Free By 50

The True Cost of Driving

2012-06-01T07:59:00.002-07:00

This is a guest post by Robert Wilkes who is an on the road freelance blogger for TruckersReport as well as a regular poster on their Truckers Forum.

You're probably aware of how much you pay for each gallon of gasoline, as well as the cost of your annual auto insurance premiums. What many people don't know, however, is how much their cars cost to drive overall. Small costs can add up over time, making it more expensive to spend your free time driving than you might think. Here's a look at the cost of operating a car, plus a few ways to make yours less expensive.

Costs by Vehicle Class

Not every car costs the same to operate. In general, larger vehicles cost more, especially those with multiple luxury features. According to the AAA motor club, small sedans and compact cars are the cheapest to own and operate. Drivers who accumulate about 15,000 miles per year pay a little less than $7,000 annually for the privilege, at a cost of 44.9 cents per mile.

That cost goes up if you own a medium or large sedan, however. These vehicles cost 58.5 and 75.5 cents per mile, respectively. A four-wheel drive SUV costs slightly more than a large sedan at 75.7 cents per mile driven, but a minivan with a comparable footprint and cargo space costs only 63.4 cents per mile.

Cost Breakdown

The cost per mile to drive your car can be broken down into several major categories. Fuel costs are the most obvious and easiest to track, but you also pay for new tires and regular maintenance on your vehicle. The cost of owning a car is also increased by insurance payments, taxes, license and registration fees, and financing arrangements. Depreciation, or the decrease in your car's value over the course of the year, makes up another large chunk of the cost of driving.

Making Driving Cheaper

If you love going on long drives in the country or if you're a big fan of road trips, high costs aren't going to deter you. However, they can certainly make it more difficult for you to spend as much time on the road as you'd like. By analyzing your car and your driving and spending habits, you can cut your costs and drive more.

Figure Fuel Costs

Drivers of newer hybrid vehicles have an easy time determining gas mileage. If you have a normal car, this is more difficult. Figure your fuel costs by filling the tank completely. Write down your odometer reading. The next time you fill up, write down how many gallons you add, how much you pay, and the odometer difference. This information plus an online trip calculator can help you decide if a journey is worth the money.

Track Maintenance and Repairs

It's easy to toss your receipts from the mechanic in a folder and forget about them. Consider saving all your repair bills for a year. Add them up and divide the result by your mileage, which most mechanics helpfully track. This will help you see how much you're paying to keep your car running, with the normal wear and tear costs.

Check Paperwork Costs

Don't forget to investigate your insurance, registration and other costs. Many of these are fixed by state law, but some can be pared down. If your car has been paid off, you may be able to lower your insurance coverage, for instance. Just remember that this comes with added risk.

When you keep your driving costs in mind, you actually give yourself the power to get more out of your car. By monitoring what you pay and adjusting your habits accordingly, you can pay less and still enjoy your regular drives.

--

You Should Love Mopping Floors

2012-05-31T07:59:00.000-07:00

Over on FreeMoneyFinance they wrote recently “Do What You Love” Is Bad Advice and in the comments someone quoted this :

"Your work is not supposed to make you feel amazing and wonderful all the time. It’s work."

Exactly. It's work.   Its called work because its work. Its not called "happy fun time".

I don't really understand why this expectation that we should love our work started and why so many people buy into it.

I mean what if I started preaching to everyone that you ought to love mopping the floors?   If you don't love mopping your floor then you must be doing it wrong.   Keep changing how you do it until you love it. If you don't love it then you're the problem.   Is the floor too big? Well maybe you should downsize your home.   Buy different mops. Get one of those robot floor things.   I LOOOVE mopping my floors and you should too.   You don't like mopping?   Its you... you're broken.   The only true way to live your life is through loving mopping.

See how silly that sounds?

Yet so many people want to accept the idea that we should love our jobs. Why should I be expected to love work any more than I love household chores?

Right about now theres someone out there thinking how they actually DO love household chores. That person will comment how they love mopping.   This just adds to the silly argument. Of course some people love mopping floors and some people love their jobs.   But you people are in the minority and that doesn't mean the rest of us are supposed to change our lives to match you. But those people will be held up as the example. See? If Bob loves mopping floors then it can be done. Look at how happy Bob is. Why are you so miserable?   You must be doing it wrong. Have you tried a different brand of cleaner?

We mop the floors because its necessary.   We don't have to love doing it, but we do have to do it. Jobs are similar.   People work at a job because its necessary to earn a living.   You don't all have to love your job but you do have to make a living somehow.

--

STILL House Shopping 18 months later

2012-05-30T08:33:00.000-07:00

My wife and I started house shopping in Sept 2010. We were still shopping in March 2011. Our home search continued in Sept. 2011.   We're still looking after about 18 months.

The market was fairly slow over the winter months and the house shopping slowed down since nothing much appealing came up for sale.   There were a few houses that came by that were interesting but not a lot.    In the past month or so the market has really started to get more active and we're seeing several homes put up for sale each week.

One failed offer

After many months of searching we actually finally made an offer on one house only to end up being outbid by a competting offer.   That experience was a little frustrating. We actually looked at the house then didn't make an offer fast enough before someone else made an offer and a sale went pending.   Losing it disappointed us, but then a few days later that deal fell through and we were able to put in our offer.   But the day after our offer the original deal was back on and we lost out.   It was a nice house in a great neighborhood.   The price was around $450,000 and I don't recall exactly how much we offered.   Since it was priced pretty low, I don't think we offered much lower than asking.

Loan pre-approval

This week we finally gathered up all the documentation required to get a pre-approval on a loan.   I submitted the documents to our mortgage broker earlier this week and I'm waiting on the results. We have had a pre-qualification for a long time but thats not the same as a real pre-approval.   The pre-qualification is more of a 'rough estimate' on our qualifications.   At least thats my view of it.   The pre-approval however is an actual approved mortgage amount.    We wanted to get pre-approved for a couple good reasons.   First it will help us make a quicker purchase.    Second, having the pre-approval already done will also tell us how much of a mortgage we can actually qualify for.     The broker indicated we'd qualify for a loan much larger than we really want, so I don't expect a problem.

More cash, cheaper houses, lower interest rates

The whole time we've been looking our cash balance has gradually grown. At the same time the prices of homes have gone up and down a little bit. Today interest rates are at 30 year lows at around 3.7% level. Combined these trends have made a house more affordable as far as impact to our bank balance and in terms of the monthly mortgage payment.

Here's the trend in finances over the period we've been looking :

	Feb-11	Mar-11	May-12
Cash on hand	$120,000	$150,000	$175,000
Cost/ sq ft	$164	$166	$161
Cost for 2500 sq ft	$410,000	$415,000	$402,500
Mortgage rates	5.10%	4.00%	3.75%
Down payment	$82,000	$83,000	$80,500
Mortgage payment	$1,780	$1,585	$1,514
Cash left	$38,000	$67,000	$94,500

The cost / sq. ft. figure quoted above is the median for the ZIP code we're looking in. The actual homes we've looked at vary quite a bit. In the past coule weeks we've seen homes that would come in at $148 / sqft versus $193/ sqft. The first was a foreclosure that needed some work and the other was a pretty nicely updated home in a nice neighborhood that was probably over priced.

Looking for 2700 sq ft up to $500,000

Right now we've mostly settled on a home of around 2700 sq. ft. in size. It seems that what we want in a home fits at that size roughly. We've also gradually increased the price of homes we've looked at up to the $500,000 level. As we looked at more and more homes and failed to find what we want, we gradually looked upwards in price. This is of course not a great trend, I'd of course much prefer that we could find a home we want for dirt cheap. But we're found that the kind of homes we want are closer to $450,000 to $500,000 range. The lower interest rates and more cash in our bank account has made it feasible for us to consider spending a bit more.

--

Taxes in Retirement

2012-05-29T07:46:00.002-07:00

One major aspect of retirement planning is the tax bill you'll face in retirement. Figuring your future tax bill has a couple major implications. First the tax expense itself is a major line item in your budget and you should plan appropriately.   You don't want to figure out a post-retirement budget and totally neglect or severely misjudge your tax obligations.   Also the taxes you pay in retirement will help determine if a pre-tax retirement fund or post-tax retirement fund is appropriate.

Most people face lower tax bills in retirement.    Income is lower and senior citizens get some special tax breaks. There is a common fear today that taxes will inevitably go up in the future. This may be true to some extent but taxes are quite variable based on income level and its unlikely taxes will go significantly for low/middle income earners. Overall though the tax breaks and lower income of retirees should generally outweigh future tax hikes.

There is a general exception to this. If you are in the top tax bracket during your earning years and you also expect to be in the top tax bracket in retirement then you may see higher tax rates post-retirement. But that situation likely only applies to the top 1% of income earners in the population and for the other 99% of us we're much more likely to see lower tax rates post retirement.

Taxes post-retirement come in several forms.   WE pay taxes to the federal government, usually states have income taxes and property owners have property tax bills. Lets look at each of these and discuss how your tax rates could change after retirement.

Federal Taxes

For example sake lets say you currently make $100k in wage income today.   You are in the middle of the 25% tax bracket. You also normally pay 7.65% into social security and medicare.   Thats a combined marginal tax rate of almost 33% and an effective tax bill of approximately 20% or $20k. When you retire you stop paying SS/med so thats a 7.65% tax cut effectively. But of course you don't still have that $100k income and you probably have more like $80k right?   Since you were making $100k you have a good SS benefit and $25k of your income is SS. Only 85% of your SS is taxable so thats more like $76k taxable income.   That $76k taxable income would put you in the 15% margin bracket in todays rates and give you about 10% effective tax rate or $7600.

So if nothing changes in the tax laws and your income pre-retirement is $100k and $80k post retirement your tax bill will drop by approximately $12,400. The effective tax rate will go from 20% to 10% and your total marginal bracket including FICA will drop from 33% to 15%.

Do you think that marginal taxes rates are going to go from 15% to 33% for retired people making $80k??   Do you think politicians are going to double the effective tax rates for a married retired couple from 10% to 20%?

I sure don't. That's kinda silly. For anyone who thinks this is feasible or likely within the next decade or two then I'd challenge anyone to find two politicians in our federal government who want to raise taxes on ANYONE by 18% marginal.

You may have notice I put a qualifier of 'within the next decade or two' in that last sentence.   I would admit that 40 or 60 years from now things could radically change in our government.   It was only 50 years ago in the 1970's when top marginal tax rates were 70% and now the top rate is currently half that at 35%.    You really can't plan for 50 year time periods.   50 years from now the Martians may have taken over after we blow ourselves up with a nuclear war with India after the solar flares knock out all the electric grids and the zombie apocalypse... oh.. sorry.. what were we talking about? Oh Yes, taxes in the distant future are anyones guess and not something you can predict nor plan for.   If you'd have told your grandparents 50 years ago that taxes would be cut in half by now they'd have probably scoffed at the idea, yet it happened.    Nobody can predict government policy 50 years into the future and anyone trying to do so is just taking blind stabs in the dark.

State Income Taxes

The majority of states do not tax social security. That is probably the biggest reduction in state taxes for retirees.   States also usually have some sort of income tax cut for senior citizens.   Usually there is a larger exemption of some sort. So often your tax bill is a little lower simply due to the age based benefit.   Many states do not tax pensions in general : Alabama, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, New York, and Pennsylvania.   Few people have pensions nowadays but for those who do this can be a considerable benefit in some states.

Between the various tax benefits for senior citizens in the various state income tax systems, most retirees will see sizable drops in their state income tax bills post retirement. But this is quite dependent on the state and your financial specifics.   I won't make any broad generalizations about the future of state taxes since we've got 50 different states with varied fiances and political climates.

Lets look at an example. Say you live in California with its relatively high state taxes. Pre retirement you have an income of $100,000 and your CA tax bill is around $3700.    Post retirement your income is down to $80,000 total but they don't tax the $25,000 from social security so your taxable income is just $55,000. Also CA has an extra tax credit for senior citizens.   As a retired couple with $80,000 income your CA state income tax is down to just $652.    Thats about a $3000 tax cut in your state taxes after retirement.

Of course every state is different and state income taxes treat retirees differently. In some states you may not see a significant change in your state tax bill and in other states your taxes may be dropped to zero. The future could hold anything here as well.

Property Taxes

This one varies from state to state generally and may also vary between cities or counties within each state.   So there are likely 1000's of different systems for property taxes across the nation.   However many states and local governments offer deferrals, discounts or exemptions on property taxes for senior citizens.   Usually such programs have an income limit but many seniors can qualify.

Going back to the California example. Say you live in San Mateo county.    There is a program in CA which gives property tax assistance for seniors and disabled individuals but they limit it to people with incomes under $40,000.    In our example the post retirement income is $80,000 total so that would be too high to qualify for the property tax assistance.

Other taxes

Most of the other taxes we pay are consumption taxes based on a % of purchases.   General sales and excise taxes fall into this category.   I don't know of any special sales tax rates for retirees so I don't expect thats common at all but feasibly I guess it could exist somewhere.   For the most part though I think sales or excise taxes are pretty predictable as a % of your spending and likely won't vary post -retirement other than any changes in spending amounts.

Estate taxes are another major category of taxation that some retirees do need to be aware of.   Estate taxes however only come into play if you're a millionaire. If you are a millionaire and likely subject to estate tax then I'd recommend working with an estate planner.

--

Whats a Jumbo Loan? Why should you care?

2012-05-28T08:32:00.000-07:00

My wife and I have been gradually home shopping.   We're in no rush to buy but still looking since prices are good and interest rates are very low.   I was talking to our mortgage guy and he pointed out that the maximum loan before you get to the "jumbo" loan is $417,000.   (The limit is higher $625,500 in Alaska, Hawaii, Guam & U.S. Virgin Islands).

Whats a Jumbo loan?

Simply put a jumbo loan is a loan that is larger than the government sponsored FannieMae or Freddie Mac will purchase.   Normally Freddie / Fannie will buy loans from banks.   To sell a loan to them the bank needs to ensure the loan conforms to standards. Such a loan is a 'conforming' loan.   But Freddie/ Fannie won't buy very large loans and the limit is the threshold between a conforming loan and a Jumbo loan.   Jumbo loans are the term for loans larger than the amount Freddie/Fannie will buy.

Why do you care?

Jumbo loans are a bit riskier and harder to resell for the banks.    Therefore they charge higher interest for a jumbo loan.

How much more do they cost?

The spread between a conforming loan and a jumbo loan is generally between 0.25% and 1%.

Lets look at an example : I compared the rates for a $416,000 conforming loan and a $418,000 jumbo loan on Amerisave.   The conforming loan could be had for a 3.625% rate with $404 in points/fees and the jumbo loan was 4.375% with $108 point/fees.   Thats a 0.75% spread. The payments were $1897 and $2087 for the conventional and jumbo respectively.     Thats a difference of $190 per month at todays low rates.   Thats a pretty big deal.

If you can help it you should avoid jumbo loans.

Of course you don't want to pay an extra 0.25-1% on your mortgage if you can help it. So you should do what you can to stay within the conventional mortgage guidelines and avoid jumbo rates.
One tactic is to bring more money towards the downpayment to avoid the higher interest costs.   For my example above the loans are on the threshold and the $418,000 loan would cost you $190 less per month if you brought $2000 more to closing to instead borrow just $416,000.   Of course few people are borrowing just at the verge of Jumbo rates and its harder to bring $100,000 extra to the table if you want to borrow $515,000.   Another way to try and avoid a jumbo rate is to get a secondary mortgage on top of your primary.   So if the house costs $600k and you have $120k for a downpayment thats still a $480k loan which is in the jumbo range. If you get a $400k primary loan and a $80k secondary loan then your primary would be a conventional rate loan.    Such second mortgages can be harder to qualify nowadays.

--

Tracking More Predictions from Money Magazine

2012-05-27T09:13:00.004-07:00

A few days ago I looked at some financial predictions for 2012 that were reported by Money magazine. It was a mostly mixed bag of failure. I found 3 more general economic predictions in that issue and we'll talk about those today. Keep in mind these predictions are for the year 2012 and we're only about 6 months past when the magazine was pointed.

Jobs   -- Forecast : 8.5%   Actual: 8.1%

On page 86 the magazine indicated an expectation that unemployment would be 8.5%. Today the April 2012 unemployment rate sits at 8.1%.

Housing -- Forecast : Sales of 4.8M homes and prices up 0.25%, Actual : sales 4.6M and median prices up 10%.

Page 74 they said that 'The median expectation among more than 100 economists and real estate pros surveyed by MacroMarkets is that home values will inch ahead by a mere 0.25%." and that "Freddie Mac forecasts that only 4.8 million homes will be purchased in all of 2012"   The reality so far in 2012 is a bit different. According to a Bloomberg article the sales are at a 4.6 million annual rate as of April but median prices have jumped 10% year over year from $161,100 in April '11 to $177,400 in April '12.

Gold prediction by Suze Orman -- Forecast : $2100 by 11/2012.   Actual : $1570 level as of May 2012

Money reported a tweet from Suze Orman she made in Oct. 2011 where she predicted that gold will be "$2100 by 11/2012"    and recommended having 10% of your portfolio in the shiny stuff.   I found her reiterate the $2100 target on Nov. 10th last year    Gold started the year 2012 about $1600 and hit a high of $1781 in February. Today its back down to $1570 level.

Generally I'd say all 3 of these predictions are wrong at least so far...

Unemployment is 0.4% better than they expected, Home prices are up 10% and gold has not gained the $500 or +30% increase per Ormans prediction.

We'll have to wait till the end of the year to make a final conclusion.   But for now the forecasts aren't proving very accurate.

--

Best of Blog Posts for Week of May 25th

2012-05-25T17:58:00.006-07:00

Every Friday afternoon I share some of the more interesting or notable posts that I have seen in the personal finance blogs and other sources for the past week.

fivecentnickel discusses how to handle a Bank Error in Your Favor?

MyMoneyBlog looks at how you can Pay Your Mortgage With a Credit Card Via ChargeSmart
Its generally not a good deal since there are fees in the 2-4% range but it might help you max out some credit card bonuses.

FreeMoneyFinance tells us The Eight Tax Rules
and FMF also tells us that “Do What You Love” Is Bad Advice which is a feeling I've shared in the past.

--

You Can’t Cook and Eating Out is Expensive; Now What?

2012-05-25T08:47:00.004-07:00

This is a guest post from Sydnee Lax who is a freelance blogger and occasionally writes for delivery.com, a site she loves using to find Food Delivery Local - particularly Chinese Delivery services.

When it comes to food and dining, most budgeting advice revolves around finding bargains in the grocery store and cooking three meals a day at home from scratch. While that might work well for some, it can be a challenge for those who don't know how to cook or who simply don't feel comfortable in the kitchen. Thankfully, there are plenty of ways for you to cut back on your food budget without spending hours each day behind the stove. Here are six ways to enjoy affordable meals without cooking.

1. Find Restaurant Coupons

The simplest way to pay less for all of your favorite restaurant meals is simply to use coupons. Coupons can be found in dozens of different places, whether you are trying to save at local restaurants or in large chains. Stop by your local travel office for great discounts that are advertised for visitors. Anyone can pick up these free flyers and coupons to save money on meals. You can also find coupons in local magazines or even online by checking the restaurant's website.

2. Purchase Gift Cards Online

Many restaurants and social media sites allow individuals to buy discounted gift cards online. These gift cards can be purchased from the restaurant's website or even from third party sites that offer discounts on group purchases. It is not uncommon to find great deals like $30 gift cards on sale for as little as $10. Buy these whenever you can to enjoy more at your favorite restaurants without paying full price.

3. Skip the Extras

Many restaurants will get you in the door by advertising their affordably priced main courses. Although you might think you are being thrifty by ordering the cheapest main course on the menu, the extras like appetizers, drinks and dessert can quickly add up. Cut the price significantly by only ordering a main course and sticking with water. You can enjoy a prepared sweet treat or soda at home, without cooking, for a fraction of the price.

4. Enjoy Affordable Weeknight Delivery

Delivery is often the best way to get food in a hurry after a long day of family obligations or work. The only problem can be how expensive the meals are. Whenever possible, try to take advantage of weeknight specials from your favorite delivery spots. Many pizza places and Chinese restaurants offer discounts on Tuesday or Wednesday nights when their business is slowest. You can enjoy specially priced items at a fraction of the full cost.

5. Microwave Meals

If restaurant meals are simply too pricey, even with discounts, then you may need to consider dining alternatives that still don't require cooking. Microwave meals have come a long way in the past few years. Instead of frozen chunks of meat and potatoes, there are ethnic dishes, crispy pizzas and fresh vegetables that can all be microwaved in a matter of minutes.

6. Frequent Diner Cards

If you eat out regularly at the same one or two restaurants, ask for a frequent diner card if they are available. Often these are swiped with each purchase and give you freebies like desserts or discounts on your purchase at each visit. Other times they need to be stamped but net you a free meal after four or five visits.

If you don't enjoy cooking but you can't afford to eat full price restaurant meals each night, there is a third option. These tips can help you to enjoy delicious meals each night without cooking or blowing your food budget.

--

S&P Credit Ratings for each State

2012-05-24T08:21:00.010-07:00

Yesterday we looked at credit ratings for nations. Today we'll look at the ratings for individual U.S. states.

Here is the list of the S&P ratings for state governments as of July 15 2011.

Delaware	AAA
Florida	AAA
Georgia	AAA
Indiana	AAA
Iowa	AAA
Maryland	AAA
Minnesota	AAA
Missouri	AAA
Nebraska	AAA
N. Carolina	AAA
Utah	AAA
Virginia	AAA
Wyoming	AAA
Alaska	AA+
Idaho	AA+
Kansas	AA+
New Mexico	AA+
N. Dakota	AA+
Ohio	AA+
Oklahoma	AA+
Oregon	AA+
S. Carolina	AA+
S. Dakota	AA+
Tennessee	AA+
Texas	AA+
Vermont	AA+
Washington	AA+
Alabama	AA
Arkansas	AA
Colorado	AA
Connecticut	AA
Hawaii	AA
Louisiana	AA
Maine	AA
Massachusetts	AA
miss	AA
Montana	AA
Nevada	AA
New Hampshire	AA
New York	AA
Pennsylvania	AA
Rhode Island	AA
West Virginia	AA
Wisconsin	AA
Arizona	AA-
Kentucky	AA-
Michigan	AA-
New Jersey	AA-
Illinois	A+
California	A-

The ratings do change gradually over time but only gradually.

The table I got the list above from was on the PewStates.org website. They also have an info graphic that shows the history of upgrades and downgrades for each state from 2001 to 2011.

The TaxFoundation website put together a nice graphical map showing the ratings by state.

The actual data is from Standard & Poor and they have specifics for each state buried among all the municipalities of each state on their website. BUT.. you may need to register and log in to get to full reports.

--

Credit Ratings By Nation

2012-05-23T08:14:00.009-07:00

You probably heard that the U.S. credit rating was downgraded recently. But even with a step down we're still among the highest rated nations. Check out the following graphic gizmo from Chartbin.com to see how our nations credit rating compares to other countries around the world:

via chartsbin.com

Citation: How Moody's, S, ChartsBin.com, viewed 22nd May, 2012, .

The embedded graphic doesn't fit very well into my article column. If you have difficulty with this version then visit Chartbin directly for the full size version.

--

$100 Apple iTunes gift card for $80

2012-05-22T12:28:00.009-07:00

BestBuy has $100 iTunes gift cards for $80 right now. You can get either the electronic email version or a physical card mailed with free shipping.

This is a sale price and I do not know how long it will last.

I know a lot of people use iTunes and and it seems to me that 20% off is a pretty good sale price.

I'd link to Ebates for an additional 1-3% cash back reward but they don't give cash back on gift cards.

I heard about this on Slickdeals.net

-- This article may contain referral links which pay this site a commission for purchases made at the sites.

6 Month Check up on Some 2012 Money Magazine Predictions

2012-05-22T07:38:00.015-07:00

I was thumbing through a back issue of Money magazine that I had lying around my house.   The Money issue interested me because it was the December 2011 year end issue with the cover declaration 'Make Money in 2012'. Its about 6 months later so I thought it would be fun to check in on some of their advice and predictions and see how well they've fared.

On page 72 of the issue there is an article about investments that has some predictions from 'Dr. Dooms' for the 2012 outlook.   The for pundits are all long standing bears who "are still bracing for Armageddon."   Here is the advice given by each:

Nouriel Roubini : "Favor U.S. stocks over European equities."

Peter Schiff : "Avoid dollar-denominated assets. Buy gold and silver."

Marc Faber: "Keep a quarter in cash, a quarter in gold, a quarter in real estate, and a quarter in stocks."

Henry Kaufman: "Buy stocks in firms with strong balance sheets".

Silly thing is that they can't all be right because for the most part they contradict one another.   For example Roubini and Schiff seem to be directly at odds.   Who do trust? I think its anyones guess.

Lets look at them individually and see how well that advice has panned out...

Roubini: All he's saying is that he thinks the U.S. market will perform better than European.   We can check that by comparing board U.S. based market index versus a European index.

For Europe we can use VEURX.   It was trading at $22.93 at the open of the year and is now at $21.64.   Its down 1.3%    In the US we can use the VTI ETF.   VTI opened at $65.41 and is at $67.65 today so its up 3.4%.

Schiff : The advice here is to just buy shiny metal.    Kitco has data on historical gold and silver prices.   Gold opened at $1598 per ounce and is currently at $1592.   Thats a loss of 0.3%.     Silver opened at $28.78 and is now at $28.39.     Thats a loss of 1.3%.

Faber : This is a much more specific and diversified strategy.   Doesn't seem like a bad investment mix in general except it may be a bit conservative with 25% in cash and 25% in gold.   We can assume the cash investment is flat.   The gold is down 0.3%.    For the real estate I'll use the VNQ REIT ETF. VNQ started at $59.05 and is at $62.45 today which is a gain of 5.7%.    Faber wasn't specific about what stocks to invest in so I'll just assume the broad US market which is up 3.4%    Combined the recommended asset mix would be up 2.2%

Kaufman : Buying stocks with strong balance sheets could be a little vague but I would interpret it to mean stocks that are in a 'value' segment. I guess you could also assume he means large cap stocks but large cap companies aren't all necessarily carrying strong balance sheets. Working with the assumption that he means value stocks I'll pick the VIVAX fund to represent value performance.   VIVAX opened the year at $20.79 and is now at $20.79 so it is flat so far.

My verdicts are :

Roubini : CORRECT - his prediction that U.S. markets would be better than Europe is right so far and the U.S. index has gained 4.7% more than the Europe.

Schiff : WRONG - gold and silver has lost value so far and underperformed stocks or cash.

Faber : MIXED - His investment strategy underperformed the broad US market but not drastically. Having 25% in cash makes for a more conservative investment.

Kaufman: USELESS - Maybe thats a little harsh or blunt on my part but honestly I think his recommendation is too vague to be of much use. He's basically just saying that you should pick good stocks.   OK.   Is that ever bad advice?   Should we buy stocks with weak balance sheets?

This is a pretty mixed bag isn't it?   Seems to me you could have just randomly picked a investment strategy out of a hat and done just as well.    Of course the year isn't over yet.

I don't mean to pick on these four guys, they just happened to be the four people highlighted in the article.   They of course aren't the only pundits that are wrong in hindsight. Various guru's have a poor track record. Jim Cramer can't beat a monkey at picking stocks. Meredith Whitney wrongly predicted that the government bond market would be hit with significant defaults. Of course I'm no better my own attempts at predicting the future have a pretty poor track record as well.

I personally don't think we should trust the talking head financial experts very far to predict the future of the economy. It seems more often than not their guesses are no better than flipping a coin.
--

$2 MP3 credit on Amazon for sharing via Facebook

2012-05-21T14:02:00.004-07:00

Right now you can get a $2 MP3 credit from Amazon by sharing your favorite song via Facebook.

follow the link on the Amazon site

The credit must be redeemed by 11:59 PM PST on May 24, 2012

--This article may contain referral links which pay this site a commission for purchases made at the sites.

Wage Increases Since 1980 versus Inflation

2012-05-21T08:11:00.001-07:00

According to the Society for Human Resources Management the average wage increase is expected to be 2.9% in 2012. On the other hand inflation from April 2011 to April 2012 is up about 2.3% and it was up about 3.2% for the year 2011.

Getting wage data for private industry and the CPI data from the BLS. We can compare how wages have trended over the past few decades and how wages compare to the inflation rate CPI.

First lets look at how wages versus CPI have trended.

Click chart for full size image.

For the most part the increase in wages has been a little higher than the CPI rate. Thats a good trend for workers in general. It means our income has out paced the cost of goods.

Lets look at the difference between wages and inflation. Here I just plot the annual % wage increase minus the CPI increase. So any figure >0% means the wages went up faster than inflation for that year.

The positive values are shown in green and the negative amounts in red. A couple times the wage increase and CPI were equal so the difference was 0% and I show those in black. Most of the time wages outpaced inflation and the green data points outnumber the red by 22 to 7.

Of course this is just the nation wide average data. Some industries and professions have fared better than others. An individual persons wages are not likely to have moved in step with national averages.

--