individual vs collective action Dave Ramsey's, Suze Orman's, Kiyosaki's: both the first and last chunk of the book were spent assembling the case thatindividual vs collective action Dave Ramsey's, Suze Orman's, Kiyosaki's: both the first and last chunk of the book were spent assembling the case that these and their peers were, at best, telling people what they want to hear, and at worst, scam artists. I didn't find that to be pioneering. But there was enough good stuff that I'll definitely be pushing certain chapters on my colleagues.
p.97 "Over the years, many have come up with plans to improve our nation's retirement system. There are Auto IRAs, which are supported by the Obama administration, where employers set up automatic deductions for employees into IRA accounts, and Universal 401(k)s, promoted by the New America Foundation think tank, where the government would match contributions on a sliding scale, with lower-income individuals receiving the most in the way of incentives, not to mention the hosts of schemes to promote savings by the poorest among us. There's even a plan - promoted by the National Conference on Public Employee Retirement Systems - to allow employees of small businesses without access to a 401(k) to buy into state pension systems... In Ghilarducci's view, pretty much anything that can be wrong with the 401(k) is wrong. For it to ultimately work as advertised, an investor not only needs to be a disciplined saver, but they must encounter no bouts of bad luck like ill health, unemployment, or divorce. They also need to understand the basics of investing, and it really helps to be a high earner since the tax-advantaged savings vehicle is not only disproportionately offered to higher-paid workers, it is most effective for those who make the big bucks."
'such studies as the National Institute on Retirement Security's Decisions, Decisions, released in October 2011, which found that monies placed in pension funds offered their enrollees greater returns for lower cost, thanks to their stable, long-term professional management and lower expenses."
p.98 "If Ghilarducci had her way she would ditch the 401(k) and create a pension plan for all of us by having workers and their employers contribute a minimum of 5 percent of pay into a guaranteed account via mandatory automatic deduction. The government, in turn, would contribute a $600 annual tax credit, which would be paid for by ending the current tax benefits applied to 401(k) and IRA contributions. All this money would be placed in United States bonds which would promise an annual minimum return of 3 percent above the rate of inflation, so participants would be protected from market downturns. Ghilarducci calls these Guaranteed Retirement Accounts."
Women & Poor People - the argument here about women can also be made about poor & working class generally p. 155 ""Personal finance for women falls into the whole self-help movement. There is this whole cultural thing that women need help to be fixed," observed Mariko Lin Chang, the author of Shortchanged: Why Women Have Less Wealth and What Can Be Done About It. "In many ways, these types of efforts - I don't say they are useless, but if you don't have the money to save, they won't help." Wells Fargo's Beyond Today illustrates Chang's point perfectly. On one hand the initiative is admirably honest about women's financial lives, pointing out that women do have a harder time saving as a result of their lesser incomes and not-infrequent greater demands on their checkbooks from things like family fiscal responsibilities to lack of a pension. But the headline on the piece belies its content: "Why Women Need to Save More Than Men." How they should do this with a lesser income that's expected to do more goes unsaid. Perhaps they think women can just turn themselves into the Ginger Rogers of money management, who, as the late Ann Richards once famously observed, did everything Fred Astaire did, but backwards and in high heels."
Being skeptical on financial literacy initiatives p. 210 "In 2003, Target Financial Services contacted tens of thousands of borrowers they believed to be at risk of delinquency. Of the more than 80,000 cardholders they attempted to reach by telephone, only 6,400 of them picked up. Half of that group was offered access to an online financial education program, but only a little more than 10 percent - that's 684 people - said they would be interested in receiving the information. Six months later, only 28 of them had actually logged on to the website and - drum roll please - a grand total of 2 customers had completed the online credit literacy program... None of this should come as a surprise. There's never been an age when Americans possessed the knowledge needed for them to be deemed financially literate. If we seem more ignorant than in the past, it's likely a mirage caused by the fact we needed to know less back when. "It was savings accounts, whole-life insurance, and the home mortgage," said Steve Utkus, director of the Vanguard Center for Retirement Research. "No one," he added, "was taking surveys of our financial literacy in 1955.""
p. 222 ""You've got a minority of the population that is not very emotional around oney ... [who] say 'you should pay your credit card often and in full,'" said Mikelann Valterra, a therapeutically oriented money coach based in Seattle. "If it were that easy, people would go read a bloody book and be done with it... You've got this virtuous minority giving advice to the majority.""
the benefits of providing motivational support p. 223 "But someone who has studied financial therapy or coaching techniques understands you need to be cajoled along. They listen when you say you really were planning to put money in the retirement account this month but then your car got a flat tire just as you were set to order airline tickets and book hotel reservations so you could attend your second-favorite cousin's destination wedding in Puerto Vallarta, and you really can't skip it, not really, because it would remind everyone of the feud between your mother and aunt twenty years ago and, besides, you like Puerto Vallarta, damn it. "Motivation doesn't come from without, it comes from within," said Saundra Davis, a financial coach who often works with low-income populations. "I could say do this or do that, or I can say, 'Why do you want to pay off your debt?' We can explore what it means for your to pay off your debt, what it means for you or your children. Do you want to travel abroad?' Then I say, 'What do you think the first step should be.' Now, I know what it should be, but change comes from you. Think of all the times people told you what to do." There is some evidence that financial therapy and coaching work, especially when it straddles the line between emotional and practical support. There are efforts like the Family Independence Initiative, a program started by longtime social justice advocate Maurice Lim Miller, which places low-income families in groups where they encourage and advise one another on how to get ahead financially. The results have been startling: in one study, family incomes increased by 23 percent in two years, while debt and dependence on government social services decreased."...more
i don't have a shelf for this! learned a lot - when planting from containers, slice into the rootball, how to deal with bulbs, stagger blooming times,i don't have a shelf for this! learned a lot - when planting from containers, slice into the rootball, how to deal with bulbs, stagger blooming times, very helpful. ...more
It was fine. The first third was best, the second chunks dragged a bit. By the end I couldn't remember what I'd liked about the beginning (maybe justIt was fine. The first third was best, the second chunks dragged a bit. By the end I couldn't remember what I'd liked about the beginning (maybe just that I'd been on vacation when starting it?). Labour unrest from the perspective of British trading houses. ...more
So far hasn't given even glancing notice to tax expenditures. The amount of personnel in the military surprised me: p.22 "About 35 percent are uniformSo far hasn't given even glancing notice to tax expenditures. The amount of personnel in the military surprised me: p.22 "About 35 percent are uniformed military personnel and another 29 percent are civilians working for the departments of Defense, Veterans Affairs, and Homeland Security." Alright, I forgive. Tax expenditures get their time on p. 28. ...more
p. 41 "The most dangerous problem of all is the very thing that makes mark-to-market accounting seem so seductive inLoving it so far. Very readable.
p. 41 "The most dangerous problem of all is the very thing that makes mark-to-market accounting seem so seductive in the first place: growth. When the initial deals are cut and all the potential profits are immediately posted, a company using mark-to-market accounting appears to be growing rapidly. Wall Street analysts applaud, and the stock rockets upward. But how do you keep that growth rate up? True, you're still receiving the cash from past contracts. But you can't count it in your profits, because you've booked it already. It's as if you have to begin every quarter fresh. If you did one deal last quarter, in order to show growth you have to do two the next and four the quarter after that and eight after that and so on. And if you're promising Wall Street that your earnings will increase at a 15 percent annual clip, well, soon enough you're on a treadmill that becomes faster and steeper as the company gets bigger."
p.160 regarding debt disguised as prepays ""Enron loves these deals," wrote a Chase banker in a 1998 email, "as they are able to hide funded debt from their equity analysts. . . ." And a Chase banker in a 1999 email: "They are understood to be disguised loans and approved as such. . . ." In a disposition taken in a lawsuit that resulted from these transactions a J. P. Morgan Chase employee recalls a senior Chase executive named Bob Mertensotto referring to the prepays as "smoke and mirrors." Citigroup understood the deals the same way Chase did. "E gets money that gives them c flow but does not show up on the books as big D Debt," a Citigroup banker wrote in a 2000 e-mail. And both banks worked to reduce their own risk to Enron. Chase entered into some $1 billion worth of insurance contracts that were supposed to pay in the event Enron didn't. (After Enron's bankruptcy, J. P. Morgan Chase sued the insurance companies when they refused to pay. The insurers said that they hadn't known that the transactions were really loans.) For its part, Citigroup sold its risk to public investors through a series of notes. In its internal calculations of Enron's total debt, Citigroup included the prepays. But when it came to selling the risk to investors, it used Enron's financial statements - which were supposed to comply with GAAP accounting - and lumped prepays in with trading liabilities. Thus, while Citigroup didn't want to assess its own risk without seeing the full picture, it was perfectly willing o sell investors a more pleasing image." p. 161 "by the end, Enron owed some $38 billion, of which only $13 billion was on its balance sheet."
p 320 Jim Chanos "In 1985... Chanos founded Kynikos, named after a sect of ancient Greek philosophers that believed the key to life was self, discipline and independence of thought. "After Chanos saw Jonathan Weil's story in the fall of 2000, he flipped open Enron's 1999 10-K. He read: "The market prices used to value these transactions reflect management's best estimates." He thought: "A license to print money." He began talking to Enron's competitors, Wall Street analysts, and virtually anyone else he thought might have information on the company--though not to the company itself, which he viewed as a waste of time. ("You can call the analysts and get the company party line," he says.)... "He was struck by a three-paragraph disclosure in Enron's third-quarter filing about its dealings with a related party. No matter how many times he read it, he still couldn't understand what it said. He showed it to derivatives specialists, corporate lawyers and other experts; they couldn't figure it out either. Chanos thought: "They must be trying to hide something."... Chanos and the others who shorted Enron's stock didn't have any special information that wasn't available to the bulls. "As soon as anyone looked, they could see the stuff we saw," says Chanos today. At first, he adds, "We didn't think it was some great hidden fraud. We just thought it was a bad business."
p 324 "Enron's board members also insist that they were kept in the dark about the restructuring--it was never included on a list of Enron's top credit exposures, for instance. Still, since the restructuring was disclosed in Enron's financial statements, there are only three possibilities. They are lying. They did not bother to read Enron's financial statements. Or they read the financial statements--but like so many others, they didn't understand what they were trading."...more
Somewhat sloppily written - by chapter 3 I've seen two thoughts repeated: P.13 "Until the seventeenth century, interest was never stated in terms of aSomewhat sloppily written - by chapter 3 I've seen two thoughts repeated: P.13 "Until the seventeenth century, interest was never stated in terms of a percentage but only as an amount to be paid. Six percent was described as six in a hundred (pounds, florin, etc)." P.46 "One fact about medieval and ancient discussions of interest is that no stated rate of interest was ever discussed, only the number of units to be paid back."
And this pair, more obnoxious maybe because they are the same distance down on facing pages: P.6 "in today's markets, where the odious term "debt" has been replaced by the more complimentary sounding "credit,"..." P.7 "what previously had been known as the more onerous term "debt" now took on a positive note. Those in debt were referred to as hahving "received" credit."
I've also had two light bulbs go off, though, so I will finish the book. The source of the 'payday lending loophole' RI activists are working to close: P.52 "a piece of legislation caLled the Uniform Small Loan Law (USLL), sponsored by the Russell Sage Foundation and the Household Finance Corporation, which had been founded in 1878, began to be adopted by individual states in 1928 as a way of making the usury laws more flexible. Loans of $300 or less were made to individuals for household items and secured by the items themselves. The small loan law was adopted by 28 states in 1928, and the usury lawd were waived to provide for higher interest, under the assumption that rates would eventually drop." Well damn. Questions I have - what was the Foundation's interest in these bills, was the HFC purely an industry group, how were the bills pitched, under what mechanism were rates expected to drop?
The shift in estimating the value of an asset that triggered the advent of unsecured consumer debt. The context here is financing the purchase of a car manufacturer. P.53-54 " until the 1920s, the traditional way of valuing a merger deal was to set the purchase price using the value of the target comapny's assets. Financing for the deal then would raise more cash than necessary, with the excess going to pay the underwriters a handsome profit... Today that excess is called synergy. At the time, it was still referred to as "watering down" a company's assets... The differences in interpretation are reflected in the choice of terms. If something is sold for more than its asset value, its existing equity will erode, or be watered. If it is sold based on estimated cash flows, then its value correctly reflects investors' expectations about the future. "Morgan made his bid for the Dodge Brothers Company, offering $155 million based on asset value, with $65 million in cash and the balance in securities. Dillon did a more complicated calculation. Originally a bond salesman, he used the tried-and-true method of bond valuation to arrive at his own price. He estimated the future cash flows of Dodge and discounted them by his assumed cost of capital to arrive at the price, which happened to be $20 million more than Morgan's. The icing on the cake was that his offer was all cash. The Dodge family readily accepted... "Dillon's coup also made him an instant legend on Wall Street, which quickly learned the lessons of discounted cash flows and net present value... The implications for consumer credit were obvious, and a change began in credit financing that would slowly change the face of and expand consumer society. It would now become acceptable to base a person's credit on the future ability to earn and service the debt [rather than solely securing the loan with a physical asset]."
another paragraph to wince about p.138 "Negative amortization loans were often attached to the balloons so that, after perhaps five years at a low sweetener rate, the mortgage would require refinancing or payments in full. Any interest accrued during the grace period was added to the outstanding amount when it was refinanced, increasing the homeowner's debt burden. This was known as negative amortization."
p.88 "Innovation in consumer credit usually begins by being marketed to those in higher income brackets, with the older concepts being relegated to those in the lower brackets. The result is that those in the lower brackets are still faced with methods thought to have long since disappeared: payday loans, very high interest charges, and punitive installment loans."...more