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Subject: persfin-digest V4 #10
Date: Thu, 20 Mar 1997 21:08:40 -0500 (EST)
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persfin-digest Thursday, March 20 1997 Volume 04 : Number 010
IN THIS ISSUE:
ADVERTISEMENT: LAN ACCESS TO MCI MAIL
Sometimes You Can Get 70% Discounts On Books
No Need For Bookstores? I Disagree?
Why Not Use the Public Library Instead of a Megastore?
Re: Buying Books Online - Bookstores Are Still Needed
Amazon.com Actually Stocks 200 Titles - Slate's Webzine Article
Don't Short Barnes and Noble Yet
You Can't Leaf Through a Book at an Online Bookstore
I Dropped My Subscription to the Book-of-the-Month Club
Barnes and Noble has Done Its Market Research
Re: Possible divorce
Current Plans For Helping My Friend Through the Divorce Process
RE: Zip Drive and Iomega Ditto - Murphy is at Work!
Recommend version of Excel for Mac?
Re: Low Cost Condo as a Starter Home
Subject: Storage, Zip, and other strange disks..
Re: Liability Insurance?
Foreign Securities Quotes And Data?
Re: Mortgage Interest Rates - 90% Interest?
Re: The new Dow - How Has It Adjusted?
Re: JUA Disaster Insurance
Re: Mortgage Interest Rates - 90% Interest?
There Is No 10K Gift Rule
Re: Mortgage Interest Rates - 90% Interest?
Re: mortgage loan types: fixed vs ARM, bank vs mortgage company
Profit Sharing Distribution
Company policy on tax on relocation expenses
Re: 401K rollover into IRA?
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Date: Thu, 20 Mar 1997 19:56:08 -0500 (EST)
From: The Editor <ikrakow@shore.net>
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------------------------------
Date: Thu, 20 Mar 1997 20:00:50 -0500 (EST)
From: Keith Mealy <kmealy@cincom.com>
Subject: Sometimes You Can Get 70% Discounts On Books
our esteemed editor wrote:
... Amazon.com is doing this, I believe, as a loss leader for their other
books. At 40% off they'll probably just about break even or perhaps lose
some money, but they'll have you in the store. Their other books
typically carry a 10% discount, sometimes less. I've even seen books
offered at *more* than retail.
==========================
Don't shed too many tears. I sometimes buy books in quantity for
a club I belong to. For what I would consider relatively small quantities
of books (~1000), a 70% discount is not uncommon. Even for quantities
of 20-50, you can get a 40% discount. Of course, this does not cover
any of their overhead, but with the quantities that Amazon orders, I
doubt they're losing money.
Shill: I've used Ira's bookstores to order some obscure technical books.
It was either that or special order from my local chain store. The books
arrived in a week in good order.
Keith Mealy kmealy@cincom.com
Cincinnati, OH http://www.cincom.com
------------------------------
Date: Thu, 20 Mar 1997 20:01:49 -0500 (EST)
From: "Mark Hamann" <hamann@myk.ilc.or.jp>
Subject: No Need For Bookstores? I Disagree?
> Bottom line - you can now shop for books online, find out in minutes
> whether it's in stock or not, get the best terms on price and shipping,
> all from your computer. In my opinion, Barnes and Noble and Borders are
> another stocks to short. There's no real need for megabookstore
> buildings.
What? One of the best books I ever read is Nature's Metropolis about the
relationship between Chicago and its environment in the last century. I
found it by browsing through Border's, looking at the table of contents,
reading pages at random, getting a feel for the book. Even with the
reviews and somewhat sketchy information at Amazon.com, I probably never
would have had it shipped to me sight unseen and it would have been my
loss. It is just one of several books I have found by browsing.
Ordering books online is great if you know what you want, and I am
currently awaiting the arrival of some books I had to order online being
out of the country, some recommended by persfiners (I'm counting on your
recommendations). But people who like to browse, see the author's
credentials, read a few pages to check the author's style, see the table of
contents, see if the book has won any prizes, see if the book is what they
really want..., will require a real bookstore with thousands upon thousands
of books on-hand.
Until I can quickly access all the information I want about a book online,
which essentially means the ability to download the entire book in seconds,
I will make my regular visits to the megabookstore building which Ira sees
no real need for (after I return to the United States).
Finally, I recommend that anyone interested in the history and development
of the commodities market in 19th century Chicago read Nature's Metropolis
by William Cronon. I also recommend it to anyone not interested in the
history and development of the Chicago commodities market, because it is
really is a lot more interesting than it may seem at first glance.
See you at the coffee shop at the bookstore,
Mark Hamann
------------------------------
Date: Thu, 20 Mar 1997 20:09:12 -0500 (EST)
From: The Editor <ikrakow@shore.net>
Subject: Why Not Use the Public Library Instead of a Megastore?
Why not use the public library to find out about new books, instead of
Borders or Barnes and Noble? My local library is a great place for this,
and it's quite a bit cheaper than patronizing a sterile bookstore in a
mall. In addition to books, it has CDs and videos. With interlibrary
loan and online browsing of titles at other branches, the library system
is one of the most underutilized resources in the US.
Is the real reason the basic American idea that because something is
free it's worthless?
Ira
------------------------------
Date: Thu, 20 Mar 1997 20:15:03 -0500 (EST)
From: Jonathan Corbet <corbet@stout.atd.ucar.edu>
Subject: Re: Buying Books Online - Bookstores Are Still Needed
Ira sez:
> Bottom line - you can now shop for books online, find out in minutes
> whether it's in stock or not, get the best terms on price and shipping,
> all from your computer. In my opinion, Barnes and Noble and Borders are
> another stocks to short. There's no real need for megabookstore
> buildings.
I have to disagree. The online bookstores are great -- I'm waiting for a
shipment from Amazon as I type -- but they are nowhere near replacing a
real local bookstore. At Amazon, I can get anything I want, so long as I
know exactly what it is. But that is only part of my purpose in going to a
bookstore. It's important to be able to just look at what's on the
shelves, appreciate the cover art, read the blurb on the back, glance
through the pages. It's nice to be surrounded by people who love books and
like to talk about them.
Every author, every book you have ever encountered has been brought to your
attention somehow. Online bookstores do not address the discovery aspect
of the reading experience, and I don't think they will get there anytime
soon. Until then, people will go for the bricks-and-mortar bookstores, and
I wouldn't short the stock anytime soon.
jon
Jonathan Corbet
National Center for Atmospheric Research, Atmospheric Technology Division
corbet@stout.atd.ucar.edu http://www.atd.ucar.edu/rdp/jmc.html
(Editor's Comment - I believe that's true for the small specialty
mom-and-pop bookstores. I have no use for the megastores, which drive out
the small specialty booksellers to the wall. Pretty soon the landscape of
the US will be just Wal-Marts and Borders. -IK)
------------------------------
Date: Thu, 20 Mar 1997 20:23:16 -0500 (EST)
From: Jim Ford <Jim_Ford@MGIC.com>
Subject: Amazon.com Actually Stocks 200 Titles - Slate's Webzine Article
Slate's "webzine" had an interesting spin on this in an article called
"Amazon.con." It debunked the notion that Amazon is the "world's biggest
bookstore." In reality, Amazon stocks a mere 200 titles; if you request
anything else, they get it from a wholesaler if possible, or the
publisher.
A large Barnes and Noble might have 170,000 titles in stock; if what you
want is unavailable, they will call the same wholesaler, then the
publisher. But of course, there's a good chance that B&N will have the
book in stock.
They compared price, convenience (using the phone vs. the web), and speed of
delivery, and in all cases, Amazon suffered by comparison.
The full text is at http://www.slate.com/Features/Amazon/Amazon.asp
(Editor's Comment - Jim's absolutely correct. Amazon.com poses as a book
retailer. In fact, they're another layer in the distribution food chain.
They get most of their inventory from large book distributors, like
Ingram, which is precisely where B&N gets it as well.
Interestingly, amazon.com now claims they have a 2.5 million book
inventory. The reasoning is that they now list out of print books. If
you try to order many of these books, you'll discover that you need to
wait 6 months for delivery. They'll go to a search service to try to fill
the order, just as you can do (I have a link to one at
http://www.krakow.com in the Specialty Bookstores section, so I guess I
can make the same claim.). There's a world of difference between
maintaining a link to an out of print book that's virtually unavailable
and a link to a real book in inventory, as anyone who has taken Accounting
101 can attest to. -IK)
------------------------------
Date: Thu, 20 Mar 1997 20:24:44 -0500 (EST)
From: Ian Haggard <ian@shellus.com>
Subject: Don't Short Barnes and Noble Yet
Maybe you can get a book cheaper over the 'net, but can you thumb
through it beforehand to make sure you really want to buy it? Same
thing for music CD's, now that we have all these try-before-you-buy
music stores.
And as for shorting Egghead and CompUSA, when I went shoppy for McAfee
VirusScan for my computer, McAfee sold direct, too. But their price was
the highest of anywhere I looked. And the cheapest price I found was
not on the 'net, but at Sam's Club. And Egghead and CompUSA both have
virtual storefronts on the 'net, so you may not want to short them yet.
And you may want to go long on Wal-mart.
Heck, you may even want to buy Wal-mart just to cash in on the "Dogs of
the Dow" effect when everyone and his brother starts putting Wal-mart in
their portfolio expecting 20%+ average annual returns. And as long as
I'm bashing the "Dogs of the Dow", has anyone tried or thought of
shorting a Dow Dog once its dividend yield dropped low enough to put it
out of next year's Dogs?
- --
Ian Haggard || ian@shellus.com (work) || IanHaggard@juno.com (home)
------------------------------
Date: Thu, 20 Mar 1997 20:29:44 -0500 (EST)
From: David Martin <dmartin@seabreeze.hc.ti.com>
Subject: You Can't Leaf Through a Book at an Online Bookstore
With a physical bookstore, you can leaf through the book,
checking out pictures, the author's biography, writing format,
etc. ahead of time. For some books, such as architecture, engineering,
cookbooks, art, home repair, and so on, this can be crucial. Online
bookstores often have comments and descriptions, but only for certain
books and of limited quality.
With an online bookstore, there is the issue of shipping
costs.
With a physical bookstore, if they have it in stock, you get
it right away; no delay at all.
If you _know what you want_ and can wait a week, an online
bookstore is often the way to go. Otherwise, a physical bookstore may
still be necessary. I don't think the megabookstores will go away
soon, but it is possible that most of the small fry will.
Of course, the best thing to do is to buy used books whenever
possible. I hate paying $5 to $50 for a book that will probably be
available used for 50 cents. Of course, this is easier for some
categories (trashy romance) than for others (technical reference
books.)
-David Martin
(Editor's Comment - Excellent thoughts. I think the Internet is a
great place for swapping used books, even technical books. I've actually
sold a number of computer books through Usenet postings. For example, 4
years ago I was just starting to learn SQL and bought 3 books on it.
Today, I am fluent in it. The core of SQL hasn't changed, and I was able
to sell all 3 books at half price to another person who wants to learn.
A win-win situation, I think. -IK)
------------------------------
Date: Thu, 20 Mar 1997 20:31:27 -0500 (EST)
From: "Barry H. Rodin" <brodin@pica.army.mil>
Subject: I Dropped My Subscription to the Book-of-the-Month Club
Ira,
Re megabookstore buildings such as Barnes and Noble:
I like being able to browse for books. I might find an interesting book
that I didn't know existed, or conversely, I might find that a book I heard
a lot about was not very interesting when I actually looked at it.
That is one reason why I am no longer a member of the Book-of-the-Month-Club.
(Another reason is so as not to have to keep sending back all of those
postcards.
Barry
(Editor's Comment - I belong to some computer book club that sends me a
postcard every month. I always send it back marked "SEND NO BOOKS". -IK)
------------------------------
Date: Thu, 20 Mar 1997 20:36:53 -0500 (EST)
From: georgene@psyberlink.net (Georgene Harkness)
Subject: Barnes and Noble has Done Its Market Research
Okay, I'll comment!
Ira, I don't argue that buying books online is convenient, and this
method of purchase will become increasingly popular. However, if
you've been to a Barnes and Noble or Borders recently in the evening,
you will find this a crowded place! I find this to be a result of
these bookstores' understanding of what people _really_ want when they
go to a bookstore:
First, they want to browse. They want to look at the jackets, they
want to see what's inside. They may not know what book they want when
they get there, so the stores provide plenty of big easy chairs and
comfortable seating. Some of the seating is so comfortable it's hard
to get out of!
Second, many of them want to meet with friends here, so the store
provides coffeeshops inside, complete with snacks for both adults and
children. And the wonderful aroma of the coffee makes it almost
impossible to resist.
Third, the bookstores provide booksignings with authors both famous
and unknown. They host club meetings, they hire local musicians to
come entertain, they even work with the local school systems to host
fund-raisers. For example, the local Barnes and Noble hosted a
special gift-wrap section at Christmas as a fundraiser for the local
high-school band. The band students staffed the booth, wrapping the
patron's book purchases and the profits all went to the band.
After all is said and done, it's so convenient, -- in many cases --
once a person's in the store, to just go ahead and buy the book he's
looking at, rather than to go home and order it online, and wait for it
to be delivered. Also, once the postage and handling is paid, many of
the online savings evaporate.
The online bookstore is, however, excellent at locating hard-to-find
books, and for those who know exactly what they want and don't mind
waiting for it, they are an excellent option.
Now, as I said before, I don't doubt for a minute that the online
bookstores will do well. I just don't agree that they will run the
neighborhood bookstore out of business. The two are so dissimilar,
they are almost not even in the same league.
Standard Disclaimer: I don't work for (or own stock in) any
bookstore, or in any related field. I just find this to be an
interesting subject.
(Editor's Comment - These are functions that should be provided in the
local public library. The fact that many people feel compelled to go to a
mall to experience an artificial sense of community is, in my opinion, a
sad indicator of the isolation and loneliness that many people feel. -IK)
------------------------------
Date: Thu, 20 Mar 1997 20:41:03 -0500 (EST)
From: jreed1@airmail.net
Subject: Re: Possible divorce
Hi Ira, I read your posting about the possible divorce of your friend. The
first suggestion I'd make is to advise her/him to - read, read, read - about
what subjects are most important to her/him.
A good search of your (or the Amazon) list should get some great
publications on almost any subject related to divorce you can think of.
Although there were not good publications about divorce when I went through
mine (14 yrs ago), there are exellent one now.
My wife and I ahve been conducting divorce recovery workshops for about 8
yrs now. We also do court-ordered programs for parents of minor children who
are divorcing.
If we need to suggest any readings, let me know.
One thing your friend may come up with when he/she does the reading is the
possible use of mediation in divorce situations. This is a good thing to try
if possible, but be sure that a competent mediator is obtained.
Some mediators who are also attorneys tend to violate the mediation process;
and please know that not all attorneys are willing to support mediation.
In most cases, some serious money can be saved through mediation. Mediation
attempts to calm a stressful situation. Attorneys can not normally get paid
what they feel they should in a calm situation. The adverserial process is
much more profitable and comfortable to them.
The costs of divorce vary widely depending on where the divorce is. In
Dallas, about an hour north of me, divorce can range from $1000 to $30,000
(or more) depending upon the circumstances.
Here in my small community, a divorce can be $800 - $2000 (or less), if
everything is fairly calm. It's common for our small town attorneys to ask
for a $500 retainer unless they can predict some difficult circumstances.
Attorneys around here all appear to be somewhat negotiable on their fees.
Although this may be true in our small community with too many attorneys,
this may not be true in other areas.
Your friend may be able to find a very competent attorney in a smaller
community where the competition for legal services is high.
Also, (here in Texas) there are legal services organizations that will
represent low income people for no charge. These same individuals get their
fee waived for attending our workshops.
Also, you can get a divorce using the Internet (if you are so inclined). I
bet you could have guessed that. <grin>
Good luck to you and your friend,
If my wife and I can be of any help in any way, let us know.
Kindest regards,
Jim, in Texas
jreed1@airmail.net
------------------------------
Date: Thu, 20 Mar 1997 20:47:12 -0500 (EST)
From: The Editor <ikrakow@shore.net>
Subject: Current Plans For Helping My Friend Through the Divorce Process
I did some research on the Web on divorce and found a book called:
HOW TO FILE FOR DIVORCE IN MASSACHUSETTS WITH FORMS by Sharyn T. Sooho
and Steven Fuchs
They write about a "1A" divorce, which in Massachusetts is an uncontested
divorce, with fault or no fault options. They include all the forms. The
fee is $110.
I plan to help my friend through the maze and to help mediate the process
so the divorce is not contested. If it works, my friend will have saved a
lot of money and aggravation. If it doesn't work, we'll then look for a
lawyer, but by that time, understanding the process, the fee should be a
lot less because much of the legwork will have been done. As with
personal finance, knowledge is power.
Anyone tried this?
Ira
------------------------------
Date: Thu, 20 Mar 1997 20:49:03 -0500 (EST)
From: "Schafer, Rick" <schaferr@eng1.otis.com>
Subject: RE: Zip Drive and Iomega Ditto - Murphy is at Work!
Murphy is at work! Right after this thread began, my 2.1Gb hard drive
died! The vendor wasn't able to get the old data off the PC. I had
him leave it in there & I will try myself.
I have installed now a 2G Ditto drive. Haven't fired it up yet but will
let you know soon how I like it.
Price was $158, but there is a $50 rebate coupon at their website.
Tapes are $20, but the coupon also include $10 off for the 3-pak.
Rick
------------------------------
Date: Thu, 20 Mar 1997 20:50:57 -0500 (EST)
From: bh314@scn.org (SCN User)
Subject: Recommend version of Excel for Mac?
Since many PersFin-digest subscribers are
spreadsheet users, I wonder if someone can
offer advice:
I need a version of Excel for Macintosh to use
for routine household (not business) tasks.
Which version of Excel for Mac offers the best
combination of stability, utility, and speed?
It's also important to be able to import the Excel
data into a later Mac version or to Excel for Windows.
The Mac is a Quadra 610 (68040 cpu), System 7.1,
8M memory.
Suggestions and advice appreciated--
bh314@scn.org
------------------------------
Date: Thu, 20 Mar 1997 20:51:34 -0500 (EST)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re: Low Cost Condo as a Starter Home
Based on my observation of low cost condo's in California this is not a
good idea:
Low cost condo developments seem to have a high porportion of absentee
landlords. This is bad for building maintenance and resale value. I can
point you to lots of $30K HUD owned 3 bedroom condos 70 miles east of LA.
As the landlord, could you deal with the cash flow problem when your
tenant stops paying the rent, declares bancruptcy and spends the next 6
months punching holes in the wall while you try to eveict him.
Buyers and seller's costs typically total almost 10% of the selling price
when you decide to sell.
Personally I think a year of married life under your belt is a better idea
before buying a property. It will allow your tastes etc to get into sync.
Avrum Lapin
Upland., CA
------------------------------
Date: Thu, 20 Mar 1997 20:52:07 -0500 (EST)
From: "Russell J. Foster" <RFoster@specgrp.com>
Subject: Subject: Storage, Zip, and other strange disks..
>>>>It is called LS120 - a 120 MB disk which has the same form factor as a
>>>>3-1/2 inch floppy, and guess what? - the drives can read the normal 1.44M
floppies as well. [the companies involved are Exabyte, Compaq, 3M,
Maxell, Mitsubishi, Panasonic, etc.
120mb 3.5" drives have been around for a long time. I first remember
seeing them over four years ago. The technology was extremely unreliable
in the long term, very supseptable to dust and magnetic interference,
which lead to their lack of popularity. I haven't read anything about
them recently, but I would be skeptical until they have proven
themselves because of my prior experiences.
>>>>So what do you think? Is Iomega's Zip heading for the grave?
The Zip disk is far more rigid than the 120mb floppies, and come in a
sturdier case. Also, Zip disks are considerably cheaper, $50 for a pack
of 3, while the 120mb floppies run about $70 each (last ad I saw).
It's interesting that Compaq is pushing this since their computers now
offer Iomega's Zip drive as a factory installed option.
- - Russell J Foster
------------------------------
Date: Thu, 20 Mar 1997 20:53:04 -0500 (EST)
From: "L. Chen" <am302@FreeNet.Buffalo.EDU>
Subject: Re: Liability Insurance?
> 2. It depends on the structure of your company. Sole proprietors or partners
> have unlimited liability. Incorporated shareholders have liability limited to
> the value of their stock (i.e., it can become worthless). However, I believe
> that large liability claims, or bankruptcy can cause liquidation of
> corporate assets.
In case of a corporation, you have to observe the "corporate formality" in
order to get the benefit of limited liability. If not, the "corporate
shield" would be pierced in court and you would have unlimited personal
liability.
> Just think about this: if you get sued and your insurance company is
> defending you, which lawyers do you think they will send if you have
> $100,000 of insurance vs. $4,000,000 (the amount they would have to pay
> if you lose)?
>
> Keith Mealy kmealy@cincom.com
I have also noticed that the "new" umbrella policy (commercial) now includes
defense costs as part of the policy limit; whereas the "old" policy was
written with the defense costs on top of the policy limit. i.e. if you
have a umbrella policy of $1 million. Someone sue your business and gets
a judgment for $1.2 mil. The legal costs totalled $100K. The insurance
company would pay $900K under the "new" policy; and $1 mil under the
"old" policy.
Lily Chen
am302@freenet.buffalo.edu
------------------------------
Date: Thu, 20 Mar 1997 20:53:42 -0500 (EST)
From: "RICHARD LEONE" <rjleone@iftech.net>
Subject: Foreign Securities Quotes And Data?
Would anyone know where to access information on the internet with regards
to foreign securities re: stock quotes and data??????
Richard J. Leone
------------------------------
Date: Thu, 20 Mar 1997 20:54:21 -0500 (EST)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Mortgage Interest Rates - 90% Interest?
>Therefore, buying the $100,000 home with 360 easy payments of $733.77
>over 30 years has cost the borrower the opportunity of over one Million
>Dollars plus the $160,000 in interest to the bank
If the person had paid $100,000 cash for the house, they would not have
had the $733.77/mo to invest, so this is a meaningless comparison.
>So, what is the real cost of the $100,000 at 8% house if paid with 360
>payments of $733.77 over 30 years?
It is the net present value of all the cash flows, discounted by what
the buyer feels he could earn on the money. This takes everything,
including opportunity cost, into account.
Discount rate NPV of payments
------------- ---------------
0% $264,157
5% $136,687
6% $122,386
7% $110,291
8% $100,000
9% $ 91,194
10% $ 83,613
15% $ 58,031
What does this tell us? It tells us that if the homebuyer can get an
ROI of better than 8% on his money, he'd be better off having the
mortgage, since his NPV would be less than the $100,000 NPV of buying
the house in cash today. Heck, if he really felt he could get better
than an 8% ROI, he should borrow as much money as he can at 8% and
invest it. Likewise, if he feels he will make less than 8% on his
money, then having the mortgage is costing him money.
In either case, the difference between the NPV of the payments and
$100,000 is the NPV of the cost of taking the mortgage. This cost may
be positive, negative, or zero, depending on the rate of return the
homebuyer can achieve with his investments.
I also note that in actuality, the NPV of the payments will be even
lower, because my analysis doesn't take into account that the
$733.77/mo payments will be less than $733.77 after-tax, due to the
tax deduction for the interest portion of the payments.
As for the bank, their profit comes from the spread between the 8%
interest they are charging on the mortgage and the 3% interest they
are paying on savings accounts and the 5.5% interest they are paying
on CDs.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Thu, 20 Mar 1997 20:54:48 -0500 (EST)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: The new Dow - How Has It Adjusted?
>Question: How was the new DJIA computed/adjusted in light of the recent
>substitution of 4 companies? We have the same sense of the numeric level
>of the Dow as we did last week. Seems like some kind of calibration was
The divisor was adjusted. The DJIA is sort of bizarre in the
investment world in that it is not a capitalization-weighted index.
It's a simple unweighted average -- you just add up the prices of the
30 stocks and divide by a number. That number is NOT 30. It may have
been once, but these days it's about 0.3 (see the DJIA chart in the
WSJ for the current divisor).
How does the adjustment happen? The key is that the DJIA must be
continuous across the change, so we have:
Sum of old prices Sum of new prices
----------------- = -----------------
old divisor new divisor
The new divisor is chosen to make the equation true. This same
adjustment happens every time a stock in the DJIA is replaced or
splits.
Cap-weighted indices (like the SP500) don't have to deal with splits
because stock splits don't change market caps. I'm not sure how they
deal with replacements, but my guess is that S&P chooses a replacement
with a very similar market cap to the departing stock, and since even
the biggest stock in the SP500 accounts for less than 3% of the index,
the change probably doesn't disturb the index much at all and so
nothing is done. But it would be interesting to contact S&P and ask
for the exact procedure.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Thu, 20 Mar 1997 20:55:35 -0500 (EST)
From: Jim_Shoenfelt@USFG.COM
Subject: Re: JUA Disaster Insurance
Stephanie said, "By the same token, the JUA has never been tested in any
significant disaster! That's pretty scary in itself, seeing as how they
*ARE* the second largest insurer in the state now... There's a lot of
argument right now regarding its ability to cover a major disaster, but
that's a whole other conversation."
There is practically no risk of a JUA not paying. If they don't have
enough money the resident insurers have to cover it. (I agree with
Stephanie though, if it's true that your prospective company carries the
highest ratings and offers smaller premiums, I'd switch. If their ratings
drop, you can always switch carriers.) If your prospective insurer is a
"non-admited carrier" I believe they are subject to less regulation which
might impact your decision whether or not to switch. I'm not sure on this,
but you might check to see if they are a "non=-admitted carrier" and maybe
someone else on the list can tell you the implications of this.
Jim Shoenfelt
------------------------------
Date: Thu, 20 Mar 1997 20:56:10 -0500 (EST)
From: David Meyers <dmeyers@panix.com>
Subject: Re: Mortgage Interest Rates - 90% Interest?
>The amount paid over the 30 years for the $100,000 home will be about
>$260,000.
>
>A person would need to earn about $361,000 (before taxes) to pay the
>$260,000 to own the $100,000 home (assuming a 28% tax bracket).
Nope. The total of the payments (including interest _and_ principal)
is $264,000. However, since $164,000 of that is _interest_ and
therefore, tax deductible, you need to earn $164k + ( $100k / 0.72)
(ie. pre-tax of only the $100k principal) --> $302,000.
All of this assuming constant dollars, of course (ie. no inflation).
It is likely that your salary will increase with inflation, while
your loan balance and your interest payments do _not_. You pay
back your mortgage with cheaper dollars.
>If a person invested the $733.77 per month (in your example) for the
>360 months (30 years) at 8% ROI, the amount accumulated would be
>over one million dollars ($1,093,581.00). Would not the bank be doing
>something like this with the $733.77 received each month?
Of course, if the person invested this $733.77 per month, rather
than paying his mortgage, he is homeless. If he rents a place
to live, and his rent even starts at a discount to what his
mortgage would be - suppose he pays only $600/month in rent, the
problem is that over 30 years, that rent is _very_ likely to
increase substantially - probably at around the same rate as
his salary - whereas that $733.77 mortgage payment would stay
the same the whole time. The picture gets even prettier after
you deduct most of that mortgage from your taxes, which you
would not be able to do with your rent payment.
>So, the bank loans $100,000 and after about 11 years has recovered
>the $100,000 and continues to receive $733.77 per month for 19 more
>years or about another $160,000 plus the Million Dollars from the
>reinvestment.
Are you so sure? Where did the bank get that $100k that it loaned
the person in the first place? Why, the bank _borrowed_ that
money itself! And, just like you, the bank must pay interest
on the money that _it_ borrowed.
>Therefore, buying the $100,000 home with 360 easy payments of $733.77
>over 30 years has cost the borrower the opportunity of over one Million
>Dollars plus the $160,000 in interest to the bank
Not even close. You got to live in the house for 360 months,
which you don't account for - that has a real value, likely
substantially higher than the interest you paid - and the bank
pockets only a small fraction of the interest you paid - it
probably had to sell the loan almost immediately and only
collects a small spread on servicing it.
>So, what is the real cost of the $100,000 at 8% house if paid with 360
>payments of $733.77 over 30 years?
Nowhere near the million bucks you postulate. What is the
real cost of _not_ borrowing money to buy a house?
Fact is that for most consumers, the tax-deductible, relatively
low-interest mortgage is the best opportunity to borrow money
they will ever get, the cap-gains exemption on the sale of the
home ultimately (which is likely to be expanded - both the
dems and repubs want it expanded), and the other advantages
of owning one's home (it is better shielded than other assets
for certain considerations, it can be used as collateral later
on borrowing again if necessary - again with deductible
interest, etc) should make you revisit your analysis. Mortgages
are neither the bank's way of screwing you out of huge amounts
of interest, nor are the payments just money that would be
able to be simply invested otherwise, as you assumed.
Of course, for many people, buying a house is _not_
necessarily practical either - the transaction cost
is substantial and if you move frequently, just as
if you trade your stocks frequently, it is easy to
spend all of your profits or potential savings in
transaction costs. Also, of course, for some people
the down payment is impossible to manage and the
other aspects of ownership - maintenance, etc - can
also be burdens that are not worth it. I only point
this out to make sure that my comments above are not
taken to be a blanket endorsement of taking out a
mortgage or buying a home.
And, as far as prepayments of the mortgage go, the
arguments are a bit different - then it is a question
of investment of _excess_ one way or another - the
previous poster mentioned the advantage of making
extra payments to pay down your mortgage faster - if
you have that extra money available, then the choice
is between paying down debt to get a guaranteed
effective return or investing otherwise.
The mortgage payment itself is not such a choice.
- --D
------------------------------
Date: Thu, 20 Mar 1997 20:57:56 -0500 (EST)
From: "Cal Lester C.L.U." <Cal_Lester@msn.com>
Subject: There Is No 10K Gift Rule
>Could someone explain what is the tax rule regarding the 10K (yearly
>maximum) gift to children? Could one's retired parents also qualify
>as recipients? What are the forms and documents needed to file it in
>the income tax return?
Thanks,
Helen
It is very simple, there is none. What you are referring to is the
IRS Unified Gift/Estate tax regulations. Anyone can make gifts in an
amount up to $10,000 to as many recipients as they wish, and NOT be
required to pay any Federal tax on those gifts. If the Grantor is married,
and the Spouse agrees to the gifting, they can give a combined gift of up
to $20,000 to as many recipients as they wish, tax free. Example, married
couple gifting:
Child $20,000
3 Grandchildren $60,000
Parent $20,000
School $20,000
Church $20,000
$ 140,000
All Tax Free.
In the event that you do gift more than $10,000 then you are required to file
IRS form # 709, and EITHER pay the Gift Tax, OR elect to USE a portion of
YOUR Unified Tax.
Cal Lester CLU
Insurance Course Cordinator
Broward Community College
------------------------------
Date: Thu, 20 Mar 1997 20:58:20 -0500 (EST)
From: paul.j.stadnik@bangate1.TEK.COM
Subject: Re: Mortgage Interest Rates - 90% Interest?
Wally Kenimer wrote ...
> ... If a person invested the $733.77 per month (in your example) for the
> 360 months (30 years) at 8% ROI, the amount accumulated would be
> over one million dollars ($1,093,581.00).
> Therefore, buying the $100,000 home with 360 easy payments of $733.77
> over 30 years has cost the borrower the opportunity of over one Million
> Dollars ...
We can't however, ignore the opportunity cost of any accelerated mortgage
payments. For example, if you pay cash for the $100,000 home you will not
get any future earnings on that money. To use your example, $100,000
earning an 8% compounded return for 30 years will leave you with
$1,006,000 -- pretty close to the $1,093,581 for the annuitized
investment. Which illustrates that the ROI for accelerated mortgage
payments is indeed the interest rate.
------------------------------
Date: Thu, 20 Mar 1997 21:03:51 -0500 (EST)
From: Greg Panayoti <greg_panayoti@il.us.swissbank.com>
Subject: Re: mortgage loan types: fixed vs ARM, bank vs mortgage company
>>
>>We are first time home buyers! I knew that this would be a very demanding
>>decision to make, but I have honestly been overwhelmed at the complexity of
>>shopping for mortgages, not to mention picking the right house. I am
>>concerned about the fixed vs. ARM question! I had read that ARM's are
>>good if you think you might not stay in your house for more than 5 years.
>>But who can know with certainty what the future holds for their career or
>>family situation?
I am a realtor here in NJ and I will try to answer some of your
questions.
Firstly, what you said about ARMS is mostly true - but debatable. The
question really should be what kind of mortgage packages are you being
offered and what can you afford?
Since you say you are putting 10% down, you will probably have to pay
(P)rincipal (M)ortgage (I)nsurance which insures the lender against
default since you'll have little equity in the house. This can run as
much as $80-90 monthly in addition to your mortgage payment. The
question of ARM or FIXED has to do with how you feel about mtg rates.
They are pretty low now - and so if you think they will be rising (common
sentiment) then you would get a fixed mortgage and "lock in" todays low
rates. If you wanted to play the mkt, you could get an ARM with a short
term "teaser" rate below market, because - "how much could rates go up in
the next couple of years? ".
Now - keep in mind that if rates go up drastically you will not be able to
refinance for about 8-10 years because you'll have no equity! Here's
where if you are not going to stay in the house long comes into play -
when the teaser rate is done in a couple of years, you sell and you saved
all that interest - but if you stay and rates go up and you can't
refinance, well ....
Now keep in mind I am trying to make something potentially complex,
simple for this conversation. There is also such as thing as a
"Convertible ARM" that starts off as an ARM and gives you the ability to
convert it to a fixed at a later date. There are restrictions and it will
cost you at conversion, so look into it. All in all, you should
*really* contact a banker or mgt broker that you trust (recommended from
someone) and sit down and discuss your situation and
what will work best for you (and what you will be able to afford!).
There are a myriad of mgt packages out there and one of them will suite
you perfectly.
>>My other question concerns where we get this loan. My local bank has low
>>closing costs and an attractive no points, 1/4 point origination fee
>>fixed rate 30 year. I know I can get the interest rate a little lower
>>1/8 to 3/8 lower elsewhere, but will encounter several possible downsides
>>(higher closing costs, possible "junk fees", the company will sell my
>>loan as soon as we close, and points to pay)
Here again you must do your homework. Rule of thumb says that a bank
has the best rates. Why? Because banks like to lend to A+ clients - the
ones with the BEST credit history. A slight credit blemish can make you
unattractive to a bank. Enter the mortgage broker/banker. He will lend
to veritably ANYONE who is not *currently* in bankruptcy. But don't worry
- - The better your credit, the better the interest rate you'll get but he
will NOT be able to match the banks best rates. Right now, my mgt brokers
best rate is 1/2 - 3/4% above the banks best rate - so its close. So, if
you are A+ on the credit scale, stick to banks.
Otherwise a mgt broker will be able to tailor something to your needs -
and once you get there, don't be afraid to shop. Compare fees, etc.
Also, most places will sell the loan, this shouldn't matter at all to
you. The address your payment goes to may not even change if the
original maker is still servicing it. Everything else stays exactly the
same.
>>We are willing to use all of our savings to put down 10%, so we
>>definitely want a conventional, not a FHA loan.
I would think about this. You should NOT sink all of your savings into
ANY one vehicle. What if you later need cash? Getting an FHA mortgage
can be a possible benefit to you and you may be able to get in with less
than 10% down depending.
Is there any particular reason why you don't want FHA?
Good luck and seek the help of good, competent (preferrably recommended)
realtors, lawyers,and mortgage people. Research everything and trust
nothing.
Greg Panayoti
------------------------------
Date: Thu, 20 Mar 1997 21:05:16 -0500 (EST)
From: ckidwell@cougarnet.netexp.net (Craig_A_Kidwell)
Subject: Profit Sharing Distribution
a family friends employer is selling the business and distributing of the
profit sharing plan. his question to me was how to avoid paying maximum
taxes and to invest for life time income. at this time he is being told
his job will not be terminated and he may continue with the new owner.
also there is the question of whether to maintain the life insurance he
currently has as he can pay the premiums monthly himself. the policy is of
the whole life variety but is never paid in full. his current age is mid
50s with two bypass surgeries in his past.
thank you
ckidwell@freenet.columbus.oh.us
my normal address
------------------------------
Date: Thu, 20 Mar 1997 21:06:23 -0500 (EST)
From: drstone@gsvms2.cc.gasou.edu
Subject: Company policy on tax on relocation expenses
I hope some knowledgeable PersFiners can help with a vexing problem:
My daughter, a new engineering grad from Georgia Tech, accepted a
job in Los Angeles last July. Her new employer paid her moving and
settling-in expenses -- about $4000. The company now (in 1997) claims she
owes them $400+ for the taxes on these expenses. Her 1996 W-2 Form reported
the relocation expenses as income for 1996 and reported a number, say N,
for total Federal Tax witheld. Her last paycheck stub also reported N as
the amount of taxes witheld from her pay during 1996.
We have no problem with the taxing of relocation expenses as
"income". But it seems to me that the company sent in to the IRS exactly
what they took out of her paychecks, so why should she owe the company now?
And especially in 1997, well after the event. She has asked, but not
gotten much explanation, and they have begun deducting extra from her
paycheck.
TIA
David Stone
"If you can't get your work done in the first 24 hours, work nights" --
Dilbert
------------------------------
Date: Thu, 20 Mar 1997 21:06:57 -0500 (EST)
From: "Lester M. Levy, MD" <llevy@hoflink.com>
Subject: Re: 401K rollover into IRA?
<<>Here's a question. If you have a 401K and terminate employment, you
can
>rollover the 401K into an IRA. That will avoid the 20% withholding and the
>10% early disbursement penalty. However, can you then withdraw an annuity
>(based on IRS life expectancies) and avoid the 10% penalty (pre- age 59
>1/2)?
Rich Carreiro said:
Yes. Once the funds are into an IRA, regular IRA rules (including the
one about no penalty in the case of "substantially equal" withdrawals
for the *longer* of 5 years or until you reach 59.5) apply to it.
Just keep in mind that if you screw up at all (or have to take extra
money out of that IRA account one year for an emergency, or take less
out because the investments in it have done badly) then the penalty
will apply *retroactively* to all previous "annuity" withdrawals.
And of course, regular income tax applies to the extent that the
withdrawals are taxable (if you've made non-deductible contributions
to ANY IRA account, then part of ANY withdrawal, even from a different
IRA account, will be non-taxable -- see Form 8606).>>
If you do roll over the 401k to an IRA, you can divide that IRA into two
or three IRA accounts, and the periodic withdrawals without 10% penalty
can apply to just one or two. In that way you don't have to withdraw all
the money. If later on you need more money, you can start withdrawing
from the other IRA accounts.. giving you more flexibility. Rich's
comments about the after-tax contributions still would apply.
- --
-Lester M. Levy, MD llevy@hoflink.com
------------------------------
End of persfin-digest V4 #10
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