It isn't, but the last time the Canadian dollar was worth more than the U.S. dollar was in 1976, more than 30 years ago. See the chart at the end of the article 'Strong currency, proud currency' from Canadian newspaper Globe and Mail.
Can You Resist a Bargain? at One Frugal Girl. It's hard to resist buying something if it's super cheap. I have a post written up on this exact topic, although from an investing angle. It will be posted tomorrow.
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