Archive for October, 2009

Scam Alert!

October 23rd, 2009

We are surrounded by crooks – fight back!

The phone rings and I grab it. A pleasant voice says, “Good afternoon Sir, is this Mr. J. K. Jones?” “Yes, it is,” I answer politely. “Mr. Jones, we have some news for you. My name is Shirley Smith of Cee, Dee and Eff, Attorneys. Our offices are at 1234 Main Street, Downtown.” “Yes, and…” “We are the attorneys handling the distribution of the proceeds of last night’s Lotto in which we see you had a ticket. The good news, Mr. Jones, is that your ticket had the winning numbers and you won over a million dollars.” “Oh my!” “Congratulations, Mr. Jones. This call was to verify that you are the winner. My manager will be calling you shortly to discuss the payment details. Good afternoon, Sir! Have a great day!”

The manager

As promised, the manager called an hour later. I was already beside myself at the delay. The upshot of the conversation was that I should give him my financial and other personal details so that he could lodge my claim with the Lotto authority. I should also send him a check for ten thousand dollars. He would attend to all the paperwork and the matter of the taxes to be paid on my winnings and the send me the balance.

A bell rang

A bell rang somewhere in the back of my mind. I remembered hearing a story about something like this. I put the phone down, shaking a little as I realized how close I had come to winning and then to losing. Once sanity returned, I understood that no one knew I had bought a Lotto ticket, my name is not on the ticket and if I had won the phone call wouldn’t have sounded like the one I received. If you receive a call like that, put the phone down. I had come close to withdrawing ten thousand dollars from my pension funds and sending it off to these people.

New scams

Beware and be awake. There will always be new scams as twisted and crooked minds dream up new creative ways to separate you from your money. A favorite place is the internet. We have all received letters from a lawyer or the governor of some bank in Nigeria asking to help him move millions of dollars out of the country. All he needs are your banking details.

The scam principle

The principle of a successful scan is basically greed – the victim’s desire to get his hands on money. That was the bait in Bernard Madoff’s Ponzi scheme. He didn’t invent it – it’s as old as the hills. It’s the victims who are new – they hadn’t been there before.

The seniors

It’s us seniors who are the targets and it’s because we are seniors that we are eminently susceptible and gullible. Who doesn’t think about a last luxury cruise, a wild exotic holiday or an unlimited budget-free shopping spree? Be alert, someone’s aiming at you!

Posted in Finance | No Comments »

Are you going back to the stock market game?

October 22nd, 2009

Or are you taking your money to the casino?

It’s pretty up and down at the moment in Wall Street. Look what happened last week to Alcoa. The company announced that it had achieved a tiny profit, whereas it had been expected to post losses. The news sent the company’s stock soaring, because the investors perceived the report to be “positive” when they are surrounded by “negative”.

Why is it significant?

What possible significance could there be in an infinitesimal quarterly profit of a few tens of millions of dollars in a company whose quarterly turnover is almost $5 billion? What meaning could there be to a profit so small that it could simply be the result of a casual accounting decision about how to calculate amortization at any one of the company’s plants? Naturally, none of that arose in the discussion. The main point was that the “expectations had been beaten.”

The information flood

With the advent of the news channels and the internet and our entry into the “Information Age” the amount of real-time information flooding in from the marketplaces has hugely strengthened the casino aspect. New financial statements or corporate announcements are released continuously. Expectations are formed well ahead of events, creating an opportunity to gamble on the outcome: whether it met these “expectations” or not. This is a gamble that strengthens the emotional side of the markets.

The game of “Gains and Losses”

Is the news better than expected? Players “vote” for gains. Did the result fall short of expectations? Players “vote” for losses. The aspect of cold-eyed measurement, and attempts to interpret the news in terms of share price, are abandoned in favor of roller-coaster emotionalism.

Urges rule

In any stock market, no matter where, there will be periods when economics and rationality rule, facts and numbers hold the day. And there will be times when speculative urges come to the fore and move the markets more than reasonable analysis. There is nothing anyone can do about it; that’s the way it is.

Your investment approach

Every investor has to decide on his own approach and his own reason for playing in the stock exchange. Is he a long term investor? Does he do his homework and invest strictly by economic criteria? Or is he a hit-and-run player trying to ride the wave before it crashes over his head? Whichever style one chooses, success cannot be assured, and there is no formula that will guarantee profits.

The Intel story

Chipmaker giant Intel published a financial statement last week that “beat expectations”. Following the report’s release, Intel’s share price rose, albeit not dramatically. In October 2008, just before profit and sales began to decline, Intel was trading at $17 per share. At its lowest point since, in March 2009, its share had fallen to $12. It subsequently rallied strongly, rising to $21 per share. No question about it, emotion is ruling the day in the investment community.

Posted in Economy | No Comments »

Caught in the Cost of Living Trap

October 21st, 2009

No increase coming, now what?

It’s official: for the first time in over a third of a century, Social Security recipients won’t get a cost-of-living increase next year. Instead there’s a chance that these folk will get a one-time check for $250. Which would make you happier?

I prefer the increase

I know what I would do with the check – I’d blow it on the day it arrives. I can’t remember the last time I had a pile of money that size. It would send me running for my wish list. The funny thing about that list is that it never gets shorter, it just grows. I have never crossed anything off it. If I get the cost of living allowance every month it will go a lot further than the one-shot payment. It would mean that I have a little extra each month. And if and when the increase question comes around again, it will be on top of the increased amount, not on top of a non-increased amount.

Unlinked economy

It’s all about linkage. Some countries have linked economies, but here in the US, our economy is not linked. If you buy a life insurance policy for $200,000 then when you pass on, say 40 years later, your heirs still get paid out $200,000, despite the fact that a loaf of bread cost $1 when you bought the policy and costs $5 when you die. The good news is that if your monthly premium for that insurance was $20 per month when you bought it, it will still be $20 when you make the last payment before you leave.

Linked economy

In the same situation in a linked economy, the $200,000 life insurance policy that you buy is linked to the cost of living (or some other) index and when you die, your heirs will receive probably well over a million dollars – the updated value of the $200,000. But in this case there is bad news: your premiums will have been linked too, so that every time there is an increase in the Cost of Living Index, your premium goes up by the same percentage as the index and you may have been paying hundreds of dollars a month in premiums. But here’s the thing: in a linked economy there could never be a decision not to pay the Cost of Living Increase as Congress decided. It’s automatic.

The linked society

In a linked economy the Cost of Living Index is announced and the citizens of that country sit with their ears towards the radio or TV on the monthly date of the increase/decrease announcement. It is important to everyone. Every citizen has something in his or her life that is linked and therefore is affected by the increase or decrease.

Which is the better system?

I have lived large chunks of my life in both economies and I’m still not sure. I do feel that I am better looked after financially in the linked economy.

Posted in Economy, Employment | No Comments »

« Older Entries

Newer Entries »