Chicago Celebrities and Homes 4/18/10

Every Sunday, the Chicago Tribune's "Money and Real Estate" section has a column called "Elite Street", which covers Chicago celebrity home buys and sells.

In the 4/18/10 column, they covered new Chicago Bears player Julius Peppers and former Bears quarterback Rex Grossman.

Peppers

Peppers, who is now the highest paid defensive player in the history of the NFL, signed with the Bears for six years and $91.5 million ($42 million guaranteed). He recently purchased a 5,923 square foot house in Highland Park.

He bought the house from former Chicago Bulls player B.J. Armstrong. Armstrong bought the house new in 1994 for $1.599 million. The two story house, designed by architect James Goldberg, has 6 1/2 baths, 4 fireplaces, and a three car garage. It sits on a wooded lot - about a block from Lake Michigan.

Peppers bought the house for $1.8 million. It was originally listed for $2.95 million in July 2008, and reduced 4 times: $2.8025 million, $2.499 million, $2.374 million, and finally just below $2 million.

Rex Grossman

The former Bears quarterback sold his last piece of Chicago real estate, a Lake Forest townhouse, for $750,000. He lost money, because he had bought the 2,714 square foot townhouse in 2005 for $797,275.

Grossman also lost money on his 3,437 square foot unit in the Chicago Trump International Hotel and Tower. He bought that unit for $2.681 million in 2008 and sold it last January for $2 million.

Read More

Minimizing Your Cell Phone Bill

Surveys show that one of the biggest complaints for consumers are their cell phone bills. Calling plans can be complicated and confusing to compare.

There are at least three 3rd party websites that can help you find the cheapest cell phone calling plan:

1. billshrink.com - This site is free, easy to use, but less detailed. It compares your cell phone plan with those of AT&T, Sprint, T-Mobile, and Verizon. If you type in your account number and password, the site can automatically read in your plan info. If you don't feel comfortable giving out this info, you can type the amounts in directly from a bill.

2. reviewmybill.com - This site also analyzes bills from AT&T, Sprint, T-Mobile, and Verizon. However, it will only compare your bill with plans within your current carrier. You have to type in your account number and password. If the site finds a plan to save you money, it will automatically downsize your account and charge you a one time fee of 1/3 of the annual savings.

3. myvalidas.com - This site provides a detailed analysis comparing your cell phone plan with those of AT&T, Sprint, Nextel, T-Mobile, U.S. Cellular, and Verizon. You can download the report for $5.

Another option is to call your carrier's customer support number yourself and ask them if you are on the best plan for your usage.

Read More

Goldman Sachs Cartoon

A friend sent me this cartoon from Casey Research (http://www.caseyresearch.com/images/1272369060-GS-2GSD.jpg).

Read More

FHA to Raise Fees and Down Payments

Here is another piece of news that shows that the real estate market has still not regained its health:

I read that the FHA (Federal Housing Administration) is planning to raise fees and increase down payments for certain borrowers.

As a little background, the FHA doesn't issue mortgages, but insures them. Up until a few years ago, FHA-backed loans only accounted for about 3% of the mortgage market.

Since then, they have accounted for 30% of all new loan activities, because they have become one of the only options for home buyers with low incomes and/or poor credit. They only require a 3.5% down payment.

While they probably helped slow down the real estate free-fall, the problem is that about 9% of their borrowers are three or more months behind on their payments, and their default-rate is skyrocketing.

This has pushed the FHA's capital reserve funds to less than 2% of outstanding loans (which is the minimum threshold required by Congress).

As a result, the FHA is implementing two changes:

1. The upfront charge to borrowers for insurance will rise from 1.75% of the loan to 2.25%. The monthly insurance premiums won't change.

2. Borrowers with a FICO score below 580 won't qualify for the 3.5% down payment. They will have to put down 10%.

Read More

Tax Carnival #69

The 69th Tax Carnival is up - just in time for April 15!

It has a bunch of good, informative blog posts on taxation.

Read More

Almost 1/2 of U.S. Households Don't Pay Federal Income Tax

According to this article: http://news.yahoo.com/s/ap/20100407/ap_on_bi_ge/us_no_taxes About 47% of all households won't pay income tax for 2009.  Either they did not make enough, or they had enough credits, deductions, and exemptions. The top 10% pay about 73% of the Federal income tax. The bottom 40% actually make a profit (they get more in credits then they owe). I don't think this is a good idea.  I think everyone should pay something.  Then, the tax rate could be lower because there will be a bigger number of payers.  More importantly, there is currently no incentive for 1/2 the people to vote against politicians who waste money. Also, I recognize that many big corporations also escape taxes.  I realize that they enjoy some of the biggest loopholes. What if we got rid of all loopholes - for rich and poor alike?  No exemptions, deductions, or credits.  Instead, everyone pays a single, low rate.  Let's say it's 10%: Then someone making $10,000 a year pays $1,000 while someone making $1,000,000 pays $100,000. You might argue this is regressive and shifts the burden away from the higher earners.  The traditional argument against a single flat rate is that a lower-income worker pays a higher percent of his income in essential expenses. But high earners have demonstrated creativity and achieved success.  They are the ones driving human progress and job creation.  Why should we penalize them for their achievements? I recognize that supply-side, or "trickle-down",  economics is controversial.  But the fact is that life doesn't happen in a vacuum.  Lower income workers will have to pay more but a flat tax should compensate them somewhat by spurring job growth. Also, maybe it's good that lower-income workers feel some pain from a "regressive" tax.  A fix is only as far away as the next election.  They can choose to vote for small-government candidates. What are your thoughts?  I welcome comments.

Read More

A Successful Trader

Since I developed my system, I can hardly describe how my trading career has changed. While I'm no financial genius like Warren Buffett, I now have a simple and elegant approach to the stock market that gives a great return without undue risk.

In fact, until 2008, I made a double-digit annual return for years.

Even after sustaining a loss in 2008, I bounced back in 2009 with a 44% return. My 5-year and 10-year returns are better than the market.

I have no expectations. I am in a very powerful position. The market can't "digest" my system - because my system works in any market - bull, bear, trending, and random choppiness.

I no longer suffer from trading system "promiscuity". I can resist the urge to "tinker", "tweak", and "optimize" my system.

Read More

Lichello's AIM System

 I previously mentioned how my trading system is build around constant value investing.  Another system that is based on this technique is Robert Lichello's AIM system.


Here, I will discuss how Robert Lichello's AIM system answers the "Questions to Build a Constant Value Trading System".

These questions need to be answered in order to develop a complete system around constant value investing. 

Here is how Lichello's AIM system answers the questions:

1. Lump Sum or Periodic Investment - AIM was meant to be a lump sum system where you would invest, for example $5,000 or $10,000. However, you could invest more money once in a while by adjusting the control.

2. cash - In the case of AIM, Lichello initially recommended a 50-50 split between stock and cash. Later, he increased it to 2/3 stock, 1/3 cash. In the latest edition of his book, he recommended 80% stock, 20% cash. Lichello did not propose a way of handling excess cash. The cash would just build up in your account.

3. Running Out of Cash - Lichello does not really deal with this, except that he mentioned that you can add more cash if you have it.

4. Investment Choices - Lichello did not give much guidance in this area.

5. Control Value(s) - Lichello advocated one control value for the portfolio. His control value would increase by half of any amount added if value dropped, and it would increase by the full amount of any new money added.

6. growth - AIM makes no provisions for growth. Excess cash simply accumulates and the control only increases on buys.

7. risk - AIM assumes risk is controlled because the portfolio is diversified. Also, between rebalancings, any stock can be replaced by another, as long the same dollar amount is bought.

8. Rebalance Frequency - A potential rebalance is done monthly or quarterly. However, a SAFE value is then calculated (equal to 10% of the stock value). Rebalancing only occurs if, and to the extent, that the difference exceeds SAFE. For example, assume the control is $10,000, and the stock value is $12,000. SAFE is then $1200. Since $2,000 is greater than $1200, a sale will take place, but only for $800.

If you are interested in learning further about Lichello's AIM system , you can buy it at Amazon.com.

Read More