Go to Jeff Salisbury LWGate Home Page.From: persfin-digest <owner-persfin-digest@shore.net>
Subject: persfin-digest V4 #57
Date: Sun, 13 Jul 1997 18:56:51 -0400 (EDT)
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persfin-digest Sunday, July 13 1997 Volume 04 : Number 057
IN THIS ISSUE:
ADVERTISEMENT: MCI AUTOFORWARD [Oppenheimer Software <Connect-Sales@mcim]
Ph.D.'s are Losers (financially) [JONESW@CCSUA.CTSTATEU.EDU]
Re: Cable Descramblers [Ryo Imamura <imamura@elwha.evergreen.edu>]
RE: VUL vs. Term Insurance / Pros and Cons of Prepaid Funerals ["Cal Lest]
Re: Banks Are Being Logical - Are Their Practices Predatory? [Greg Panayo]
Which Credit Card Customers Banks Love The Most ["Lester M. Levy, MD" <ll]
Historical quotes on web ["Michael T. Nolan" <mtn@his.com>]
There Are Other Benefits To a PhD That Make Up For Lost Money [GeorgeS <p]
Re: Best Way to Buy Stocks? [borisv@ctron.com]
Best Place For US Savings Bonds? [taylor.hs@pg.com]
Re: Credit Card Airline Mileage Deals [George Kolb <afn01634@afn.org>]
"Opportunity Cost" of Getting a Ph.D. [Susan Mangiero <mangiero@shu.sacre]
Re: How can I get a passport? [Somesh Rao <somesh@syl.nj.nec.com>]
Re: Best Way to Buy Stocks? ["Harbinder S Virdee" <hvirdee@ford.com>]
Dogs of the Dow or Foolish 4 - Are They OK? [Mike Morehouse <mikemore@roc]
The Tax Law Should Be As Content Neutral as Possible [Rich Carreiro <rlca]
Why I Kept My Advanta card [Drew Blaha <drew_blaha@gilbarco.com>]
RE: VUL And Reserves ["Cal Lester C.L.U." <Cal_Lester@msn.com>]
Re: Science and Engineering PhD break-even point ["Dalmia, Bipin K." <DAL]
Re: Debit Card Hype [reb@pobox.com]
Re: Tuition Reimbursement Deduction [David Martin <dmartin@seabreeze.hc.]
PhD versus BS [David Martin <dmartin@seabreeze.hc.ti.com>]
Dividend Yield ["Ken Meinken" <kmeinken@one.net>]
Judging "return on investment" for a paid off house? [jdennis@www3.nsknet]
PhD vs Master's degree [Avrum Lapin <avrum113@cyberg8t.com>]
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Date: Sun, 13 Jul 1997 12:17:50 -0400 (EDT)
From: Oppenheimer Software <Connect-Sales@mcimail.com>
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------------------------------
Date: Sun, 13 Jul 1997 12:19:20 -0400 (EDT)
From: JONESW@CCSUA.CTSTATEU.EDU
Subject: Ph.D.'s are Losers (financially)
Some respondents did not allow for time-value of money or inflation or
taxes in the question of the financial advantage of a PhD. Perhaps the
following logic will convince people that the break-even point is far
worse for the PhD student than they thought, way beyond the 40 years that
others came up with.
The following use figures that are reasonable. But if you don't like
them, you can adjust them to your taste and re-calculate; the conclusion
will come out the same for any other reasonable values.
Assume a beginning PhD makes 45K, a beginning BS makes 29K, a difference of 16K
annually. This means that if the PhD had begun work 5 years ago, instead of
going to school, he would have started at 29K (adjusted for inflation) and have
had raises of around 5% a year over inflation (because he is smarter than the
average BS, since he is smart enough to do a PhD), so would now be earning 37K.
PhD is better off by 8K, on which he pays 28% federal tax, 4.4% state tax, and
7.6% FICA, a total of 40% in taxes, leaving him $4,800 a year post-tax
advantage over the BS.
But he gave up $24,000 in post-tax income the first year, plus $5,000 for tui-
tion (at a state university) and books, a total of $29,000. Over five years,
allowing for salary increases and 3.5% inflation-adjusted interest from the 1st
to the 5th year, that means that the post-tax present-value on graduation day
of what he gave up was well over $160,000, in exchange for a post-tax income of
$4,800 lasting until the day he dies, which is a 3% return, inflation-adjusted.
So he lost: THERE IS NEVER A BREAKEVEN POINT; HE STAYS BEHIND FOREVER.
Scenario #2: PhD has an assistantship, paying $10,000 plus tuition, that gives
him an extra $14,000 or so post-tax, for a net loss in year 1 of $15,000
relative to BS. But he now needs 7 years to complete the program. Over the 7
years, allowing for salary increases and interest of 3.5% over inflation, he
gave up over $120,000. And with an extra 2 years to work, he would then be
earning $40,800 instead of 37K at his BS job, which means that the PhD only
gives him $4,200 pre-tax advantage annually, which is $2,520 post-tax. So the
post-tax present-value on graduation day of what he gave up ($120,000)returns a
post-tax inflation-adjusted income of 2.1% lasting until the day he dies. So he
lost again: THERE IS NEVER A BREAKEVEN POINT; HE STAYS BEHIND FOREVER.
Scenario #3: PhD drops out of the PhD program after a few years because he
can't handle it. Result: Worse than either of the two above, which were already
financial losers.
Overall conclusion: Financially, a PhD is NEVER a winning proposition.
Bill Jones
------------------------------
Date: Sun, 13 Jul 1997 18:24:02 -0400 (EDT)
From: Ryo Imamura <imamura@elwha.evergreen.edu>
Subject: Re: Cable Descramblers
My son responded to one of the ads that he found in his email. He was
curious and paid around $20 for the plans. He followed the directions
closely but could not get the device to work. He tried calling and
faxing the distributor (Freedom Publishing in San Diego), but they have
not responded. So he is probably out the $20 plus the cost of parts for
pursuing his curiosity. Did anyone have a similar or a better experience?
Ryo Imamura
imamura@elwha.evergreen.edu
------------------------------
Date: Sun, 13 Jul 1997 18:26:50 -0400 (EDT)
From: "Cal Lester C.L.U." <Cal_Lester@msn.com>
Subject: RE: VUL vs. Term Insurance / Pros and Cons of Prepaid Funerals
>Subject: does VUL is better than term + mutual funds for long term
investing
Some one keep tell me that VUL life insurance is the best long term
investment vehicle because it's tax deferred benefit.
>>>> As I have written many times in the past, Life Insurance in
whatever form it is being sold should NOT be purchased as an "INVESTMENT".
Life insurance is designed to do one thing, and one thing only, and that
is to provide "dollars at death".
It is true that under current IRS Reg's, that the INSIDE BUILD UP
of the Cash Value Account in any permanent life insurance policy is Income
Tax Deferred. It is however the GAIN is fully taxable in your current tax
bracket in the event that you withdraw or remove more than your BASIS.
However, you CAN WITHDRAW up to Basis Income Tax Free, and in many
policies make Interest Free Loans, which are also Income Tax Free.
How about buying TTERM life insurance and also puting the same amout of
money in mutual funds by my self? Will it get better return (after tax)
than VUL? Has anyone comparied VUL life insurance with TERM + mutual funds?
>>>> Very simply, an Income Tax Deferred investment of any kind will grow
faster and larger than any similar currently taxable investment over time.
There are reams and reams of comparisons available at your public library to
assure you of that fact. In the case of V/U/L verses Term, it is even more
dramatic due to the EVER INCREASING COST OF ANY TERM POLICY. At some given
point in time, the actual premium for the term policy in question, MUST
surpass the original premium for the V/U/L policy, at which time ( if you are
doing a real apples & apples comparison) you would have to start to deplete
the investment account to pay the DIFFERENCE to maintain the term policy.
Cal Lester CLU
>From: Steven Klein <SKLEIN@snm.org>
>Subject: Anyone Prepay Funeral?
Has anyone out there purchased one of those pre-pay funerals? If so I
would like fedback. In particular:
>>>> Personally, I have not done so, primarily for personal reasons. The
primary one being that I really have no idea of "where I will be when I die".
My family is somewhat spread out, and we do not have a central family
cemetery, so to speak. The problem that I see, is that if YOU do so, and then
move to another State, it would or at least could involve some problems to get
rid of, IF you wished to do so.
However for many other people it is an excellent idea. My father
DID purchase and prepay for three cemetery plots, for my Grandmother,
Mother and himself. When each of them died, it was a financial relief to
know that MOST of the actual arrangements had already been made and paid
for ( with YESTERDAYS DOLLARS ).
>What happens if the funeral home goes under before you die?
The answer to this one really depends on the laws of your home State. I would
suggest that you start with the Chamber of Commerce, then your State Governors
Office.
>Will the price be based on your life expectancy?
Generally not. You are in effect purchasing a product for delivery at a later
date. Any increase in the retail price of that product should be absorbed in
the earnings on the prepayment that is being earned by the seller.
Steve Klein
(Editor's Comment - I've heard it's a good thing to do if your parent is
going into a nursing home or trying to qualify for Medicaid. -IK)
Excellent idea Ira. In most States, the ownership of a burial plot and
burial service will not be taken into consideration during the
qualification process for MEDICAID ( which can help to pay for that
nursing home).
Cal Lester CLU.
------------------------------
Date: Sun, 13 Jul 1997 18:29:45 -0400 (EDT)
From: Greg Panayoti <greg_panayoti@il.us.swissbank.com>
Subject: Re: Banks Are Being Logical - Are Their Practices Predatory?
>
>I don't think it's a curious twist of logic. Banks are in the
>business to make money. They make money if you keep a balance.
>They don't make money if you pay it off every month. Ideally, they
>want you to keep a high balance that you can handle. They don't want
>you to go bankrupt, and they don't want you to pay it off each month.
>
>I wouldn't invest in a bank who ignored their own bottom line.
>
>Ken
>kmeinken@one.net
Ken,
You are right as to how banks make money, but there is something
seriously wrong when these vultures are allowed to target people with
little or no income or credit with the (proper) assumption that these
people will hang themselves with their own plastic. They always do and
end up as slaves to their cards forever or we end up footing the bill
when these people declare bankruptcy or skip town. Banks set you up
for the fall and then make an example of you once you get there.
When a bank charges 22% interest, it's business. If I charged you 22%
interest on a loan, that would be illegal. It's bullshit.
Furthermore, (while I'm on a roll) it should be illegal for banks to run
promotions, contests, or give "special incentives" for/to people who
carry a balance or to induce people to carry a balance. It promotes and
encourages people to be financially irresponsible and produces whole
generations of poor, dumb, in-debt Americans. While I agree people
should take responsibility for their own affairs, "we" should not make
that more difficult than it has to be. "We" should be giving these
people good advice and examples, not piss poor ones.
It's also no secret that the majority of the people in these catagories
are poor whites and blacks, women and young adults. It's
discriminatory and wrong and should be stopped. I am not, however,
naive enough to think it ever will.
Greg Panayoti
------------------------------
Date: Sun, 13 Jul 1997 18:31:00 -0400 (EDT)
From: "Lester M. Levy, MD" <llevy@hoflink.com>
Subject: Which Credit Card Customers Banks Love The Most
In persfin-digest V4 #55, Russell J Foster wrote (in part)
Banks *love* creditors that pay their balance in full each month. Why?
There's no risk. Payments received pose a 0% risk to the bank, right?
And they *still* make money.
However, every month a transaction goes unpaid represents a greater risk
to the bank-a risk that the payment will never come. Sure, the bank can
charge interest, ruin a credit report, and threaten legal action, but it
they don't have their money the bank still has to pay the vendor-it's
simple a transfer of risk from the vendor, to the bank.
As usual things are somewhat more complex than that. Like Airline
companies, Banks are constantly looking at "Yield Management". Banks
receive from their credit card operations, about 2 percent of the
purchase on a one-time basis from the vendor (varies with volume), and
18 percent and more from the purchaser who maintains an outstanding
balance. A small amount goes to the VISA or Mastercard Entity.
According to recent data, something less than 10 percent of outstanding
balances are not fully current in payment, and perhaps half that or 5
percent will goto collection and is subject to loss. Those banks which
accept riskier clients will charge higher interest rates trying to
maintain perhaps a 15 percent margin (including the vendor 2 percent)
over losses.
While customers who pay their balances are much less riskier, they
provide only the 2 percent vendor contribution, and tie up substantial
assets for the 25 day grace period, which could have earned the 15
percent profit margin. Hence several credit card banks have attempted to
charge an additional premium to their clients who do not maintain credit
balances, and undoubtedly will attempt to eliminate costly benefits such
as rental car insurance, hoping inertia will keep the customers. Despite
the higher risks, customers who maintain credit balances provide the
bulk of profits. Banks after all are in the loan business. They pay as
little as possible to borrow your money, and charge as much as possible
when they lend out money.
Companies like American Express which (for some of their products) do
not permit credit balances make their profits from the higher annual
fees, and somewhat higher vendor charges.
- --
-Lester M. Levy, MD llevy@hoflink.com
------------------------------
Date: Sun, 13 Jul 1997 18:31:51 -0400 (EDT)
From: "Michael T. Nolan" <mtn@his.com>
Subject: Historical quotes on web
Hello-
Great List, Ira and all persfiner's. I have learned a great deal in just a
couple of months and am thrilled at the opportunity to offer an answer.
Historical Quotes:
A recent post requested information on where to get historical quotes for
stocks.
1. I have found historical quotes for both mutual funds and stocks at
Microsoft's Investor web site.
http://msn.investor.com is the URL I think. I was there about a month ago
and the quotes were found by clicking on the Charts button on the main
page. That should lead you to the right place. You can see a chart or see
a table of prices over a certain amount of time. They will also export the
info as an Excel file.
2. I also know that Lexis-Nexis has a "file" (maybe called 'quotes' ?) that
gives historical quotes, if you know the ticker symbol (same with
investor.com, but investor let's you look it up.) I know it exists, but I
have not used it.
[NOTE: the remainder of this answer is only of interest to people who want
to know a relatively simple way to track mutual fund performance for free
(outside of ISP costs.)]
I was interested in tracking the performance of my mutual fund against
others I considered when I invested my thrift savings plan $ (government
401 (k) ) into an IRA and others I am considering investing new money in.
I wanted to quickly see what % returns my fund had year to date, and
historically since I invested in '94, compared to other funds. I had the
historical info for my mutual fund, since I track it in Quicken. But I used
investor.com to get historical info on the other funds I was interested in.
I initially wanted to put all of the other funds I was watching on my
"watch list" in Quicken. But I didn't want to enter the prices by hand
(other than initially). So I went to http://www.merc.com/ and found out
they will email you closing prices of just about any Mutual Fund and stock
traded in the states. What is even better, they will send you an attachment
file in either Quicken or Excel format that has the closing prices. So,
back to my story, I wanted to import the merc.com Quicken attachment into
Quicken to update my watch list, but it wouldn't work since I can't (as far
as I know) report performance of the funds on my "watch" list, I can only
report performance of funds I _own_. So , I set up an Excel spreadsheet,
and I import the file once a week ( I now have it sent as an Excel file),
even though they send it every day. Within a minute after receiving the
attachment file, I know how my fund is doing compared to others, and some
indexes. ( Not the Morgan Stanley EAFE index, though, merc.com doesn't
report it (oh well.)
Hope this was useful,
Michael T. Nolan mailto:mtn@his.com
------------------------------
Date: Sun, 13 Jul 1997 18:35:40 -0400 (EDT)
From: GeorgeS <pip@shore.net>
Subject: There Are Other Benefits To a PhD That Make Up For Lost Money
>Francesca Pardo <fp10@cornell.edu> wrote:
>> . . . the increase in salary for holding a Ph.D. doesn't typically pay enough
>> to make up for the reduced salary during the years it takes to get a
>> Ph.D...
Just a side note, there are benefits to a PhD that have nothing to do with
money. There is the joy in pursuing one line of thought clearly and
concisely ('purity of heart is to will one thing'). It is the simple
pleasure of thoroughly understanding a disciple, and the struggle associated
in the effort to understand. It is the closest thing the secular world has
to the spiritual pursuit of the monk. You isolate yourself from the normal
cares of the world, associate with people of similar goals, and take a
virtual vow of poverty to boot:) A vow of celibacy (or at least the
unmarried life) also helps.
Later in life, you need to deal with budgets, proposals, the people in
charge of budgets, the people who work for you, the people you work for,
the whole panoply of samsara that distracts us from the essential in the
life of a PhD student, the unremitting pursuit of a single idea. Life in
the world has its pleasures ( love, things, travel ) but life in pursuit
of an idea to the exclusion of all other activity has a special place in
life. I'm not saying that it is a life that should be led forever (
twenty years a student, twenty years a warrior, etc..), but, as one of
those who has led the life, let me assure you, the missed salary is of no
concern at all.
I cannot even remember thinking about money until I left the university.
If money is your primary goal, I'd say you probably want to rethink the
pursuit of a PhD. I say this not because of the missed salary, but because
you are missing the main point: the joy of knowledge itself.
------------------------------
Date: Sun, 13 Jul 1997 18:36:15 -0400 (EDT)
From: borisv@ctron.com
Subject: Re: Best Way to Buy Stocks?
Mike,
It's very easy these days. Find which type of broker suites you
better: full-service (like Fidelity or Merill Linch - they give you
recearch and advice in addition to making a transactions), or discount
(a'la Schwab - limited recearch and no advice), or deep discount (pure
execution of buy/sell order).
Prices will vary from ~$60 to ~$20 (very approx.) per trade.
I prefer deep discounters with online service. Cheap (fixed price per
trade [any number of shares up to 5000] in the range of $15-20),
Web-based access, and fairely good execution. I use National Discount
Brokers (www.ndb.com), and there are quite a few of them (E-trade,
Datek, etc.) I think you can find them all through Yahoo
(Business->Investments->...).
I will appreciate any corrections/additions from other persfiners.
- -Boris
Dover,NH
------------------------------
Date: Sun, 13 Jul 1997 18:37:20 -0400 (EDT)
From: taylor.hs@pg.com
Subject: Best Place For US Savings Bonds?
<<Some states, New York included, immediately lock your safe deposit box when>>
<<you die, and require an agent of the State Tax Department to be present when>>
<<it is opened>>
Where is the best place to keep U.S. Savings Bonds? I currently have
them in a safe deposit box, but is that necessary?
Thanks,
Holly
------------------------------
Date: Sun, 13 Jul 1997 18:38:22 -0400 (EDT)
From: George Kolb <afn01634@afn.org>
Subject: Re: Credit Card Airline Mileage Deals
>1) AFTER paying my yearly NONREFUNDABLE fee, I was informed that my bank
>would now give only one airline mile for every three dollars charged,
>rather than the prior one for one. Seems unfair to me, since I don't even
>have the option of cancelling. Any recourse?
>
>2) Anyone know any bank/credit card that offers a choice (more than one)
>of airline mileage credit?
Eric,
Though I haven't tried this myself (I have another FF mile card that I plan
on using at least until November), I received an offer in the mail for a
USAA Eagle Points card that expires 7/30/97 [I'm still pondering whether it
would be worth it to get one now for a November "back-up plan"]. It's a
$40 annual fee card, but they'll waive the fee for the first year. You get
1-1 credit and the mileage rate is standard (25K miles = free US ticket),
but there also appear to be some twists:
- - from what I read 25K is the minimum redemption level, but there are
higher ones, so you'd have to charge a lot in one year to get out of paying
an annual fee in year two
- - you can use any airline (they're not affiliated with any particular one,
I guess USAA basically buys the ticket for you...)
- - or, you can take $250 for the $25,000 you spent, so it can be *either* a
FF mile card, or a 1% cash back card.
The number is 800-793-8990 and it says that "each year you can redeem
points to pay the fee," so maybe there are smaller redemption levels (or
maybe that's an exception when it comes to paying the annual fee?). That
number is supposed to let you apply over the phone, though I don't know if
you have to have received an offer in the mail first...?? If it sounds
interesting to anyone, it's always worth a try, right?
George Kolb
Gainesville, FL
------------------------------
Date: Sun, 13 Jul 1997 18:38:59 -0400 (EDT)
From: Susan Mangiero <mangiero@shu.sacredheart.edu>
Subject: "Opportunity Cost" of Getting a Ph.D.
Having left a job on Wall Street to get a Ph.D. in finance I am all too well
aware of the "opportunity cost" in terms of the salary I gave up by going
back to school and teaching while studying for my Ph.D. However, on the plus
side of the ledger, a person who enters academe has much more flexibility
in terms of one's daily schedule. You can often choose what research
topics to pursue, what new courses to develop and what initiatives to
undertake. In short, I work long hours but often can choose when to work
them and where. There are interesting opportunities to travel and to
discuss ideas too. Then too, depending on one's Ph.D. major, you may
be able to augment your income with consulting.
Also, getting a Ph.D. is a choice. Like any other career choice, one ought
to do his or her homework. Before I went back to school, I thoroughly
investigated the income potential, talked to professors in academe
(informationally interviewed them), read about the typical career path
for a person with a Ph.D. in finance, made a list of the advantages and
disadvanatages including explicit income foregone/expected.
------------------------------
Date: Sun, 13 Jul 1997 18:39:22 -0400 (EDT)
From: Somesh Rao <somesh@syl.nj.nec.com>
Subject: Re: How can I get a passport?
>From: hartwig@gate.net (Bob Hartwig)
>Subject: How Can I Get a Passport?
>
>How does one obtain a passport and how much does it cost? It's my
>understanding that it also takes quite a while to receive one.
Go to your county offices and they will have the application forms.
You need to fill those forms, provide two photographs and provide
a fee and you are all set.(You also need proof that you are an
American citizen). They usually say it will take 3-5 weeks, but in
my case I had it ten days after I submitted my form.
>Also, does a young child (4 - 5 years old) need one?
Yes. Some countries like Canada may not need a passport (just the
birth certificate), but in case you need a visa, I would suggest
you have a passport.
Somesh
------------------------------
Date: Sun, 13 Jul 1997 18:40:36 -0400 (EDT)
From: "Harbinder S Virdee" <hvirdee@ford.com>
Subject: Re: Best Way to Buy Stocks?
Mike,
Each brokerage firm has their own way of calculating the commissions.
It usually depends on both, the stock price and the number of shares that
you are buying. Buying shares of one company is considered one transaction
and you will be charged a commission on it. So, if you buy shares of four
companies, you will pay four commissions. The amount of commission the broker
charges for each of your four transactions may or may not be the same. It
would depend on the stock price, number of shares bought etc.
However, if you already know what stocks you want to buy, you might
be better off going thru an electronic broker (e-trade, e-schwab etc., there
are quite a few out there). These electronic-brokers usually have a fixed
per-transaction charge of $15 - $20 and are cheaper than, IMO, discount
brokers.
Harbinder S. Virdee
Product Design Engineer
Ford Motor Co., MI, USA
hvirdee@ford.com
------------------------------
Date: Sun, 13 Jul 1997 18:42:35 -0400 (EDT)
From: Mike Morehouse <mikemore@rocketmail.com>
Subject: Dogs of the Dow or Foolish 4 - Are They OK?
Ira,
You indicated in aresponse to a recent e-mail not to buy stocks based
on yield.
Do you then not recommend buying either the Dogs of the Dow or the
Motley Fool (Foolish 4) portfolio?
Mike Morehouse
mikemore@rocketmail.com
Opelika, AL
------------------------------
Date: Sun, 13 Jul 1997 18:43:40 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: The Tax Law Should Be As Content Neutral as Possible
> My comment:
> Then I presume you would disallow discounts for retail employees and
> what about free travel for air line employees? What about those who
I wouldn't "disallow" them, but I would make them taxable income.
> receive free health benefits as part of their employment package. Or
Again, they should be taxable income. Or better yet, people should be
paid, in cash, what the company is contributing to their insurance and
they can then go to a health insurance provider of their choice
instead of being limited to what their company happens to have
available.
> what about auto salesmen who get a "free" car? I have a friend who
Again -- should be taxable income.
> works for a CPA and has her taxes done for free - should that be
Taxable income as well.
> disallowed? Employees of colleges/universities are not the only ones
> to receive perqs that are not taxable income.
So providing loopholes to a bunch of different special interest groups
somehow makes it all more fair? I think not.
Personally, I think the tax base should be broadened (by shutting down
loopholes and exemptions) and rates reduced. If nothing else, this
would have the beneficial outcome of reducing compliance costs by making
the tax code simpler.
Of course, it is my personal view that a tax like the income tax
should be as "content-neutral" as possible. It should not be designed
(the way it is now) to encourage certain activities over others, be
these distortions for "noble" purposes or be they giveaways to
lobbying groups that push hardest (or fill the politicians' pockets
the most).
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Sun, 13 Jul 1997 18:45:24 -0400 (EDT)
From: Drew Blaha <drew_blaha@gilbarco.com>
Subject: Why I Kept My Advanta card
One nice thing about Advanta has made me keep their card.
They issue the Edvance card, which gives a 1% rebate given
as savings bonds. You can earn up to 10 per year, and it
is given for their balance transfers and convience checks.
I can write a $5000 check to myself, wait a couple of days,
and send in a payment. I usually spend maybe 3-4 dollars
in interest and get 2 savings bonds.
$250 in bonds cost me about $20 in interest. Now I have to
make sure I actually use the card once every 6 months. I got
it on my calendar. Its worth the trouble for me.
Drew
------------------------------
Date: Sun, 13 Jul 1997 18:47:18 -0400 (EDT)
From: "Cal Lester C.L.U." <Cal_Lester@msn.com>
Subject: RE: VUL And Reserves
And the portion of the premium that is allocated to "reserves" has to
be higher than it would have been if no commissions were going to be
deducted from the "reserves." Bottom line: the policyholders pay the
commissions. They have to. If they didn't, then the insurance company
would be unprofitable, and wouldn't qualify for A.M. Best's highest
ratings.
>>>> It has never been my intention to enter into a "debate" with anyone who
might contribute to Ira's Digest, but I can not simply sit by and ignore these
statements.
That portion of the premium that I referred to in U/L & V/U/L that is placed
in the reserve, is an amount decided by the INSURED. The carrier will require
a minimum amount, but the insured can contribute almost as much as he wants,
subject to IRS limitations.
Of course, all commissions are eventual paid by the purchaser. Is it morally
wrong for a person to get paid for his labors??? I feel rather uneasy about
someone that offers me something for nothing ! ! ! !
> ...as in most investments, there is a "back end load", if the policy
> is SURRENDERED within a certain time period.
As in most investments SOLD BY INSURANCE AGENTS. Most no-load mutual
funds do not have a "back-end load." Direct investments in common
stocks, preferred stocks, bonds, real estate, or almost anything else
do not have a "back-end load," either.
>>>> Those that do not have a backend load, normally have a front end load.
Suppliers of any product, have to get compensated in order to stay in
business. So called " no load funds " normally collect their fees in other
ways, in order to compensate those people involved in the sale of the product.
This is a capitalistic society, and I for one prefer it that way.
> ...you CAN buy an equivalent amount of term for less money FOR THIS
> YEAR. However ALL Term policies have an increasing premium due to the
> increasing risk each and every year. You can buy 5, 10 or even 20 year
> level premium term, but they cost more. You are still faced with the
> VASTLY increased premium at the end of THAT period, IF you still have
> a need for Insurance protection.
This is a VERY MISLEADING STATEMENT, based on a false comparison. The
insurance portion of a whole life (or VUL) policy DECREASES EACH YEAR,
as it is offset by the increasing cash value of that policy.
>>>> In most cases this is true, however the INSURED has a choice to use
either Option (A) described above, or Option (B), which will provide a Death
benefit equivalent to the Face Amount PLUS the accumulated Cash Value Account
at death.
The only way the insured can access the cash value is by either borrowing
against it or surrendering the policy. The first option reduces the
eventual payout to the beneficiaries, while the second eliminates it
entirely.
>>>> NOT TRUE ! ! ! One of the primary advantages of U/L & V/U/L is the
ability to WITHDRAW money from the policy at no cost. IRS will not penalize
you unless you WITHDRAW more than your Basis. Any amount above that is
currently taxable income. The reduction in Death benefit IS correct. You can't
get paid twice ! ! ! ! ! !
If the insured simply continues to pay the premiums, and
allows the insurance to remain in force, then the cash value is
eventually paid to the beneficiaries as PART OF THE INSURANCE
SETTLEMENT.
>>>> Under Option (A). However, the INSURED has only been paying for the
ACTUAL Amount of INSURANCE ( that amount between the Cash Value Account total
& the Death benefit all of this time. BTW, does that sound just a little bit
like "Buy decreasing term, and invest the difference", except that the
"invested portion" is Tax Deferred, and Income Tax Free at death.
The proper comparison IS NOT between whole life (or VUL) and a LEVEL
Term insurance policy, but between whole life (or VUL) and a
DECREASING Term insurance policy. In that comparison, the decreasing
Term insurance policy will almost always cost less.
>>>> The "premium" will be less, but the NET COST in every comparison that I
have run is higher.
> ...Most U/L & V/U/L policies today have a GUARANTEED Interest of 4%
> or higher...
For WHAT LENGTH OF TIME is this "Interest of 4% or higher" GUARANTEED?
For one year? Five years? Ten years? When that period of "GUARANTEED
Interest" ends, the insurance companies often pay below-market rates,
AND THE POLICYHOLDER IS STUCK. If the policyholder surrenders his
policy to get a better rate elsewhere, he loses his insurance, and
may have to pay that "back end load" you mentioned, to boot!
>>>> What part of Guaranteed did you not understand????? It is
Guaranteed for the Life of the Policy. The Policowner is never stuck. Life
insurance is not something that you would or should "shop around" every
year. If you do, then you will be paying somebody or something a new
commission and expenses each time. Keep in mind, that one would also have
to maintain perfect health to make all of the changes.
> ...but in U/L, most are CURRENTLY paying 5 1/2 to 7 % INCOME TAX
> DEFERRED INTEREST.
And Vanguard's S&P 500 Index Fund is CURRENTLY* paying a total return
of 24.90%, most of which is INCOME TAX DEFERRED.
>>>> EXCELLENT, why not buy it inside of a V/U/L ????
*YTD Total Return from 1/2/97 to 7/3/97
Cal Lester CLU
------------------------------
Date: Sun, 13 Jul 1997 18:48:26 -0400 (EDT)
From: "Dalmia, Bipin K." <DALMIABK@phibred.com>
Subject: Re: Science and Engineering PhD break-even point
hello all:
i am a little dismayed at all this talk about the financial aspects of
getting an advanced degree. although the financials should be part of
the decision, i think that there is a lot more to getting a Ph.D. that
just that. if one makes the decision to get a Ph.D. just because the
'financials' work out, i can almost guarantee that he/she will never
finish the research and drop-out. getting a doctorate requires a genuine
commitment to the science behind the fundamentals. i can say a lot more,
but i do not want to sound condescending so i think i'll stop here.
bipin (Ph.D.)
------------------------------
Date: Sun, 13 Jul 1997 18:49:07 -0400 (EDT)
From: reb@pobox.com
Subject: Re: Debit Card Hype
>>>>> "Jeff" == Jeff Carpenter <jeffcarp@usa.net> writes:
Jeff> How do you know this? My debit card agreement with Elan
Jeff> states very plainly that I am liable for only $50 of
Jeff> unauthorized usage on my debit card if I notify Elan within
Jeff> 24 hours after *I* discovered the loss of my card. Very
Jeff> simple. You would have no more difficulty proving
Jeff> unauthorized use of debit card than you would on a credit
Jeff> card. My advice: actually READ your agreement instead of
Jeff> falling into the press trap and taking advice from others
Jeff> (including me!)
It's not the issue of the liability that concerns me. It's the fact
that disputing the money on my credit card took a lot of time before
it was cleared up. But that was OK because I simply did not pay the
disputed charges. On a debit card, that money would already be gone
and I suspect that even though I would eventually get my money back,
life would have a lot of other charges and penalties for me since my
checking account would insufficient money to cover the checks I wrote
since I didn't "plan" on having the money removed.
------------------------------
Date: Sun, 13 Jul 1997 18:50:15 -0400 (EDT)
From: David Martin <dmartin@seabreeze.hc.ti.com>
Subject: Re: Tuition Reimbursement Deduction
Rich wrote:
If the answer is "Yes", then I have to wholeheartedly agree with the
House's stand on this. People should not be getting special tax
treatment because of what employer they happen to be working for.
This is exactly the sort of thing the tax code should be completely
neutral on.
Barbara replied:
Then I presume you would disallow discounts for retail employees and
what about free travel for air line employees? What about those who
receive free health benefits as part of their employment package. Or
......
My comment:
While I can't claim to know what Rich's opinion is, I would
point out that he was only urging that the law be neutral and treat
all tuition reimbursement in the same way; he did not specifcally say
which way they should all be treated. I agree with him, and I will say
that I think all types of tuition reimbursements should not be taxed.
(It would be hypocritical of me to say otherwise since I got almost
5.5 years worth of untaxed grad school tuition waivers when I was in
graduate school.)
-David
------------------------------
Date: Sun, 13 Jul 1997 18:50:48 -0400 (EDT)
From: David Martin <dmartin@seabreeze.hc.ti.com>
Subject: PhD versus BS
Some people have commented on how long it takes for a PhD to
make up the money he/she lost by not working for 5+ years. A lot
depends on the field and upon the individual's saving habits. I
calculated this for myself. I make about $15K/yr more because of my
PhD, and I lost about $30K that I could have saved if I had been
working. So, it won't take too long for me to make up the
difference.
However, I would have had a higher standard of living (nicer
car, apartment, etc.) if I hadn't gone to grad school but had instead
been working. The other factor is stock options. Stock options are
fairly common in my industry, and if I had gotten some 6 years ago, I
might have a WHOLE lot more money now.
But, as graduate students day, the long hours make up for the
low pay.:)
-David Martin
------------------------------
Date: Sun, 13 Jul 1997 18:51:18 -0400 (EDT)
From: "Ken Meinken" <kmeinken@one.net>
Subject: Dividend Yield
> I have a question about stock prices and yields. My understanding is
> that the yield annual dividend/stock price. Is the dividend fixed for a
> period of time?
>
> For example, for Philip Morris (MO) the stock price from the PCQUOTE
> website yesterday was 44 7/16 and the yield was 3.6. This would mean the
> annual dividend was $1.59975 (44 7/16 * 3.6%). Today when I checked the
> stock price was 43 7/16 and the yield was 3.5.
>
> Would this not make the yield $1.52013125 (43 7/16 * 3.5%)? Does the
> annual dividend change daily or am I missing something?
Mike,
the dividend yield is the dividend divided by the current stock
price. For most stocks, the dividend is a fixed dollar amount that
remains until the board of directors changes it. If the dividend is
$2 and the stock price is $50, then the yield is 4%. If the stock
moves up in price, the yield goes down.
Most companies pay a continuing dividend and some raise it every year
(P&G just raised their's for the 44th consecutive year). Some
companies pay "special" one time dividends, that are not continued
annually. This is especially true for REITs where the dividend is
based on cash flow.
Variations you see with PCQuote could be rounding and/or updating
errors or adjustments. I'd suggest checking the Wall Street Journal,
Barrons for more definitive information. Actually, Yahoo seems to
have good data, although I haven't checked it for accuracy.
Ken
------------------------------
Date: Sun, 13 Jul 1997 18:52:03 -0400 (EDT)
From: jdennis@www3.nsknet.or.jp (John D. Dennis)
Subject: Judging "return on investment" for a paid off house?
I'm well past the halfway point of paying off a house/mortgage, and was
dreaming pleasantly about the time when I would have made the last payment.
Apart from the personal/human advantages to ownership, one question that
came to mind concerned how to "value" a fully paid off house as an
"investment." As an example, imagine a house that's worth $100,000. (I'm
leaving out taxes for simplicity's sake, and would also bracket the issue
of whether it's best to pay off a mortgage early--I followed the earlier
postings on this topic and that's not the point of this question.)
One way to consider the return on this investment might be to lump together
a year's worth of payments that would've been paid and to consider that
amount to be the "yield" on this investment. If the payments were
$1000/month then this would producing 12%. A second possibility would be to
calculate a year's rent in comparable housing (perhaps this would be more
or less than the mortgage payment) and to consider that amount to be the
more "proper" return on the investment.
Third, in either of these cases, suppose that you begin saving/investing
the money that would've been directed to mortgage payments (or the
comparable rent). A few years down the road and the added "return" from
this type of budgeting could become significant. Should I consider this to
be an added "return" on the house?
Any opinions on this? Is the first or second option more appropriate (or
are there others)?
Thanks in advance,
John
------------------------------
Date: Sun, 13 Jul 1997 18:53:14 -0400 (EDT)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: PhD vs Master's degree
The answer isn't as easy as it might appear. Certain career path's are
closed if you do not have the right credential while on the other hand
entering and maintaining a specific career path may exclude you from
certain financial opportunities
I did a similar calculation about 10 years ago where I tried to determine
how much a doctor needed to earn relative to an engineer to compensate him
for the extra training.
The model that I used was to consider two individuals - an engineer who
went to work for a major company after completing his BS degree and a
second individual who went on to med school after completing his BS degree.
The engineer was assumed to earn the median salary as reported by the Inst
of Elect & Elect Eng (IEEE) for his entire career. The doctor drew the
equivalent salary annually plus tuition book etc as a line of credit from a
hypothetical bank which charged him interest at the then current 30 year
home mortgage rate while in med school (the doctor went to UCLA). After med
school the doctor's draw was reduced by the stipend that he earned as an
intern and resident at a local county hospital. After completing his
residency the doctor went to work at a salary at the local Kaiser hospital.
What should the doctor earn so that he could pay off his debt over a 30
year period using the same interest rate. At the time I did the
calculation it turned out that Kaiser's starting salary gave the doctor a
slight advantage - (but if the doctor borrowed his money at the home equity
loan rate he was behind) Obviously a doctor with an entrepenural bent
who went into private practice would do a lot better
One of my subordinates tried a similar calculation to see if he should take
a master's degree in EE (at night using company paid tuition). His bottom
line (and I concur) was that what you did with the knowledge you acquired
was more important than the extra degree. He eventually left the large
company and is doing very well at a smaller company without the master's
degree.
Avrum Lapin
Upland, CA
------------------------------
End of persfin-digest V4 #57
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