Ask Uncle Bill

Vanguard vs. TRowe Price

A 29 year old reader writes--

Dear Uncle Bill,

I'm preparing to open a ROTH IRA since my 401k covers my pre-tax investments.  I have my 401k invested into a 2040 lifecycle fund that tracks indexes.  I've read a bit of information about Vanguard and T.Rowe Price.  My 401k lifecyle fund is similar to the Vanguard lifecyle funds except they have a higher expense ratio.  My gut tells me to go with T.Rowe Price because they invest more into international stocks and overall more into stocks throughout the funds life.  My head tells me to go with Vanguard because their low expense ratios will continue to pay off.  What's your take on Vanguard vs. T.Rowe Price?

Signed, Torn Between

Dear Torn Between,

As you can tell from my blog, I am a big fan of Vanguard.  That being said I have an IRA in two TRowePrice accounts.  Being lazy I haven't moved them but I should as fees are lower at Vanguard but inertia is a powerful force in our lives.  Leaving that aside, let's look at the facts of the two funds. 

After a brief review of the company web sites I believe the two comparable funds are the Vanguard Target Return 2045 and T. Rowe Price 2040.  The Vanguard fund is 70% in domestic equity indexes, 12% in European indexes  and 6% in the Pacific equity index.  12% is in bonds.  The expense ratio is .21% and the minimum investment amount is $3,000.

The T. Rowe Price 2040 Lifestyle fund is 67.9% in domestic stock indexes, 21.6% in foreign equity indexes, 7% in bonds, and 3.5% in cash.  (Hope this all adds up to 100%.)  The expense fee is .8% with a $1,000 minimum for IRA's and $2,500 for all other accounts.

Four things jump out.  The international component for Vanguard is 18% for Vanguard vs a slightly higher exposure of 21.6% for T.Rowe.  To me, not enough difference to get real excited about.

As your correctly point out the Vanguard fee is lower by .6% or $24 a year on a $4,000 account.  No big deal but pennies count and you would certainly bend over and pick up $24 if it was lying on the sidewalk so worth pocketing if the two funds are basically the same.

There is one place I think Vanguard is really blowing it and that is in the minimum account balance.  TRowe will let you in for $1,000 for an IRA while Vanguard sticks with that stupid $3,000 minimum.  Investors in IRA's are slow to move and once in a fund tend to stay there.  Witness my IRA's at TRowe Price.  Vanguard will argue that the minimum keeps out the riff raff and lowers expenses which lowers fees and I'm sure they argue this all the time at corporate but I would adjust the minimum downward for retirement accounts.

BUT the biggest thing I don't like about BOTH funds is the bond aspect and here is where things get sticky.  The question is Do You Want More Than 10% Of Your Retirement Money Tied Up In Bonds And Cash And Increasing Every Year As You Get Older? 

Only you can answer that but if I'm in something for 35 plus years I probably want all my money in stocks because, historically, stocks have outperformed bonds and cash by three or four percent annually and that money really adds up with compounding and reinvesting.  I'm not sure at 29 I want 10% plus of my money sitting on the sidelines. 

So here is my strategy--if you have the minimums of $3,000 go to Vanguard and put together a mix of domestic and international index funds that matches your desired allocation and enjoy fees averaging about .2%.  If you don't have the minimums, go to TRowe Price and put together the same portfolio in their pure index funds but expect about .4% in fees.

OR just do any of these things, including the Lifestyle funds, and pat yourself on the back.  You are doing great.  You are in the game building wealth and being in the game is the important thing. 

Think Inside The Box

If you'd like to subscribe to Ask Uncle Bill, a quick click on the link below allows you to do so.  You can choose how to receive it, the reader of your choice (such as, into your Google main page), whatever you prefer.

Oh, and it's free. I like that.

http://feeds.feedburner.com/askunclebilltypepadcom

Most workers are encouraged to think outside the box and then punished when they do so.  Outside the box thinking is, I guess, the Eureka type of discovery when the light bulb goes off after being struck by lightning and you think up the next great Super Bowl commercial.  That doesn't happen very often, if ever.  Our educational institutions and commercial institutions should teach people how to logically gather information, process it and make decisions.  But we are not taught how to do that so we race around trying to look busy and productive and feeling desperate.

This bit of heavy thinking came as I drove to College Station, home of Texas A&M University,  to meet Margot and switch cars.  See last Friday's post for details.  Driving onto college campuses always reminds me of Doug because Doug did a thinking exercise many years ago that still astounds me for its simplicity and beauty.

College admission procedures back then were not a lot different then now except if you were male and didn't go to college you went to Vietnam so there was a big incentive to get into school.  Plus there weren't junior colleges to fall back on for two more years of extended high school.  You had to get in somewhere and private schools were, as they are now, prohibitively expensive and the use of loans was not acceptable.  Our parents were Great Depression and World War II veterans and borrowing money was just something they didn't do.  You saved for your kids education and you expected them to go to public universities.  The best deal for us was the University of Illinois and everybody knew it.  My father was the Henry Ford of education.  Henry Ford said you could have any color car you wanted as long as it was black.  My dad said you could go anywhere you wanted as long as it was Illinois.

So with the draft board breathing down our necks we started the process.  And as in any group, the herd seperates.  Joe and Frank  and one Steve didn't have the grades or the SAT scores and knew they were headed to Southern Illinois University for drug dealer training.  The other Steve, Lee and I had the grades.  Steve and I barely and Lee no problem as he was a mechanical genius but things didn't work out later for him in life and I learned last year he committed suicide.  I got relatively decent grades through osmosis as I have two older sisters that got really great grades.  One had a 3.9 GPA in high school and she was the dolt.  The other one had a straight 4.0 in high school and then did a repeat in college.  I gave up early trying to match her since the best I could do was tie.

The guy on the bubble was Doug.  Bright guy, decent SAT scores but a bit of an ambition problem early in his high school career.  Nice guy too with an uncanny resemblance to Paul McCartney.  But Doug didn't have the grades. Applied to Illinois and got the academic equivalent of Drop Dead.   But he did have a girlfriend in town that he wanted to keep (we were townies), a strained relationship with his father and wanted to pay most of his own way in school out of pride, and smart enough to realize that a degree from Illinois was worth a lot more than a degree from Southern, Eastern, or Western Illinois university. 

Fall turned into winter and the group was starting to worry about Doug.  Joe and Frank and Steve  were set and Steve 2, Lee and I got our acceptances and immediately stopped doing any work.  Doug wasn't doing much or so we thought and so we worried.   Winter faded into spring and no action until April when Doug announced at lunch that he had been accepted.  Where?  Illinois.  Huh?

Here's how he did it and how great thinking is really just collecting and figuring out the variables.  Doug listed--

girlfriend

strained relationship with father

monetary constraints

added worth of graduating from a Big Ten school like Illinois

and the mention of Big Ten triggered football and basketball in Doug's mind.

Football?  Basketball?  What?  By gathering all the variables in one place the solution to Doug's dilemma presented itself.  Doug realized that Illinois had a bad, but sizeable, athletic program and not all athletes were Rhodes Scholar material.  Where did they put the jocks at Illinois?  In the Physical Education department, of course, so Doug went down to the PE department, mumbled something about wanting to be a coach and got accepted.  Doug went from being the dumbest Liberal Arts applicant to being the smartest PE applicant. 

After a year in PE Doug had the grades to transfer to Liberal Arts.  The last thing I heard he was an artist in New York.

Maybe you don't think what Doug did was all that great but I do because when somebody figures out something I can't figure out, I'm impressed.  And the answer was there all the time--figure out where the jocks go and you're in.  Doug took some time to gather the facts, push them around a little and the solution presented itself.  Most of us are too busy running around trying to be brilliant to just be smart.  Doug was smart. 

PAUL IS DEAD or YOU CAN'T ALWAYS GET WHAT YOU WANT BUT IF YOU TRY SOMETIME YOU JUST MIGHT FIND YOU GET WHAT YOU NEED

If you'd like to subscribe to Ask Uncle Bill, a quick click on the link below allows you to do so.  You can choose how to receive it, the reader of your choice (such as, into your Google main page), whatever you prefer.

Oh, and it's free. I like that.

http://feeds.feedburner.com/askunclebilltypepadcom

It's not every day you get two pop icons into one title but I managed to do it with Paul McCartney and the Rolling Stones.  And Margot's car, Paul.  (If Margot comes across as a lightweight she is not--she had a 3.5 GPA at Texas A&M in business on top of being drop dead gorgeous, taking after her mother.  But she does like to personalize things and her car is Paul, Margot being a big Beatles fan and the car being bought soon after Margot and her mother saw Paul, the musician, in concert.)

I came home the other day after turning on the water in one of the houses after a massive cold snap and the plumbing had more holes than Albert Hall (jeez, another Beatle reference.)  I was not in a good mood as this meant me doing a lot of plumbing or calling Edwin, my off the clock plumber, and spending some money.  I was not in a good mood.  There was a message on the phone.  "This is your daughter and I had to crawl under my car at 7 this morning and duct tape the front back on.  I need a new car."  Click.  Dialed her number, knowing she was at work and wouldn't pick up, and left the following, "Buy more duct tape."  And then waited for the fallout.

Margot called a little hot that night and said "Paul is dead."  I had cooled off a bit and calmly asked for a list of injuries.  "But first does it run ok?"  "Yes."  "Anything mechanically or safety related, like brakes, not working?"  "No."  "Ok, what's wrong?"

The list of problems consisted of  a fallen off VW symbol, broken front grill, ripped up plastic front bumper, a cup holder cover that was half off, broken center armrest, scuzzy looking antenna, driver side armrest that looked moldy, same for passenger side, and worst of all, a non-working CD player.  "That's it?"  I asked.  "That's enough." Margot said.

And this is why 99.9% of new cars are bought in the United States.  Little stuff going wrong on the existing car and people getting bored with what they have.  Paul was not dead, he just needed a little plastic surgery.  (Some of you may be scratching your head thinking "What is this Paul is dead stuff?"  Jump in the Wayback Machine to 1969 and you will find the nation's campuses buzzing over the burning question of the time.  Not the Vietnam war or civil rights or women's rights but "Is Paul McCartney dead?"  Somehow this rumor got started and everyone under 25 was looking at Beatle albums for clues which included Paul barefoot and in a white suit on "Abbey Road", John singing the "Walrus is Paul" and the best--running a record backwords and hearing the words "Paul is dead."  I actually saw somebody do this but I can't verify that I heard "Paul is dead."  I heard something but not sure what.  What we know now is that John is dead and George is dead but Paul is going strong.  Or at least the guy that took over when Paul died is going strong.  Conspiracy theories were big back then.  Not sure where Ringo is.)

But Margot's Paul was not dead, just wounded.  And I was determined to nurse him back to life.  Sue had been planning a trip to Houston to see Margot and I told them to switch cars with Margot getting the Lexus and Sue the Jetta.  When Sue got home I surveyed Paul and he did look his age.  Dangling duct tape and big hole in the grill along with the non-functioning CD and scattered interior body parts.  Made a list of parts needed and called Dee my resident import mechanic who told me there was only one place to get them--the dealer. 

I figured as much and went down there.  Made a list and confronted the parts department guy.  First he wanted to see the car which I thought was pretty smart since we would both know which parts we were talking about.  Also, he didn't go "Uh, oh" when he saw the car.  I don't like guys that go "Uh, oh" when they see a problem.  Makes my blood pressure go up.  He took a long look and we went back in to see what he had and what he had to order. 

The laundry list was:

Pin for cup holder $3.98

Driver side arm rest cover $32

Center arm rest cover $37

Grill $140

VW symbol for grill $38

Not too bad but the big item was the ripped up bumper valence as I was afraid we would have to replace the whole bumper which would be a lot but got lucky.

Bottom valence $73

So got out of there for about $300 plus tax.  Some of the stuff had to be ordered, probably in on Wednesday. 

Got it except for the CD player which they told me was $279 uninstalled.  Not too bad but held off, called Margot and agreed on an in-dash player.  On the internet to Circuit City, Best Buy, Car Toys, etc. all with the knowledge that I would spend more than what was on the screen.  Car stereo and car tire shops are both places where you go in thinking you're going to spend $300 and end up spending $500 or some equivalent ratio.  Decide on Circuit City and meet the stereo dude.  Everybody knows the stereo dude, the guy that knows everything and any unit less than $700 is trash.  This stereo dude was not bad, probably figured I couldn't hear anything anyway but did opine that the unit I was looking at may, just may, reject burned CD's AND the unit he recommended at $30 more had an input for Margot's iPod.   Convinced me so 40 minutes later the stereo dude and his gang had put in a new Sony unit for $172.

Got home and the VW guy had called saying the parts were in.  Next day pick them up and go to see Bo, my body guy.  Bo, or one of his guys, made a big mistake a couple of years ago when they were taking the windshield out of my then being restored 1962 Porsche 356 convertible and dropped it.  The windshield went in a thousand different directions and finding a replacement was neither cheap or easy.  I told him to forget it as we probably needed a new one anyway but he felt bad, really bad and made it up with some free work on my son's Firebird and Sue's car.

Bo looked at Margot's car, the parts and 'no problem.'  He and one of his guys had everything on the car in 30 minutes.  No charge.  C'mon, Bo.  No charge.  I tried to make a contribution to his church (Bo is very religious) but he wouldn't take it.  Made me feel bad but I told him I would say good things about him to other people.  He said, "I know."

So Paul, Margot's car, is back among the living.  Not concours but she doesn't have to park it two blocks away so nobody will see it.  Actually for less than $500, it looks pretty good. 

The next time you get in that piece of junk of yours, consider spending $500 rather than running up $20,000 in debt and interest for a car that will look like your current piece of junk in four years.  Paying $500 and not $20,000 is how you get rich.   

       

SCAM II- Termites Can't Jump

If you'd like to subscribe to Ask Uncle Bill, a quick click on the link below allows you to do so.  You can choose how to receive it, the reader of your choice (such as, into your Google main page), whatever you prefer.

Oh, and it's free. I like that.

http://feeds.feedburner.com/askunclebilltypepadcom

The introduction to this blog says personal finance for young people and I'm going on and on about houses, flipping properties and, now, termites.  Getting a bit far afield?  Maybe a little bit but not really because wealth building is about avoiding mistakes or at least limiting the damage.  Mistakes will be made but avoiding the one that sinks the ship is the important thing.  So back to termites.

Ok, yesterday we avoided the slimy buyers trying to pull the house level scam.  There is light at the end of the tunnel with just the termite inspection left.  And termites, or just the thought of termites, eating your house is scary.  My termite knowledge is a bit spotty so call up Mike Johnson, resident house guru.  And it went like this, me first then Mike.

"How can you tell if you have termites?"  "You can't really unless you get under the house or the house falls down.  If that happens its too late."  "Not getting under there."  "The inspector will and can tell."  "What if he says you have termites?"  "Treat 'em."  "How much?"  "$500."  "OK."

Since Mike is stuck, price wise, in the mid '80's I thought maybe $700-$800 but not $10,000.  Whew.  Limited damage. 

So the buyer scheduled the termite inspection and, lo and behold, we had termites.  Not bad but needed treatment and he would do it for a mere $800 plus tax.  Having the guy doing the inspection also doing the job didn't sit well with me so back to Mike.  "Got termites.  Know any good termite guys?"  "Greg Borgeson.  Tell him I told you to call.  Tell him to give you a good price or I'll beat the hell out of him."  "Will do, Mike.  Thanks." 

Got the number and arranged to meet Greg at the house.  Greg took a look at the termite report and said, "Figures."  There's a lot of body language in the home repair business and this meant "Seen this guy before and you probably got screwed."  No outright condemnation, just a look and "Figures."

"How do you get in the crawlspace?"  Since houses with crawlspaces don't have basements and thus no basement stairs, there is usually a trapdoor in the house or a removable panel outside.  I had put a 'skirt' around the house made up of siding screwed into the house between the house and the ground.  To gain access just unscrew a couple of boards and crawl on in.  Greg said "Let's find where he went in."  We walked around the house and did not see any boards or areas that looked like they had been off recently.  "Figures." 

Greg looked at the diagram the other guy had drawn (standard operting procedure in the termite trade) which indicated the critters were in the rear of the house.  I removed some boards while Greg put on a 'Ghostbusters' outfit.  As he was entering the crawlspace I asked about the worse thing he had run into.  "Hornets."  I would have thought snakes.  "How about snakes?"  "That's what this is for." he said, brandishing an ordinary, Home Depot hammer.  "That?"  "Just got to get close enough."  "Rattlesnakes?"  "No, usually copperheads."  I had a run in with a copperhead once and that was enough.  Copperheads are rattlesnakes with anger management issues.  They also don't have the rattle so you don't know they're out there until too late.

Greg was soon under the house and roamed around for about half an hour.  Threw out some boards and declared, "You don't have termites.  You had termites but not anymore."  "Where did they go?" I asked.  "Somewhere where they could find something to eat." he said.  Greg gave me a short course on termites--seems that when we put in the concrete blocks to level the house we cut off the path of least resisitance for the termites and when I fixed the plumbing in the bathroom I cut off their food supply.  I still wasn't getting it.  "Termites can't jump."  he said.  Actually they can fly but those are the swarmers, not the grunts that do the real work, or damage, in this case.  The grunts commute to work by going from wood piece to wood piece and when concrete is put in place of wood they go somewhere else.  Also, they like damp wood and when I fixed the bathroom the wet wood went away.  The termites went looking for greener pastures. 

"Anything else?" I asked.  "Yeah, cobwebs." he said.  I was confused since cobwebs are not all that uncommon in dark, dank places.  His point was IF the other inspector had done what he did, he would have swept away the cobwebs.  Since the cobwebs were there this meant the first inspector had not gone under the house.  The termite equivalent of the dog that didn't bark.  "Figures."  That word again.

"Has the bank seen this report?" he asked.  I told him the buyers realtor had the report.  "You're screwed.  They have the report and you'll have to treat."  "But there are no termites" I protested.  "He said, she said... you know." he said.  One experts word against the other. 

I saw the logic.  I would have the treatment.  "How much?"  Greg came back with $600 which was better than the other guy and I figured he would actually do the work so signed a contract.  Bitched at my realtor but resigned to it so go ahead.

Got home and got a call from the realtor.  Seems she called the other realtor and somebody realized or discovered that the buyers had some kind of homeowners warranty that would cover the treatment for a deductible of $200.  I think my realtor put the screws to their realtor.  Better than a sharp stick in the eye but I had a contract with Greg.  Called Greg, explained the situation.  His take was twofold--1) the warranty work wasn't worth anything and 2) he would let me out of the contract. 

So $200 poorer at the closing but we did close.

Bitter?  Not really.  I was out $200 but had found two honest men, Kevin and Greg, and that's two more than Diogenes.

   

SCAM I- ON THE LEVEL

I really hate to write about getting scammed, or attempts people make to scam other people, but it seems to be happening a lot lately.  Which is ok as long as it doesn't bankrupt you or you catch it in time.  And it is not really a commentary on the human condition as scams have been around since Eve scammed Adam, or was it the other way around?  So here are two scams that got caught, kind of, in the last two weeks.

As noted in yesterday's post I also sold a house last week.  Similar to the Freddy and Celia house; two bedrooms, one bath, updated by me with central heat and air conditioning, painted and patched, the usual.  A nice little starter home or investment property.  Also was in a smaller town near here--note to those interested in buying investment property.  It is a lot easier to find a rundown house in a small town than a big city.  Big cities have slums and if you go there you might get shot.  Small towns cannot afford slums unless the whole town is a slum.  Fixing up a house in a small town will pay off because there are usually fairly nice homes in close proximity.  Plus your neighbors will love you.

So fixed up the house a few years ago, rented for awhile, decided to sell with owner finance-again, and promptly had to foreclose.  You are thinking, "How stupid is this guy?  First, Freddy and Celia and then do it again?"  Actually they were both done at the same time and the money was flowing, for awhile.  Plus the husband drove a beer truck and made $45,000 a year--way enough to pay the mortgage.  And she had a criminal record which I didn't know because when she got married and got a new name, the check didn't reveal the criminal record because of the new name. 

After a few months, beer man decided married life was not for him and bugged out.  And Mike Johnson called.  Mike owns the rent house next door and we had met when I started renovating the house.  Mike is about 5'5" and 120 pounds but tough and stringy and a Vietnam vet who had lived in the town since Nam and knew everybody and where each body was buried.  And he didn't like the lady that bought my house because she had a habit of flinging beer cans around, many landing on Mike's property.  Mike used his military training and loved lobbing these beer grenades, especially the ones where the tab broke and they were still full of beer, back across the driveway.  Mike was good and hit what he was throwing at, including her car which soon looked like a golf ball.  If those cans had been real grenades that car and house would have been in slivers.  And Mike didn't care because he had a good lawyer and knew every cop in town and as another of my friends that had been a Marine in Viet Nam told me, "When you've been shot at, not much else scares you."  I'll take his word for it. 

So foreclosed, cleaned up the house which was really a mess, painted and patched and gave it to a realtor with the warning--no owner finance.  Put it on at a pretty good price for me and nothing for five months.  Then a call and offer, accept and start that mating dance called the closing.  The house inspection, which for a 80 year old house, went surprisingly well.  Then another call from the realtor.

Seems that buyer wanted to 'level' (not level as in tearing down but make level) the house and got bids for $4,000 and $6,000 and wanted a credit for $1,500 at closing.  In other words, I was out $1,500.  This is the part where little stuff comes out of the woodwork, similar to getting nibbled to death by a duck.  But my suspicions were aroused as I had had the house levelled, not a very good job but ok, and it cost $1,100, not $4,000.  Plus, why ask for $1,500 when the cost is $4,000 or $6,000?  Didn't sound right so called Mike and asked for his levelling guy.  Kevin Langley, honest as the day is long.  Call my realtor and tell her to get an estimate from Kevin Langley, honest as the day is long.  She called the other realter who revealed that the $4,000 quote came from Kevin.  Hmmm. 

When in doubt, go the the source.  Got Kevin's number from Mike and called him.  "Quote on leveling the house?"  "Yep."  "$4,000?"  "Nope."  "Got a copy of the quote?"  "Yep."  "Can I get a copy?"  "Yep."  "How much is the quote?"  "$2,500."  Hmmm.  "And I don't cheat people."  Honest as the day is long.

Kevin dropped a copy of the quote off in the mail box and I went over to my realtor's office, scratched out the part about the levelling credit, muttered something about lawyers and jail time, and told the realtor to call me with the buyers response.  Got home, phone rang, realtor with the news that the buyers had no problem dropping the credit request.  One scam down, one to go. 

Only the termite inspection to do and I learn why termites can't jump. 

 

 

DAMMIT

"Dammit."  When I'm really mad or upset I say 'Dammit.'  If things are going ok I just cuss a lot.  And I said "Dammit" when Marion said "Here's the closing estimate from the broker."

If you scroll down a few posts you will find a series on how I had to foreclose on a house, re-do it with Cynthia the ex-con doing most of the work (and doing a great job by the way), and then putting a sign up in the front yard.  One day Marion with daughter and granddaughter in tow show up, take a look around, offer full price and give me a check for $500.  So far so good but don't get a real good feeling about Marion et al., but that's ok because Cynthia still has work to do and if the deal falls through we are no worse off, I thought.  And Patricia said she had been preapproved by Wells Fargo.  Great.

Met with Patricia and she has a written agreement that says basically the house would be in good working order at close, this painted, that painted, fix a small crack in a window, and split the closing costs.  I crossed out a few things and signed it.  A little voice was nagging, "Hey, stupid, how about those closing costs?"  To little voice, "Well, I just closed on another house and they were, not counting realtor fees, about $1,400 and in this case there are no realtor fees, so get lost, little voice."  Sarcastic comeback, "OK but I'd check it out." 

Sat for a day, little voice bugging me, and called Marion and asked her to have the banker call me.  The 'banker' called and said the closing cost estimate wasn't ready yet.  I told her I had just closed on another house and assumed the closing costs would be similar and 'normal and customary.'  'Normal and customary' has no legal weight, I don't think, but it means basically that there won't be any curveballs at the last minute and that all deals look basically the same.  "No problem." says the 'banker.'

A couple of days later I get a call from Marion wanting to meet to review the closing costs.  I'm starting to realize that Marion is not stupid, just wants to get Patricia and granddaughter out of her hair and on their own.  We agree to meet at the Dixie Cafe.  Never been in the Dixie Cafe but a rapidly disappearing part of Americana with a long counter, stools, booths and a waitress that said "Howdy."  We exchanged Howdys and got down to work and Marion produced the statement from the 'broker.'  I said, "I thought Patricia was approved by Wells Fargo?"  Turns out Patricia had gone to a broker who was going to sell the loan to Wells Fargo.  "Who's the broker?"  I asked.  "Deanna."  "Deanna what?" "I don't know." 

Great.  All I know is that brokers add a layer of complexity and, more importantly, a layer of cost to any transaction.  "And how did Patricia find Deanna?"  I asked.  "She's one of those low down, no down brokers."  Getting better and better.  There is no free lunch and if you go low down you ( and in this case me) are going to pay FEES, lots of them.  Loan origination fees, private mortage insurance fees, broker fees, lawyers fees, administrative fees, inspection fees, termite fees.  A second 'Dammit.' 

Plunging ahead, Marion handed over the closing estimate.  These look like a long addition problem with all the items listed above and added up to $5,008 which my share was $2,504.  Ouch.  Third 'Dammit.'  Marion wasn't too happy about having to cough up that amount either.  Got Deanna on the phone.  I said, she said.

"This is too high, I thought you said it would be normal and customary."  "It is normal and customary."  "I closed on a house last week and paid $1,400."  "Was it FHA?" "No."  "This is."  "So what?"  "FHA is more expensive."  "Why?"  "They just are with FHA."

Never much of a fan of the "They just are..." school of explanations but saw I wasn't going anywhere with Deanna.  She was hiding behind the FHA and wouldn't come out.  Deanna then suggested upping the price of the house to cover the closing costs.  I didn't understand that and hung up.

Thought a minute and asked Marion how much she was willing to pay in closing costs.  "No more than $2,000."  I was willing to do the same just to get this nightmare over with.  So I decided to stick it to Patricia who started the whole thing by going to a broker instead of a bank. 

Called Deanna and said raise the selling price by $1,000 and reduce the closing costs shares from $2,500 to $2,000.  Unfair to Patricia?  Not really.  An extra $1,000 spread over 30 years is $12 a month.  So we are supposed to close today but I don't think it will happen.

And the winner?  Not me.  I only got the closing costs down to $2,000 which is still $600 over what I paid on the other house.  Not Marion either.  Or Patricia either.  The winner(?) is Deanna since she gets a bigger commission on the increased sales price.

Bitter?  Not really.  I'm just glad I don't have to be a broker for a living. 

Moral to the story and nothing new here--if it sounds to good to be true, it probably is.

Run, Buck, Run

If you'd like to subscribe to Ask Uncle Bill, a quick click on the link below allows you to do so.  You can choose how to receive it, the reader of your choice (such as, into your Google main page), whatever you prefer.

Oh, and it's free. I like that.

http://feeds.feedburner.com/askunclebilltypepadcom

The rant today is not about finance.  This is much more serious.  It appears that Buck, my son's bull terrier, is a victim of racial profiling.  Or, perhaps, canine profiling. 

It's been pretty much of a up and down week for Buck.  He had to feel good when Rufus, a colored bull terrier, took home the gold at the Westminister Kennel Club show.  Then Marc said Buck wasn't himself for a couple of days, moping around the house, doing his Brando impersonation from 'On The Waterfront', "I coulda been a contender."

Seems Rufus scored big because Rufus has, as reported by the Associated Press, " a perfect egg-shaped noggin the size of a football."  If Rufus is a football, Buck is a rugby ball and he knows it.  Yes, Buck could of been a contender EXCEPT for EED, ear erectile dysfunction.  Seems the old ear, the right one, won't stay up.  See a picture of Rufus and he's at attention all the time.  Buck is perfect in practice but a flop, literally, on game day.   I thought of some Viagra but that would have all kinds of different side effects at a dog show.

Then Buck really hit bottom.  In cities in more than 20 states, Buck is a fugitive, a victim of BSL, short for breed specific legislation.  BSL is designed to control certain types of dogs deemed dangerous and aimed specifically at pit bulls, a distant and unwanted cousin of bull terriers.  Every family has secrets and the pit bull is the bane of the breed. 

BSL started in Denver in 1989 when some minister (religious persecution?) managed to get mauled by a pit bull.  Bull terriers are not banned but often confused in Denver (what's wrong with those people?) with pit bulls.  Juan Zalasar, animal control officer for Denver, admitted "It's not a fun job" and he does try to educate people as to the differences between the dogs.  Juan says, "As far as we're concerned, we don't have a problem with that dog."  Good for Juan but some cities have jumped the gun on Denver and one is Alburnett, Iowa which bans bull terriers outright. 

And BSL is gaining momentum.  Even the Terminator is in on the act as Arnold recently signed a bill that lets cities and counties pass ordinance against specific breeds.  "It's our No. 1 concern," said Dale Schuur, president of the Bull Terrier Club of America.  "It has shown no signs of letting up.  Are we going to be able to have these dogs in the future?"

Shame.  Where is Jesse Jackson when you need him? 

As for Buck, he's not planning any trips to Allburnett, Iowa.  Wherever that is.

 

Stupid CEO Tricks and Other Resume Busters

If you'd like to subscribe to Ask Uncle Bill, a quick click on the link below allows you to do so.  You can choose how to receive it, the reader of your choice (such as, into your Google main page), whatever you prefer.

Oh, and it's free. I like that.

http://feeds.feedburner.com/askunclebilltypepadcom

The CEO of Radio Shack appears headed toward the exits because he lied about getting a bachelors degree from Pacific Coast Baptist College.  WHERE?  Pacific Coast Baptist College.  Pacific Coast no longer exists and what is left has moved to Oklahoma but the name is not Pacific Coast because, as you might have guessed, Oklahoma does not have a Pacific coast.  Actually it doesn't have any coast at all.

One might think that if you are going to lie about a degree, lie about something big like Harvard or Stanford.  That really isn't the point.  The point is don't lie.  It's not really worth it.  With Google and Bush's 'domestic spying'  program your life is an open book so don't bother.  As my mother once told me, "Don't lie and then you don't have to remember what you said."  Think about it.

But there is a more subtle form of 'lying' and everybody does it.  It's a gray area but can make or break your being hired.  It is known as 'resume polishing' and somewhat of an art and a savvy boss can catch you in a lie, or embellishment, every time.

But first, here are the facts facing the person reading your resume.  We will asume that the job you are applying for requires a college degree, 1-3 years experience and is a postion where the person is expected to move up into management ie, not a dead end job.  Through ads or going to recruiters or college career centers, the hiring manager ends up with no less than a hundred and perhaps as many as three hundred resumes.  Most HR departments will offer to 'pre-screen' the resumes and 'make your life easier' as a manager but I always refused because HR people have lists of requirements and if your resume doesn't meet all those requirements, your resume goes in the basket.  I don't want that kind of help because I will waive requirements--a person may not have taken advanced calculus but if they swam the English Channel in March, I want to talk to them.   

Back to the resume processing business.  I have read that the average hiring manager spends one to two minutes reviewing a resume.  Don't believe it.  15 to 30 seconds, tops.  That's right, the resume you have spent hours on gets 30 seconds.  That 's the way it goes, get over it.  And the number one way to turn me, the hiring manager, off and shove your resume to the bottom of the pile is to Tell Me What You Want.

This is the resume equivalent of a Mission Statement.  "Desire rewarding and motivating position to enhance my skills and talents...."  Full stop.  The sound of paper being wadded up and bouncing off the waste basket.  I am not your personal coach.  I am hiring somebody after working my butt off, convincing my boss we need help, offering to sleep with anyone in HR to get the job approved and now you tell me that you "Desire rewarding and motivating..."  Gnashing of teeth.

I would love to see this.  "Desire position where I can work my butt off to make my boss look good and we both succeed and make a lot of money."  I'm knocking the door off my office, trying to get down to HR to get this person in here before somebody else grabs them.

Number Two reason for making the hiring manager toss a resume.  The "I" word.  ""I" saved the company a million dollars through cost cutting."  "I" increased sales by 12% through personal initiative."  "I" managed a team that reduced marketing expenses by 25%."  Now if you did swim the English Channel in March I may believe that (but I will check it out) but I doubt very much that you, and you alone, saved the company a million dollars, or increased sales by yourself by 12% or that you managed any team whatsoever because nobody lets 23 or 24 year olds run anything except as quarterbacks for professional football teams and there aren't many of them around.

I WOULD pay attention to "Junior member of team appointed by CEO to review and recommend changes to cost structure of company.  Team recommendations resulted in annual savings in excess of $1 million."  Here's why:

Junior-you admit you are the junior but you were picked by the CEO or recommended by someone to the CEO.

member of team-not "I", member.  Team, no I in team.  There is 'me' but let's not quibble.

CEO-you got some exposure and may know how not to embarass yourself, and me, around senior management.

review and recommend-indicates analysis and presentation.

team-theres that word again.

$1 million-you could say $10 million or $100 million because by now I want to believe what you tell me.

So if your resume is shooting blanks and getting no results, take a real long hard look and see if 1) the resume is about you and not the hiring manager and 2) is just outright unbelievable.

And make sure the facts are straight or they will catch up with you.  Just ask the CEO at RadioShack.

   

Let The Games Begin--No, Not Those Games, The Tax Games-Part II

If you'd like to subscribe to Ask Uncle Bill, a quick click on the link below allows you to do so.  You can choose how to receive it, the reader of your choice (such as, into your Google main page), whatever you prefer.

Oh, and it's free. I like that.

http://feeds.feedburner.com/askunclebilltypepadcom

How about a little Olympics on the tax issue?  Does the United States win the gold medal for having the lowest tax rates on dividends and capital gains?  Or does it face rough sledding against those other Olympic countries?  But we have to win because we have such a high deficit and low rates and the wealthy are, well, wealthy.  As George Tenet, ex-head of the CIA, would say, "Slam dunk."

After a five minute review of Google and figuring out some dirty calculations the United States Downhill Tax Team comes in (flourish of trumpets here) DEAD LAST.  Yikes.  Against who?  Not just against those typical tax havens like Luxembourg and Monaco but against those red-blooded tax cutters--Germany, Switzerland (no real surprise here), Japan, Canada and, gasp, France.  FRANCE?  Yes, with apologies to John Kerry, France. 

I'm hoping that there is some tax attorney sitting out there with insomnia that can back this up but my cursory review shows that:

In Germany the taxpayer gets a euro for euro tax CREDIT for half of the tax due on capital gains and dividends.  So if your ordinary tax rate is 25%, the rate on capital gains and dividends is 12.5%.  Ditto for Canada on dividends paid by Canadian companies.

For Switzerland I couldn't find a capital gain tax or tax on dividends but Swiss tax law is kind of goofy so I may have missed something but considering that Switzerland is a country where tax evasion is NOT illegal, I can't see much of a tax on anything.

Japan, depending on how you do the calculation could tie for no medal with the US as they tax capital gains at 10% and dividends at 20%.  So if you have dividends and capital gains at 50/50 you have a tax rate of 15%.

But I'm going to give the gold medal for tax cuts to FRANCE.  16% tax on Capital Gains and 11% for Dividends. 

If the Democrats want to change the rates on capital gains and dividends, then it is ok with me.  I just demand they adopt the French model. 

Let The Games Begin--No, Not Those Games, The Tax Games

If you'd like to subscribe to Ask Uncle Bill, a quick click on the link below allows you to do so.  You can choose how to receive it, the reader of your choice (such as, into your Google main page), whatever you prefer.

Oh, and it's free. I like that.

http://feeds.feedburner.com/askunclebilltypepadcom

Among all the important news in the last few days like Dick Cheney coming up with a unique solution to the Social Security crisis, one item slipped by mostly unnoticed.  Congress has started a fight over the capital gains and dividend tax rates.  Yawn.  First, the facts.  In the tax reform of a few years ago, the tax rate on capital gains was reduced from 20% to 15% and the rate on dividends was reduced from the rate on ordinary income (as high as 39% something) to 15%.  But because the Republicans did not have the votes to make the cuts permanent, they got the cuts extended only to 2008 when they turn into a pumpkin at midnight and the old rates go back in effect.  You are now muttering, "Where is this going?  I ain't got no capital gains and dividends so I care less."  But you should care and here's why.

One--You will have capital gains and dividends as you invest in Roth's, 401(k), and just plain old investments like mutual funds and stocks.  And the lower the rate, the more you keep.

Two-Your parents and grandparents rely partially on dividends and capital gains for income.  Income to eat and pay for utilities.  If more of that income goes to Uncle Sam, your parents and grandparents will need more money and all eyes will fall on you.

Three-The financial markets don't like this kind of stuff.  Talk of tax increases scares the heck out of Wall Street.  And not all these guys are stupid.  Somebody is sitting there with a calendar and copy of the tax code reading that on January 1, 2008 or 2009 or sometime, the rates go up.  And what will they do?  They will 1) sell their stocks to lock in their capital gain and 2) really sell all the stocks that pay big dividends.  And that means that your Roth, 401(k) and other investments will go down.  How far down?  Don't know but down ain't good, especially in the short run, so bad for you. 

And all future dividends and capital gains will be taxed at higher rates which means people will have less money to spend, less money to invest, etc.  And less money to spend means lower corporate profits which means lower stock price which means corporate spending cuts which means you lose your job and move back in with Mom and Dad who have no money because they are taxed at a higher rate on their dividends and capital gains which are now capital losses.  The end of the Western world as we know it.

Ok, maybe not.  But watch this one because it will be interesting with the Republicans about to reach into their bag and pull out their "the Democrats are raising taxes" puppet and Democrats screeching class warfare and tax cuts for the wealthy.  Of course, these are tax cuts for the wealthy because the wealthy spend money that creates jobs or invests their money that creates jobs and capital.  What the Dems forget is that if the wealthy (and to the government that is anybody making over $50,000) don't have the money, the government does and the government is about the worst distributor of capital on the planet.

Now we got everybody riled up with raising taxes and shafting the poor and tax breaks for Bill Gates so...what is a fair analysis and what is a fair tax rate?  I was taught in corporate life that when you don't know what to do, find out what the other guy is doing.  So tomorrow we will look at how some other countries handle taxes.  Not very exciting but important to your future success.