Tax Cuts in Fiscal Stimulus Package
Update on Feb. 14: The stimulus package has been passed by both the House and the Senate. The President is expected to sign it shortly. See the follow-up post for updated information.
Printing Money Confirmed
When I drove home from work a couple of weeks ago, I heard the Fresh Air program on NPR. The host Terry Gross was talking to someone about the government printing money. I wrote about her interview with Paul Krugman last November, in which she asked Krugman whether our government was printing money and Krugman said no. This time the guest didn't deny we are printing money but said it was OK to do so. For a minute, I thought it was Krugman reversing himself because the voice was similar to Krugman's. The guest was actually Dean Baker (Wikipedia bio), a different liberal economist.
Gross: We've been printing a lot of money to increase liquidity. What does that do to the value of the U.S. dollar? Is the dollar going to be worth less because we've been printing more of them? » Read more …
One-Time Credit Card Numbers for More Security
The sixth largest payment processor in the country Heartland Payment Systems disclosed recently their system was compromised by hackers with a piece of data sniffing software watching credit card data pass by between Hearatland and credit card networks. That system processes 100 million transactions a month. This had gone on for months until Visa and MasterCard alerted Heartland about unusual patterns of fraudulent activities. The Wall Street Journal quoted a credit card industry analyst as saying this could be largest credit card data breach ever.
While credit card companies typically reimburse customers against unauthorized charges, having your credit card number stolen is still a hassle. You have to get a new card number, update your recurring charges, and change your bill payment set up. It'll be best if your card data aren't stolen in the first place. If you have the right card, you can make your credit card number more secure by using one-time card numbers.
You need a card by Citibank, Bank of America, or Discover. These banks offer software that generates a one-time card number, officially known as a "controlled payment number." You can configure the expiration date and the maximum amount allowed for the one-time card. Once used, the card is tied to the merchant where it was used. If you gave the card number to XYZ.com online or your dentist's office over the phone, only XYZ.com or your dentist's office can use it. If you put the maximum at $50, they can only charge up to $50. If the card number is stolen, the thief can't use it elsewhere. They don't have your real card number.
Agape World and P2P Lending
I wrote about peer-to-peer lending, also known as P2P lending, in early 2007.
I didn't think it was worthwhile as an investment because there was too much credit risk. In April 2008, the SEC started requiring these companies to register with the SEC. During the registration period, these companies had to stop accepting new loan offers. Lending Club went first. It finished its registration after six months and reopened in October 2008. Prosper entered the process in October. It hasn't come out yet. Then a third P2P lending company, Loanio, followed suit in November 2008.
In NPR's Planet Money podcast on January 12, 2009 (fast forward to 05:40), the guest Clay Shirky, New Media professor at New York University, said that the SEC was wrong in shutting down peer-to-peer lending sites and requiring them to register before they can open for business again. Last December, Netbanker published an open letter to the SEC, urging them to "leave peer-to-peer lending alone." Was SEC wrong in shutting down P2P lending sites and requiring them to register?
Book Review: The Little Book of Bull Moves in Bear Markets
I read The Little Book of Bull Moves in Bear Markets by Peter Schiff. Peter Schiff is President of Euro Pacific Capital, a broker/dealer in Darien, CT specializing in international markets. He is known on Wall Street as a permabear which means he has been bearish on the U.S. economy and stock market for a long time. He also wrote the book Crash Proof: How to Profit From the Coming Economic Collapse in 2007 in which he predicted the economic recession in the U.S. We all know by now that prediction was correct. This new book The Little Book of Bull Moves in Bear Markets was written in the first half of 2008.
I picked up this book because I'm interested to see what Mr. Schiff has to say about what one should do in a bear market after he successfully predicted the recession and the bear market. If it delivers what the book's title says — bull moves in bear markets — everybody should want to know what those moves are. Unfortunately although he correctly predicted the bear market, his recipe for what people should do didn't turn out too well so far. Maybe those moves will eventually work, but we won't know until years later. It just shows how difficult it is to make predictions. You can see the recession coming but you can still prescribe the wrong moves. You have to be right in what will happen and in what to do. Being right in one but not the other doesn't help you make money. Here are a couple of things Mr. Schiff said in this book:
1. There will be hyperinflation in the United States. The U.S. dollar will collapse. Sell U.S. dollar-denominated cash and bonds. Foreign economies will decouple from the U.S. economy. Buy dividend-paying foreign stocks. Instead of hyperinflation, we are having deflation right now. U.S. dollar went up against most major foreign currencies. Foreign equities also dropped 40% or more, not much better or even worse than U.S. stocks. Staying in U.S. dollar cash and bonds would've been the correct move.
ItsDeductible vs DeductionPro for Valuing Donations
If you donate clothing and other household items to places like Salvation Army or Goodwill, the tax law says you can deduct the fair market value of your donated items. The IRS places the responsibility for coming up with a fair market value on you, the taxpayer. The places that accept your non-cash donations only give you a receipt for what you donated. They don't tell you how much the items are worth.
If you use the standard deduction, you don't have this headache. Charitable donations are included in the standard deduction. You don't have to separately track and value your donations. If you use itemized deductions because you have more deductions than what the standard deduction allows (state income tax, mortgage interest, property tax, etc.), or because you are subject to the AMT, you must estimate the value for your donations.
The two major tax preparation software TurboTax and TaxCut both bundle a deduction estimate module that attempt to solve this problem. The program for TurboTax is called ItsDeductible. The one for TaxCut is called DeductionPro. They both do pretty much the same thing: they put an estimated value on your donated stuff based on price information they gathered from various sources. When you say you donated a sweater, they tell you how much it's worth.
NYU White Papers on Restoring Financial Stability
I saw this in an ad on Financial Times. A number of business school professors from New York University wrote 18 white papers on the causes of and policy recommendations for the financial crisis. They will be published into a book later this year.
"In 18 short, targeted and definitive White Papers — each tracing the core of the problem, the policy alternatives, and a specific course of action — 32 academics, combining a solid understanding of financial economics with the practice of modern finance, suggest solutions, in the public interest, to the central issues of today's financial crisis."
How Long Can You Live On Your Credit Cards?
It's old news that credit card companies are cutting people's credit limits. I also read on FatWallet some banks paid people more than $500 for paying down their balance. I checked my three cards. None of them cut my limits. Maybe they just haven't got to me yet. Besides merchant fees, they are not getting any other revenue from me. I guess they are still OK with that. Every month I use about 15% of my available limits among three cards, and that includes paying a mortgage and a car loan with a card. If they want to reduce my credit limit, go ahead. I think the limits are too high to begin with. I like the questions reader Pelon asked in the comments to a previous post:
"What is a healthy borrowing level for the economy? What were we at before the credit market started to freeze-up? Where are we now? Are we trying to prop up something that is unsustainable or trying to get the market back up to a healthy level?"
Top 10 Banks in United States
Reader simplesimon asked in a comment to a previous post Too Many Banks:
"I’m interested in seeing some sort of chart laying out what percentage of individuals in the USA bank where."
Book Review: Rule #1 by Phil Town
I read the book Rule #1 by Phil Town while waiting for an oil change. As a book, it's been a success. It received 4-1/2 stars from 156 customer reviews on Amazon. It got on the BusinessWeek Best Seller List. It also got an endorsement from the former SEC chairman Arthur Levitt on the back.
However the first sentence of the book doesn't pass the smell test.
"This book is a simple guide to returns of 15 percent or more in the stock market, with almost no risk."
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