TedCo Software Financial Matters Blog

In The Baseline Scenario, James Kwak offers an excellent piece titled, “The Need for New Antitrust Laws“. Kwak discusses Zephyr Teachout’s proposal that new antitrust laws be enacted aimed at reducing the political power of large firms. Teachout’s proposal is in The Nation’s article, “Trustbusting 2.0?”

Teachout’s best line: “I happen to think corporations serve incredibly valuable social purposes. But those values are radically limited if we stop understanding the corporate form as deeply flexible, putty in our hands if we want it to be–a flexible tool for human, democratic, societal ends.”

In other words, it’s time society flex it’s power to wrest control of our future from self-serving corporations. Any corporation deemed “too big to fail”, must fail. Legislation should be in place to prevent any corporation from reaching the mythical “too big to fail” status.

The news is horrid these days. 11% of home owners are in default or foreclosure. Unemployment is rushing to 10%. Can you do anything about it?

Watching this economy play out reminds me of the way many of us in Louisiana watched the news as Katrina approached the Gulf coast. We were fascinated by the potential devastation. We knew the score and what was at stake. Many were glued to the TV because we had family and friends in New Orleans. After Katrina made landfall, people across the country watched the ruckus Katrina made of Louisiana and shook their heads in disbelief.

But for all the time spent focusing on the bad news of Hurricane Katrina, did watching the news do anything about it? No. Did worrying save anyone? No.

The only way people saved themselves and others was to accept that a killer storm was coming, make plans to take care of themselves, their families, friends and neighbors, and implement their plans.

In a nutshell, the equation is this: K + P + A = S.

Knowledge + Plan + Action = Survival.

The current economic environment does remind me of Katrina approaching the Gulf coast. You know it’s going to be bad. Based on the experiences of many, I believe if you have the ability to see potential consequences, make plans to accommodate them, and implement your plan, you’ll be a survivor.

Many lost their homes to Katrina, but they survived. Many moved away from their homes, but they survived. If you watched the U.S. Coast Guard’s helicopter crews pluck people from rooftops, you know many people gladly accepted help and they survived.

An economic storm is approaching. Can you do anything about it?

You can’t stop it. It’s bigger than all of us, but you can certainly prepare.

1. I’ve quit watching the doom and gloom news. You know it’s going to be bad. There’s not reason to depress yourself by immersing yourself in every talking head’s dark tale of the economy.

2. Evaluate your current situation. Ask the basic question, “Am I prepared for this storm?” Do you know what you would do if you were to lose your job?

3. If you are not prepared for the storm, prepare yourself. Start now. As soon as possible, set aside some money and begin an emergency fund. If you haven’t considered it, think about what you will need to do if you lost your job. (For example, as soon as it happens, ask your employer, supervisor, and co-workers for letters of reference. Leave with a good attitude instead of burning bridges. Go ahead and clean up your resume while you’re thinking about it. Keep building good connections in your business network.)

4. Keep your wits about you. Bad news stirs strong emotions. If you get lost in all of the flood of emotions like worry, fear, panic, etc. you cannot make good decisions. Survivors think and act.

5. Be practical and prioritize: take care of the basics you and your family need like shelter, food and utilities. For example, if you can’t afford both, lose a 4-wheeler before you lose your lights. Give up your boat before you quit eating. Know what’s important and focus on maintaining that.

You almost can’t help but hear bad news and the comparisons to the Great Depression. Here’s what I know. It’s true that fortunes were lost during the Great Depression. It’s also true that fortunes were made. Living through it changed an American generation. People survived the Great Depression.

Know what’s going on, create a plan to handle it, implement the plan and survive.

Here’s an entertaining Google adventure: Search for “now is the time to buy a home” using Advanced Search and limiting the results to the past month. Record the number of results. I get 416 web pages with the phrase, “now is the time to buy a home”.

Now do the same thing with the phrase, “now is not the time to buy a home”. I get 0. No web page in the past month has declared, “now is not the time to buy a home”.

Finally, do both searches for the past year. “now is the time to buy a home” has 843 results while “now is not the time to buy a home” returns 14.

What’s this mean? I don’t know for sure, but I think it means those who want to sell (home owners, real estate agents, lenders) are speaking louder than those don’t want to buy.

It begs the question, of course, “is now the time to buy a home”.

As always, regardless of what anyone proclaims, buying a home is a significant, personal experience. Foreclosures and walk-aways are in the news on a daily basis. Some even declare they have quit making payments because it’s a good business decision. Whatever.

It’s only a good time to buy a home if it’s a good time for you.

Can you afford it? Can you afford it with a fixed rate mortgage? Can you afford it on one partner’s salary? Do you need to buy a home? Is the home you want to buy in good condition? Are you going to live in your home long enough for it to be cheaper than renting? There are a lot of questions a home buyer must ask and answer honestly.

It’s always easy to find someone who will tell you now is the time to buy a home. Only you can determine whether now is the time for you to buy a home. Protect yourself out there!

I live in a small town. I’ve been spoiled by the locally owned businesses which provide great customer service in Ruston. In fact, I take it for granted that great customer service is a part of doing business.

I am traveling this week and I am seeing sorry customer service. Out in the “real” world, great customer service seems to be the exception. However, in the current economic environment, small and large businesses may pay dearly for the refusal to provide exceptional customer service.

Here’s an example. Traveling through the Houston airport yesterday, the importance of customer service was driven home in a graphic way. In line to board a connecting flight to Phoenix, I approached the desk where the airline employee was scanning boarding passes. The gentleman in front of me handed her his boarding pass. She scanned it and then scanned it again. She muttered to herself.

Looking to the other lady standing behind the counter she asked, “What is Smith’s new seat?”

“My name is Smithdale,” the man said. She ignored him and continued to talk to her co-worker about “Smith.”

My last name is Smithdale,” he offered again in case she had not heard. She ignored him. With more agitation, she asked her co-worker again, “What is Smith’s new seat?”

Mr. Smithdale said, “Excuse me, Ma’am. My last name is Smithdale. It is not Smith.”

She turned on him. “I know what your name is. We were having a conversation about you. Not with you,” the grumpy lady responded shortly. “Your seat is 6D.” His shoulders dropped and he shook his head as he walked away from her and toward the plane. “Never again,” he muttered.

When she scanned his boarding pass and realised his seat had been changed, it would have taken so little effort for the airline employee to say, “Oh! Welcome, Mr. Smithdale. Your seat has changed. Let me get your new seat number for you.” Instead she was rude.

Sorry customer service like that will help kill businesses … especially smaller businesses. While a multi-billion dollar airline may be able to afford angering customers with rude customer service, a small business cannot.

Aware of this, in my experience, most smaller businesses work hard to provide exceptional customer service. Those that do not disappear.

(Or “Why My Truck is Worth Only 5 Small Dents”)

Earlier this month in “Buy a New Car to Save on Gas?” I blogged about being a happy driver of a 2000 Ford F150. I wish I hadn’t.

Do Not Blog about Your Truck!

Just a few days after that article, the Pendulum of Irony swung up behind me and whacked me on the back of the head. (The Pendulum of Irony is related to the Pendulum of Justice that swings through the universe — we only see them swinging towards us half the time unless we look over our shoulder a good bit.)

I’ve learned you should not blog about your truck.

Why? Because your truck may catch fire. At least mine did. In a parking lot. By itself. While I was in my office.

The insurance adjuster tells me the cruise control switch started the fire which almost did enough damage to total it. A good friend ran out of his office with a fire extinguisher and put it out before the tire caught afire from the burning plastic fender which was dripping onto it.

When an adjuster is deciding to total your truck, dings from the past can cost you today. Ford and the insurance company are discussing which company will pay for damages. If my insurance company covers it, they’ve said they’ll total it.

It won’t be totaled because the fire damage alone is enough to push the repairs past 75% of the NADA value. I expect they’ll total my truck because of a small dent in the rear door. The small ding will be what pushes it over the edge.

What surprised me is that they put a repair value on the small dent of $1,325! When the insurance lady told me about the whopping damages assessed on the small dent I reminded her that it’s a truck, it’s supposed to have a dent.

There is no cracked paint in the dent. I can almost cover the entire dent with my hand. It’s low on the door and unnoticeable unless you’re accumulating damages so you can total a vehicle.

I’m typing this on an IBM ThinkPad that cost just a few dollars more than $1,325. They’re equating the value of small dent (smaller than my ThinkPad) with the value of the technology in my ThinkPad! That’s crazy!

If you do blog about your truck and it catches fire and then is totaled, your insurance company (and certainly a dealer) will encourage you to buy a new vehicle.

“A new truck will be safer,” the insurance lady said. “You don’t know what hidden damages from this engine fire may cause you to have an accident in the future.”

I don’t want to buy a new or used truck. I’d like to have my truck, hereafter known as “Old Smokey“, repaired. Why? Because keeping my truck will continue to save me money. A new truck will not save me money and one can never really know how well a used truck has been cared for.

Unfortunately, the insurance company seems determined to act so that the engine fire on my F-150 costs me more in the long term than I believe is reasonable.

Here’s how I think it works. I talked with a friend who has his hands in the salvage business.

If my insurance company totals my truck they’ll cut a check for the NADA Book Value which is $6,475 (or about the cost of 5 small dents). I can’t find a truck just like it with the same mileage for the same price. If they total my Ford F-150, they’ll sell it to a salvage buyer for about $800-$1000 according to my friend. Then the guy who buys it for that amount will take it apart or more likely, simply replace the melted plastic parts (master cylinder and wiring harness) and resell it for $5,000 or $6,000.

The system seems designed to allow someone else to get my truck!

Of course, I looked. New truck prices are outrageous. I priced a comparable 2009 Ford F-150. It would require unspeakable foolishness on my part to purchase a brand new replacement for Old Smokey.

I would instantly lose in the transaction. Here’s why. I went to FordDirect.com and “built” my truck in a 2009 model with the same features as Old Smokey which is now at the local Ford dealer’s body shop. The 2009 replacement for my 2000 model has a MSRP of $33,320!

When I price the new truck on the Kelley Blue Book site, www.kbb.com, I find the new 2009, $33,320 truck has a “value” between $26,725 and $29,460 … or about 20 small dents. In other words, I would immediately lose $6,595 by purchasing a 2009 with the same features as my 2000!

Finally, I’ve learned about vehicle recalls. If you have a Ford vehicle of any type, you should check the National Highway Traffic Safety Administration recall database and see if it has been recalled, especially for engine fires! (Ford’s site offers recall information but you must have your VIN handy to check their database. NHTSA’s database is more accessible because it does not require you to enter your VIN.)

P.S. Don’t blog about your truck!

“The Mess That Greenspan Made” is Tim Iacono’s blog which is subtitled, “How Eighteen Years of Easy Money Changed the world”.

His post, “Renters Unite!“, on October 16 describes a phenomenon that has been happening “under the radar.” He writes about renters being kicked out of the homes they rent because of landlords who lose their rentals to foreclosure.

One of the most respectable things he describes is that the sheriffs in Illinois and Michigan are coming down on the side of renters. Tom Dart, Sheriff in Chicago’s Cook County, announced last week he will no longer send deputies on court-ordered foreclosure evictions because many who were being evicted were renters who had faithfully paid their rent.

Perhaps renters should start doing credit checks on landlords!

MarketWatch.com reports on the many mistakes unlicensed, paid tax preparers make in, “Some tax pros get it wrong: Limited study of paid preparers’ returns finds many mistakes“.

The article reports on a study of tax returns prepared by unlicensed preparers in which 61% were prepared incorrectly. Some tax payers owed more tax, some owed less tax. The study focused on tax preparers who were unlicensed and did not include tax preparers who were CPAs, tax attorneys or enrolled agents.

Surprisingly, only two states require tax preparers to register with a state agency and receive continuing training. In other words, the chances are good your paid, unlicensed tax preparer may not have the skill, knowledge, or training required to do a good job with your taxes.

What can you do to ensure you have a qualified tax preparer?

• Ask him or her about continuing education.
• Contact the local Better Business Bureu.
• Visit the website of the National Association of Tax Professionals (NATP). You’ll find a “Find a Tax Professional” link in the menu. Click it, fill out the search form and view a list of NATP members in your area.

There were no NATP members in my small community or in surrounding communities. However, whether or not you find an NATP member in your area, the information available on the NATP website is informative.

The last few days have been rough for the financial markets. And everyone seems to be talking about it.

Some are calling it a “Category 4 financial storm“. Talking heads on CNBC and other cable finance channels are talking as fast as they can to everyone they can find with a professional opinion. The financial headlines are moving from section C to the front page of newspapers. I can’t count the number of times I’ve heard or read, “We are in a financial crisis.”

What people want to know in a crisis is whether they are protected. If you live along the coast in an area prone to hurricanes, you plan ahead of time for higher ground. If you live in an earthquake zone, you keep in mind where you should go when your building begins to shake.

To prepare for a financial storm, you plan ahead of time to keep funds protected.

And, fortunately, much of that planning was done for you by the FDIC (Federal Deposit Insurance Corporation). If you want to learn how the FDIC protects your deposit accounts, the best place to learn more is on the FDIC: Are My Deposits Insured? web page.

While the FDIC insures deposit accounts (think traditional bank accounts; checking, savings, trust, certificates of deposit (CDs), and IRA retirement accounts), there are some accounts and investment products the FDIC does not insure.

Increasingly, institutions are also offering consumers a broad array of investment products that are not deposits, such as mutual funds, annuities, life insurance policies, stocks and bonds. Unlike the traditional checking or savings account, however, these non-deposit investment products are not insured by the FDIC.

Specifically, the FDIC does not insure: investments in mutual funds (stock, bond or money market mutual funds), whether purchased from a bank, brokerage or dealer; Annuities (underwritten by insurance companies, but sold at some banks); or stocks, bonds, Treasury securities or other investment products, whether purchased through a bank or a broker/dealer.

The general “limit” on insurance per deposit account is $100,000, but the FDIC website offers EDIE, their online Electronic Deposit Insurance Estimator. It’s an excellent tool that helps you discover exactly how protected you have.

The FDIC’s promise (on the EDIE homepage) is, “When your deposits are 100% FDIC-insured, you can’t lose a penny, no matter what.”

Hard drive encryption protects your data.

More frequently than I wish, I hear from customers who have had a notebook computer stolen. The typical request is similar to,

“My laptop was stolen. Do I need to repurchase the software I bought from Wheatworks for my new computer?”

My answer is, “no”. In fact, I send a download link and generate a new user name/license key combination and then disable the previous license key.

The greater issue to me is not the loss of one of Wheatworks’ financial calculators. The greater issue is the loss of all the data on a customer’s hard drive. And unfortunately, most people still do not encrypt their hard drives or even important files on the hard drive.

So, in addition to providing a new download link, user name and license key for the Wheatworks Software product our customer lost on their stolen computer, I’ve also started sending information about TrueCrypt.

In my opinion, TrueCrypt continues to be the best drive encryption I’ve found. It is easily installed, doesn’t slow a system down, doesn’t interfere with the use of the computer (aside from requiring the user to enter a password when the computer is turned on) and it is free. I can think of no reason for any person to use a notebook computer (or desktop in many environments) without using TrueCrypt. http://www.truecrypt.org … I’ve used it for years.

Note: this is not in any way paid advertising for TrueCrypt. The folks at TrueCrypt.org have probably never heard of me or Wheatworks. Their product is so good at securing a hard drive that I’m telling you about it in the same way I’d tell you to buckle your seat belt. TrueCrypt is great, free protection for you.

I read, “Thousands Later, He Sees Lottery’s Cruelty Up Close,” in the New York Times and I am reminded, while there are strong moral and religious arguments against the lottery, the best reason to avoid playing the lottery is that it is inherently unfair.

“Thousands Later …” is about a gentleman in New York who, with an annual income of $40,000, spent $30,000 on the lottery last year. (How he swings that is surely another issue.) He has thrown away money in this fashion during the last three years and has won only 3 times, $1000, $2000 and $2000. Of course, he “reinvested” the “winnings” and lost them.

The lottery is such a sucker’s game.