It's Just Money

Going out like a Rock Star

Andrew Lahde, manager of a hedge fund that profited enormously by speculating on the failure of firms that made major bets on sub-prime mortgages, has called it quits.

His "so long, and thanks for the fish" comes in the form of this letter.

Enjoy.

Isn't it sad that Hank Paulson is a household name?

Back in 2003, a friend said to me, "isn't it sad that we all know who Donald Rumsfeld is?"

"Bizarre," I thought.  Why is it sad that we know who the Secretary of Defense is?

Well, the point was that my group of friends, while intelligent and educated, did not follow most of politics closely.  So, the fact that we all knew Donald Rumsfeld was seen as a sad state of the political environment.

Case in point... 

Quick, name the three men who served as Secretary of Defense under Clinton!

Very few of you were able to rattle them off.

And now Hank Paulson is a household name.  Quick, name the three Secretaries of Treasury under Clinton!

Do Bloggers have a responsibility to be "fair and balanced"?

It's a rhetorical question, I think.  Or, maybe not.  If I have already decided the answer, does that make it rhetorical.  Because here's the answer:  absolutely not.

Several months ago, I wrote a post about the wonder juice, Mona Vie.  It's a juice made with acai berry and other exotic sounding things that you couldn't possibly grow yourself.  You see, you would have to get the magic seeds from the depths of the Brazillian rain forest.  Ever wonder why the most healthy things in the world only grow in the far reaches of Brazillian rain forests and Himalayan mountain tops?

Anyway, I analyzed the business plan offered to those wishing to be part of the Mona Vie pyramid.  Er, I mean, take advantage of the exciting business opportunity.  Looks to me like it is possible to make some money.  Of course, I don't wish to view all of my friends and family as sales prospects.  So, I guess I wouldn't be successful.

Not surprisingly, the comments were one of two things.  Either it was someone telling us all that Mona Vie cured their high blood pressure, insomnia, baldness, made them taller, grew back their amputated leg, etc.  The other type of comment was that Mona Vie made them broke, ruined their marraige, caused them to be impotent and friendless.  Tragic, really.

So, I guess I shouldn't be surprised that it was that same post that instigated my first bit of hate mail.  Here's the email that I found in my inbox this morning:

I went and got married!

Well folks, we finally did it!  Just a few short months after I started this little blog in early 2006, I bought an engagement ring, popped the question, and got engaged.  Months and months of planning, picking photographers, florists, and fighting over the guest list, we finally did it!

I am now Mr. LA MoneyGuy.  Oh, wait a minute.

Well, nothing I hate more than, "sorry I haven't posted much lately" posts.  They're just so arrogant.  It presumes that everyone is sitting in front of their computers waiting for your next words of inspiration.  So, I'm not going to apologize, but just say that the wedding was awesome, and our honeymoon absolutely incredible.  We returned a couple of weeks ago from a two week trip to the Mediterranean, and moved in to a new apartment last week.  Busy times, indeed.

I may write more about both later, as there is definitely a personal finance angle to both.

I know, I know... you all want to know where to send the gifts.  Tell you what, in lieu of gifts, please pay off your credit cards!  And if you don't have any credit card debt, take an old friend out to dinner.

So, what's the problem with Multi Level Marketing scams (er, business models)

Recently, I wrote a post about the product, Mona Vie, which is sold through a Multi-Level Marketing system.  In case you are not familiar with the product, it is a super juice of some sort with exotic ingredients, such as Acai Berries and Kyrptonite.  I questioned the ability for the juice to cure all the ailments that is claimed by the many distributors out there, and the viability of the business model to actually make money for those same distributors.

The number of comments on that post was pretty incredible.  Many of the comments, not surprisingly, defended the quality of the juice.  The juice was credited with healing, curing or aiding in the following areas:  multiple sclorosis, weight loss, joint pain, high blood pressure, mood swings, something about ORAC values in Leukemia cells, insomnia, headaches, stomachaches, arthritis and gas reduction.  I'm serious.  It does all this.  Read the comments for yourself.  They don't lie.

Of course, there were comments that defended the business model, and in fact the MLM business model in general.  Frankly, being a money blog, this is what interested me.  I could give a damn about the juice.  If it tastes good, doesn't kill people, and can sell, maybe I'll sign up to make some money.  But do I really want to be one of those MLM people out there?

So, here were the arguments in favor of multi-level marketing.

Teen Teaches Financial Literacy to Adults

I freaking love this.  One of the topics that I have seen frequently on the PF blogosphere is how little financial education there is for America's youth, and how that leads to poor decision making as adults.

In a reversal of roles, High School Freshman and Teen Columnist, Emily Hu, writes For Adults, It's Payback Time.

A brilliant nugget from Miss Hu's article: 

"It comes down to this: Once upon a time, when people were forced to really consider what they could afford and credit actually counted for something, people bought houses they could live in for a few years."

Isn't this how we got in this mess?

I found this Kiplinger's "Truth or Bunk?" Quiz on Free Money Finance's site.  I haven't even finished the quiz, but I ran into this question and it bugged me:

"True or false:  Never buy a home that costs more than 2.5 times your annual income."

I knew they would consider the answer false, as it's become a somewhat outdated rule of thumb.  Interest rates are lower than they used to be when this was widely used.  But I answered "True" anyway.  Here was the response:

SORRY, WRONG!

Your answer A. True is incorrect.

The right answer is B. False

Good luck even finding such a house in many major cities.  Instead of the price, what counts is your monthly payment.  And that's affected by your down payment and the terms of your loan.

I didn't add the emphasis.  They bolded, "what counts is your monthly payment."

Seriously, isn't that how we got into this mess?

Passing the CFP exam

Since announcing that I passed the CFP exam, I have received requests for advice on passing the exam.  So, I'll do my best, but everyone's experience may differ.  Here you go Zook.

First, let me explain how I went about the process.  I began the process without a sense of urgency.  The company that I was working for neither paid for the classes, nor was very supportive about it.  They were strict money managers, and financial planning was viewed as an elaborate ruse to get people to buy life insurance.  Ignorant, I know.  But they are very old school.

So, watching my budget, I went with the online only classes through the College for Financial Planning.  It was cheaper than any actual classroom version.  Besides, the "at your own pace" sounded attractive.  Initially, I went at it pretty diligently.  I had some friends who were studying at the same time, so we formed a small group to keep each other on track.  However, as they began to drop off, that support dissolved.

From the time that I enrolled, to the time that I took the test, it was almost two years.  In my opinion, too long.  See, I thought that my prior experience in financial services would allow my to walk through the coursework in the self study mode.  It turns out that there is a tremendous amount of detail that is covered, and knowing what to study is probably the most important thing of all.

After finally completing the coursework, I enrolled in a CFP Exam Review course.  There are courses offered by a host of companies, some with classroom, some without.  Here, in Los Angeles, there are two ladies, Linda Hewitt and Nancy LeClair, who teach classes at UCLA extension, and UCI extension.  They are a two weekend, Friday, Saturday and Sunday deal.  It's not cheap, something like $1,200, but man it's worth it.

They take all that you have studied, and say, "okay, don't worry about all that, here's what you need to know, and here's how you should approach the test."  They have been teaching CFP classes for years, so they know what to expect, and they know how to prepare you.  This was the most important thing that I did.

So, what I would have done differently. 

Presidential Candidate Subprime Bailout Position

In case you haven't heard, it's an election year.  This means endless and tiresome political commercials, mailings, and even phone calls.  This is not a political blog, as god knows there are enough of them out there.  But, as politics can have a major impact on our collective and individual pocketbooks, I'm going to venture into some political ground.

About two years ago, there were a handful of housing bubble blogs and risky finance blogs out there warning us of the impending housing and mortgage meltdown.  Most notably, The Housing Bubble Blog and Another F'd Borrower.  The housing industry dismissed such talk as doom and gloom.  A bunch of Chicken Littles.

Then it began.  Sales slowed.  The rate of price increases slowed.  Then flattened.  Soon, the subprime mortgage holders who were relying on price increases in order to refinance or sell at a profit found themselves in trouble.  And we all know what followed.  Government intervention.

I made my position on the matter known in an open letter to my senator.  As expected, the idea of a bailout is predominantly a Democrat issue.  Surprisingly, however, it has crossed the aisle.

So, as we continue into the primaries, and try to educate ourselves on the candidates and their positions, I have taken some time to research where each of them stand on the subprime bailout.

Goals 2007 Review

Wow, where did the year go?  2007 was an eventful year, and overall a really good one.  Way back in January, I laid out my goals for the year.  Let's see how I did:

Financial:  My goal was to increase my net worth to $200,000 from $154,321.  Overall, that would have represented an increase of 31%.  Well, as of Friday, December 28, my net worth stood at $196,020.73, a 27.02% increase.  Technically, I did not reach this goal.  Frankly, I'm not too disappointed, as I am still satisfied with my results.

Professional:  I aimed to complete the CFP coursework and pass the comprehensive CFP exam.  Check!

Spending:  I used to maintain a daily expense tracker.  My goal was to restart the tracker, and keep myself accountable on a daily basis.  This didn't happen.

Non-Financial:  Lose the gut!  Yikes, long way to go.  The weight loss blog has been neglected.  The good news?  I have lost some weight.  I still have a long way to go, but I am about ten pounds lighter than I was a year ago.

There we have it.  Not a perfect year, but overall a successful 2007.

I started the year as an avid blogger.  As my CFP studies required more of my time, I began to neglect the blog.  At times, I thought I was going to close shop.  I appreciate those who have stuck with me, and continued to read what I have to say.  I don't anticipate that I will become the avid blogger in 2008 that I was a year ago, but I will definitely keep it alive.

Happy New Year to all of you.  Best wishes for a safe, happy and successful year.