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Subject: persfin-digest V4 #67
Date: Thu, 31 Jul 1997 10:29:14 -0400 (EDT)
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persfin-digest Thursday, July 31 1997 Volume 04 : Number 067
IN THIS ISSUE:
ADVERTISEMENT: MCI FAX REPLY SERVICE [The Editor <ikrakow@shore.net>]
Ramifications of the Proposed Tax Changes? [The Editor <ikrakow@shore.net]
Re: Non Deductible IRA - Possible to Withdraw Money Before 59 1/2 [Rich C]
Re: Vanguard [Rich Carreiro <rlcarr@animato.pn.com>]
Be Careful When MMFs Waive Expenses [Rich Carreiro <rlcarr@animato.pn.com]
Re: Public Education Debate [Susan Mangiero <mangiero@shu.sacredheart.edu]
Re: SAT bias - Basis for Class Action Suit? [Mike Machnik <machnik@tiac.n]
Re: Bob Ford's Proposal for College Admissions [Victor Daniel <vdaniel@ol]
Re: SATs [David Martin <dmartin@seabreeze.hc.ti.com>]
Re: Vanguard MMF Minimum? [David Meyers <dmeyers@panix.com>]
Re: Software to Track US Savings Bonds? ["Ray McKinnon" <mckinnon@hns.com]
college admission fairness [BOB FORD <BOB_FORD@compuserve.com>]
Executors and Bonds [BOB FORD <BOB_FORD@compuserve.com>]
How Does Randy Barnes Beat the Top Fund Managers? [rrk@aps.anl.gov (Rober]
Retirement investments [Richard Santee <Richard.Santee@ucop.edu>]
Real Life Results of Chemistry BS/MS/PHD Salaries ["Steven P. Cepa 847-93]
College Admission Discussion [0500101@ACAD.NWMISSOURI.EDU]
Ph.D. vs B.S. - Penalty for Staying in Grad School [0500101@ACAD.NWMISSOU]
Did My Broker Short Me on Short Trades? [dmak@tma-net.org]
Re: Mutual Funds vs. Stocks - Remember the Tax Angles ["Ken Meinken" <kme]
$50 liability on MC Debit Cards - MC Extending to Debit Cards [hrj@juno.c]
Re: SEP Situation ["Ken Meinken" <kmeinken@one.net>]
Re: Mutual Funds are Better than Stocks for the Average Person ["Ken Mei]
Re: Driving across country [Tony_Babb@notes.pw.com]
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Date: Thu, 31 Jul 1997 09:42:31 -0400 (EDT)
From: The Editor <ikrakow@shore.net>
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------------------------------
Date: Thu, 31 Jul 1997 09:55:51 -0400 (EDT)
From: The Editor <ikrakow@shore.net>
Subject: Ramifications of the Proposed Tax Changes?
I'd like to start a thread on the effects of the proposed tax changes on
our financial plans. Based on articles I read in the Boston Globe and the
Wall Street Journal, I think the changes are profound and affect just
about all of us. I see the following major effects:
1) Reduction of the capital gains tax, especially on long term (18
months) capital gains. Should encourage long term investing, particularly
in growth stocks, and discourage (a) short term trading (gains are taxed
at income tax rates, which are higher than long term capital gain rates;
and (b) investing in dividend producing stocks (better to go for the
capital gain than pay income tax on dividends.
2) Expansion of tax free exemption of capital gain on sale of primary
residence (to $500K, I believe). Should encourage home ownership and
provide more capital to older home sellers.
3) Some disincentive to sock away money in retirement plans. Why not pay
the income tax now, invest in growth stocks, and pocket the capital gain
(at lower rates) when retiring, as opposed to locking money in an IRA and
taking the distribution as ordinary income. The quick tax exemption for
the IRA may not be worth the hassle of not being able to touch the money
without severe penalties.
4) Expansion of estate tax exemption to $1 million will give more
incentive to build up assets at retirement without worrying as much about
estate tax consequences.
5) The special IRA (no deduction, but no tax on accumulated dividends and
no penalty if withdrawn for college tuition or first home) is a good idea
for helping people save for these purposes.
I've heard there's a proposed change in the Alternative Minimum Tax that
might lessen the good effects of the tax changes. Overall, I like the
proposed changes. How much chance is there of passing these proposals?
I hope we get a good discussion going. This appears to be the most
significant tax change since 1986.
Ira
------------------------------
Date: Thu, 31 Jul 1997 09:58:30 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Non Deductible IRA - Possible to Withdraw Money Before 59 1/2
>Rememebr that what ever you put in the IRA is stuck there until age 59 1/2
>(or there is a penalty for premature withdrawal). You might want to
>investigate a low cost annuity where you can with withdraw the principal
>in the future.
You can in fact withdraw money from an IRA account penalty-free before
age 59.5. The catch is that you have to do it in substantially equal
amounts and must maintain the withdrawals for the *longer* of 5 years
or until you reach 59.5. Any screw-up and all withdrawals under this
plan are retroactively assessed the penalty.
An interesting sidelight is that this type of withdrawal is one of the
only times where IRA accounts are considered individually instead of
aggregated into one in the eyes of the IRS. You can calculate the
withdrawals and make the withdrawals from a single IRA account of your
choosing. You do not have to consider the total value of all your IRA
accounts (this has been discussed a number of times on
misc.taxes.moderated).
Rich Carreiro
rlcarr@animato.pn.com
(Editor's Comment - I believe in the proposed tax law changes the special
IRA allows nontaxable withdrawals after 59 1/2.
Also, what's the effect of tax law changes on variable annuities? -IK)
------------------------------
Date: Thu, 31 Jul 1997 09:59:41 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Vanguard
>I recall reading something about Vanguard (because of how their unusual
>structure) couldn't chip cash into their money market funds if their share
>price ever broke a dollar. Not that this happening is very likely, but
>there has been at least one money market fund before that broke a buck and
>had to be saved by being brought back up to $1. What exactly are the
>details regarding this and Vanguard? And is it unique to Vanguard?
If you want to find out more about Vanguard than you ever cared to
know :-), go to you library and check out the book titled something
like (I can't remember exactly) _John Bogle and the Vanguard
Experiment_.
A mutual fund is basically a corporation like any other. However,
because of its purpose and certain regulations it effectively agrees
to submit to, it is taxed differently -- it acts as a pass-through and
is not taxed, unlike a regular corporation. As a corporation, it has
a board of directors and company officers. Like a regular
corporation, it is wholly owned by its shareholders (i.e. the people
who invest in the fund).
As the executives of the mutual fund, the board of directors chooses
who will manage the fund's assets (subject to shareholder approval).
Believe it or not, they are in fact theoretically independant and
could choose anybody as fund manager (c.f. the MFS/Louis Navallier
frou-frou). In theory, the board of directors of (say) Fidelity
Magellan could (say) decide to hire T. Rowe Price's management team to
run the fund when the current contact with the Fidelity Management
Company (FMC) runs out. Of course, this would never happen, primarily
because the shareholders wouldn't approve it, but also because FMC
does all the work of distribution, preparing statements, filing
paperwork, etc. for the fund. In practice, this tends to lock a
mutual fund in to a management company, even if the management company
is totally horrible.
Now, the management company is a separate company from the funds it
manages. Fund shareholders hold no ownership interest in the
management company. The management company may be publically traded
(rare) or privately held. It wants to make a profit and sets the fees
it charges the funds who use for management accordingly.
As Bogle spun up Vanguard, he decided to do away with both of these
paradigms. First, he created a company wholly owned by the *mutual
funds themselves* that would do the distribution, statements, filings,
etc. Vanguard funds can thus hire managers soley to manage money and
are not "held hostage" to a manager because they need that manager to
perform distribution, etc. Second, for many (but not all) funds, that
same owned-by-the-funds company manages the funds. Since this company
is owned by the funds it has no need to make a profit and bills the
funds that use it at-cost, leading to lower expense ratios. For the
funds Vanguard chooses not to manage internally (such as Wellington),
they hire external management companies. From time to time, based on
performance and fees, the executives of those funds do in fact change
managers.
Finally :-) on to the original question. In the cases where MMFs have
come close to breaking-the-buck, the management company has coughed up
money from its own pockets and simply given it to the fund they manage
in order to maintain its NAV at $1.00.
However, since the manager of Vanguard's MMFs is the internal company
which is jointly owned by all Vanguard mutual funds, there is no place
to take any money from, since the internal management company has no
money (it operates at-cost) to give to a MMF to maintain its $1.00
NAV. So if a Vanguard MMF breaks-the-buck, it really will
break-the-buck since it can't be bailed out like other MMFs have.
Having said all that, I'm not about to worry. Given the Vanguard
MMFs' low expense ratios, the manager can be more conservative than
those of many MMFs and still end up with a superior yield. So I'm not
too worried about a Vanguard MMF breaking-the-buck.
Whew! :-)
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Thu, 31 Jul 1997 10:00:15 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Be Careful When MMFs Waive Expenses
>Be careful, though when looking rankings like this, as some
>funds _temporarily_ waive expenses to boost short term
>yield. Usually, when they stop waiving expenses, they fall
>off the top of the list.
Absolutely agreed. This is one of the reasons I like Vanguard's MMFs
so much -- they get their well-above-average returns without any fee
waivers. While you will never do as well as you could by switching
from the top-yielding MMF to the top-yielding MMF as fee waivers
expire, you'll do better than most and without the hassle of switching
from account to account.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Thu, 31 Jul 1997 10:03:34 -0400 (EDT)
From: Susan Mangiero <mangiero@shu.sacredheart.edu>
Subject: Re: Public Education Debate
Regarding comments made about why we have a public school system, let me
first say that I think education is VERY important. Let me also say that
the following comments reflect my personal thoughts and not those of any
organization.
Our K-12 public school system is a govt. run monopoly. Consumers always
benefit from competition. There are lots of interesting papers at
http://www.plutarch.com on alternatives (privatization, competion, etc.)
Assuming that dollars spent on education equals "education" is a flawed
assumption. Many studies show that there is an inverse relationship
between money spent on K-12 public education and "quality" (which can be
defined in many ways). Moreover, there is no accountability (built-in
incentives) for public school administrators to be efficient.
There are MANY examples of money spent on supplies and equipment, prior
to the end of the budget year, to make sure that next year's budget is
higher and then the supplies and equipment are thrown away because they
are not needed. After Switzerland, the U.S. spends the most per student on
public education.
Most people recognize a crisis in American education (U.S. students being
ill prepared for many jobs because they don't learn the basics while in
K-12). Money is hardly the issue in ensuring that people are adequately
educated.
While some college graduates earn higher incomes, this is not
always true. A skilled carpenter (with no college) makes much more
than the typical college professor, with a Ph.D.
Then there is the philosophical issue (most important IMHO) about
"public" goods. I will gladly
chat "offline" with anyone who wants to discuss the philosophical issues but
will say no more here, given the nature of this listserv.
Re: specific funding, almost all states use the property tax to finance
public education. The property tax is a wealth tax.
Where is the "fairness" in taxing people with large houses
(who may have saved more, worked longer hours or took on more risk in
starting a business, let's say) who may have no or few children to
subsidize the educations of those people with many children who live in
smaller houses? What about parents who choose to homeschool their
children or send their children to private schools? They are making the
world a better place by educating their children so we all benefit but
why should they pay taxes to fund the public schools and also their
childrens' education?
------------------------------
Date: Thu, 31 Jul 1997 10:04:13 -0400 (EDT)
From: Mike Machnik <machnik@tiac.net>
Subject: Re: SAT bias - Basis for Class Action Suit?
Bob Ford writes:
> If 1/3 of the questions on the SAT are not graded, this is a CLEAR CUT
> CASE FOR FRAUD in my mind. Is this information disclosed on each test and
> to each test taker?
Bob,
My recollection (having taken it about 13 years ago) is that it is made
quite clear in writing that some of the questions will not be included in
the student's score. They do not, however, tell you which questions they
are - for obvious reasons. I don't see a problem with this. It affords
them an easy way to evaluate questions for possible future use and helps
improve the test.
Since this topic has taken on a life of its own :-), I also wish to draw
attention to one point that I believe one or two folks made but which seems
to have been glossed over. That is that SAT scores are often not used
alone to determine whether a student gets in or not. There are a myriad of
other factors that are looked at and which could result in a school taking
a student over another who happens to have a higher SAT score. Those
factors can include high school grades, choice of major (a department with
fewer applicants may have to take lesser academically qualified students
than another department), interview results, extracurricular activities,
community involvement, etc.
As an example, it is quite common for a school to give preference to a
student with a strong record of extracurricular activities and involvement
in the community, because it is expected that the student will add to the
college community in areas other than academics. This should not be read
to mean that very poor students should expect to be accepted just by having
a strong "resume". Rather, it means that admissions looks at the total
package that the student presents them with, and that sometimes a student
with a stronger "resume" can get the nod over one with little or no
activities and a similar or slightly better academic record.
Admissions is an extremely complicated process. This is very important to
keep in mind, and it seems to have almost been lost in the SAT discussion.
All of this may or may not apply to "John". I admit to still being
confused that in your initial post, you stated that the school *required* a
certain minimum SAT score for admissions (sounded like there was no way
around it - of course, we don't know if that is combined, or verbal/math,
etc.) but then said that other students with lower SATs were getting
scholarships (again, we don't know if this is combined or not). That seems
contradictory to me and so I would want to know more. For example, it
could be that there is a minimum required of 300 verbal and 300 math. John
could have 600 verbal and 290 math - total 890 - while an admitted student
has 550 verbal and 320 math - total 870. But John doesn't meet the
required minimum despite having a higher combined score.
If there is a stated required minimum score and students are being admitted
who do not meet it, then yes, I would want an explanation. There either is
a minimum or there is not. But you have not given us enough information to
support your claim that it is unfair that John was denied admission because
of not meeting the "minimum" while another student with a "lower score" did
get in. A clear definition of "minimum" needs to be provided along with
specific examples to prove that the minimum was not met in some cases.
Because of the nature of the test and the division into sections, it is
quite possible, as shown above, that a student with a higher total score
could be denied admission while one with a lower total score could still
meet the "minimum" as it may be defined.
What we are looking for here is something of the form, "The stated required
minimum is 600 combined; John had 590 combined and did not get in; Student
X had 580 combined and did get in." Or, "The stated required minimum is
300 on each section; John had less than 300 on one section and did not get
in; Student X had less than 300 on one section and did get in."
Finally, in reading comments from people as to how they can help provide
for their children's education, my best advice is to encourage their
involvement in one or more activities or organizations (doesn't have to be
athletics - could be church groups, student government, etc.) that they
enjoy and excel in, long before they become of age to enter college. Of
course, encourage them to do well in school too, first and foremost. But
having these activities in their back pocket *will*, I am certain, improve
their chances both of being admitted and of obtaining scholarships -
especially since many organizations do award scholarships to deserving
members. Things like this will set them apart from other applicants who
have a similar academic record.
I hope this is helpful.
- --
Mike Machnik
machnik@tiac.net
------------------------------
Date: Thu, 31 Jul 1997 10:05:13 -0400 (EDT)
From: Victor Daniel <vdaniel@olympus.eng.temple.edu>
Subject: Re: Bob Ford's Proposal for College Admissions
> I now believe that the ONLY FAIR system of college admissions is also the
> best one for the state and society as a whole. I would appreciate your
> comments. Is this proposal a good idea or not?
>
> I propose that all 4 year state colleges in the state adopt the same
> admission systems as the 2 year community colleges. Anyone who wants to
> be admitted will be admitted. If you maintain passing grades, you can
> stay in college.
> If you do not maintain passing grades, you are out. Now in California,
> you can go to school for 14 years with no tests of any kind to determine
> whether you can be admitted. I would like to change that to 16 years.
>
> BOB FORD
Sounds fair to me. It is pretty much the de facto standard at most
colleges anyway, why not extend it? You can get into any college you want,
but you'll have to work to keep your place there. Most colleges require
you to maintain a certain GPA to stay in there anyway, and financial aid
(which most students use in some form or fashion) is mostly dependent on
academic performance.
So, all in all, I consider that to be a very fair system.
Later,
The MacNut
| Victor Daniel a.k.a the MacNut Web page in progress at: |
| vdaniel@neptune.eng.temple.edu http://www.netaxs.com/~macnut |
| macnut@netaxs.com |
------------------------------
Date: Thu, 31 Jul 1997 10:05:49 -0400 (EDT)
From: David Martin <dmartin@seabreeze.hc.ti.com>
Subject: Re: SATs
>If 1/3 of the questions on the SAT are not graded, this is a CLEAR CUT
>CASE FOR FRAUD in my mind. Is this information disclosed on each test
>and to each test taker?
When I took the SATs in 1985, the instructions clearly stated
that certain questions and even whole sections would not be graded
because they were trial questions.
-David Martin
------------------------------
Date: Thu, 31 Jul 1997 10:07:51 -0400 (EDT)
From: David Meyers <dmeyers@panix.com>
Subject: Re: Vanguard MMF Minimum?
>Do you know if the Vanguard $3,000 is a minimum to start up or does it need
>to be maintained each month as well for the MMF?
As far as I know, it is the minimum to start up. They apparently
check the balances of your account once a year and at that point,
if it is below the $3000 (because of redemptions, not just because
of market fluctuations, I think), they assess a fee.
(I have had my MMF there go below 3k for short periods and
asked them this question before allowing it to do so).
Nevertheless, best you call them and ask specifically when
they check the accounts.
- --D
------------------------------
Date: Thu, 31 Jul 1997 10:08:50 -0400 (EDT)
From: "Ray McKinnon" <mckinnon@hns.com>
Subject: Re: Software to Track US Savings Bonds?
Hello -
I am looking for software to help track US Saving Bonds?
thanks....
RMcKinnon
vrmjr@juno.com
------------------------------
Date: Thu, 31 Jul 1997 10:10:10 -0400 (EDT)
From: BOB FORD <BOB_FORD@compuserve.com>
Subject: college admission fairness
>>>I propose that all 4 year state colleges in the state adopt the same
>>admission systems as the 2 year community colleges. Anyone who wants to
>>be admitted will be admitted. If you maintain passing grades, you can
>>stay in college.
>I think you will find the concept true at most state universities. I
>have found that most state schools will allow you to transfer in once you
>have taken two years at a community college and proven that you are able
>to do the work.
>Drew
DREW
I believe you are correct that most state universities will admit you as a
student if you complete 2 years at a community college with full credit
for the courses at the community college. Doesn't this mean the state
universities are acknowledging the community college and state
universities courses for the first 2 years are equivalent?
So how could it be FAIR to admit a student to a college that has only 2
years of study and not admit that same student to a university that has
the same 2 years of study plus 2 years more? As a taxpayer, I am paying
for both colleges. Shouldn't my tax dollars treat everyone the same?
BOB FORD
BOB_FORD@COMPUSERVE.COM
------------------------------
Date: Thu, 31 Jul 1997 10:11:13 -0400 (EDT)
From: BOB FORD <BOB_FORD@compuserve.com>
Subject: Executors and Bonds
>My mother's will stated that my brother and I (executors) should not be
>required to post bond, but the State of Maryland required us to post bond
>anyway!
This is perfect example of why when it comes to legal matters, you should
get legal advice in the state of the transaction. State laws only rarely
are the same among the 50 states. Some state laws are the exact opposite
of other states.
When I do business in states other than California, it is always stated in
any agreement that the laws of the State of California apply to this
agreement. It is very difficult for me not being a lawyer to understand
the laws of California, let alone other states.
It has been my experience that state laws (or Federal for that matter) do
not have to make sense. There are some really strange state laws. Your
example of the children having to post a bond to be an executor seems to be
one of them.
BOB FORD
BOB_FORD@COMPUSERVE.COM
------------------------------
Date: Thu, 31 Jul 1997 10:12:51 -0400 (EDT)
From: rrk@aps.anl.gov (Robert Kalt)
Subject: How Does Randy Barnes Beat the Top Fund Managers?
Randy Barnes wrote: "My monkey consistently beats the top fund
managers and always will."
Assumming you meant money instead of monkey I'm sure many of us would
love to know how you *always* will beat the top fund managers.
(Editor's Question - Is there a "Dart Board Mutual Fund" - a fund run by
picking stocks at random? Anyone care to start one? -IK)
------------------------------
Date: Thu, 31 Jul 1997 10:15:40 -0400 (EDT)
From: Richard Santee <Richard.Santee@ucop.edu>
Subject: Retirement investments
>I am 35 years old. I now have $35,000 in my pension plan. I plan on
>retiring between age 60-65. The $35,000 is invested in the following
>classes of mutual funds: 50% growth, 30% cap. appreciation, 20%
>International. I would like to reitre with $500,000 from these funds.
>
>Is it fairly safe to assume the money should double every 7 years on
>average?
I recommend that the writer take this approach. First, make a very
accurate estimate of expenses that would be required to sustain his
current standard of living if he were to retire today. Second, use a good
projection model to determine what savings/pension would be required at
retirement for the remainder of his life in order to meet these annual
expenses.
I've tried a number of projection models and found problems with most.
Recently I found a retirement projection model that is free and very
friendly. It's called "Thinkware" and is available at:
http://www.fidelity.com/
This model determines the amount needed at retirement at any age, given
total return and contribution assumptions. I've checked the model against
my own Excel spreadsheet projections and it validates well.
Once you see what rate of return is required to generate the savings needed
at a desired retirement age, given a certain level of annual savings
contribution from salary, then you can work backwards to the type of
investment distribution across mutual fund classes that is required to
produce the required rate of return. One can adjust the distribution to
create the rate of return needed, given one's comfort level with risk.
Hope this helps.
Richard Santee
(Editor's Comment - The trouble with these models is that you can get any
result you want by tinkering with the assumptions (inflation rate?
interest rate? salary increase?). Anyone successfully retire based on,
say a 20 year old model? What assumptions were used? -IK)
------------------------------
Date: Thu, 31 Jul 1997 10:16:57 -0400 (EDT)
From: "Steven P. Cepa 847-937-7539" <CEPA.STEVEN@Igate.Abbott.Com>
Subject: Real Life Results of Chemistry BS/MS/PHD Salaries
To beat a dead horse, here are some real-life statistics.
The annual survey of chemists done by the American Chemical Society (over
120,000 members) has just been published. While the report goes on for pages,
here are some quick slices of the report, which address the question of
compensation at different degree levels (in thousands):
Years since B.S. degree: 2-4 20-24 40 or more
B.S. degree $35.0 $58.0 $67.1
M.S. degree $40.5 $62.0 $64.0
PhD degree --- $75.0 $81.0
Interesting stuff. The average person who earned an M.S. degree 40 or more
years ago (in the 1950s) is earning *less* than someone who earned a B.S. at
the same time ($64K vs $67K). I assume (?) that this is because the
population is vastly different and the "good" performers at the M.S. level
left chemistry and are not available to respond to the survey.
In a ranking by percentile, the top 10% of B.S chemists earn an average of
$80K (bottom 10% at $32K); while the top 10% of PhDs earn $117K (bottom 10%
$57.9K).
As with all statistics, a field day can be had with the interpretation. But
on average, the PhD earns more than the B.S or M.S. level person. Is that
difference worth the 5-7 years of extra, low-income schooling? That's what
choice is all about.
Report in Chemical & Engineering News, July 28, 1997 issue, p.13-19.
------------------------------
Date: Thu, 31 Jul 1997 10:17:23 -0400 (EDT)
From: 0500101@ACAD.NWMISSOURI.EDU
Subject: College Admission Discussion
>1. Is State College A discriminating against John on the basis of mental
>ability? If it is discriminating, is it legal to do so?
>
>2. Is State College A saying in effect "John, you are not smart enough to
>come to our college and learn to be smart"?
>
>3. Since both John and his parents pay state taxes that support the
>college, and the college has plenty of room for John, is it morally and
>ethically right to deny John admission no matter what his SAT scores are?
>
>4. Is it morally and ethically right to deny John admission to college
>because of his low SAT test scores when the same college gives full
>scholarships to people with even lower SAT scores than John.
>
>BOB FORD
>
Even though I am implied at an instutition of higher ed., I am not
employed in the admission area, so all of the usual disclaimers (and more)
apply.
Assuming the point of view that the college is trying to predict whether
the student will be successful or not, the SAT is one indicator. Are there
other indicators of success in college? Sure. Now does this particular
student have these predictors? I don't know, but start with high school grades,
and rank in class. If these types of predictors are indicating that the school
should invest in him, then build a case and write a letter of appeal to the
college. Most colleges will have an appeal process, but it would be up to
the student to build his case.
A second alternative is to go to another school, and prove that the
student is very capable of doing college level work. As a successful
student, he can then apply for admission as a transfer student. Often the
admission criteria for transfer students is different from the admission
requirements for first-time freshman. The number of credits required to be
admitted as a transfer student varies from college to college, but it
usually is the equivalent of one or two semester of full-time study. Check
with the admission department of the college you want to attend.
Terry
------------------------------
Date: Thu, 31 Jul 1997 10:19:44 -0400 (EDT)
From: 0500101@ACAD.NWMISSOURI.EDU
Subject: Ph.D. vs B.S. - Penalty for Staying in Grad School
Since this is a personal finance digest, there is a pers-finance
aspect of the debate which has not been addressed. Often graduate
students delay their marriage and/or having children.
It is not uncommon for people with doctoral degrees to have their first
child while in their 30's. Now, if we assume a typical family of two or
three children, the Doctor is now in his/her mid- to late-thirties. Twenty
years later, they still have children at home, or in college. Now less
than a decade before the usual retirement, they are finally able to be
financially independent of children.
(Well, OK, you know what I mean) At the very time when they can make
larger contributions to their retirement fund, they have fewer years to do
that. Starting earlier would be good, but I couldn't have put money into
a retirement fund when my only income was from a graduate assistantship.
The "penalty" for staying in graduate school (with no fringe benefits) is
still being paid with a smaller personal retirement fund and most likely a
smaller retirement fund from the employer (when "years of service" is
taken into account.)
Terry
------------------------------
Date: Thu, 31 Jul 1997 10:23:02 -0400 (EDT)
From: dmak@tma-net.org
Subject: Did My Broker Short Me on Short Trades?
I'd like to know whether a couple of things my broker did when I
shorted stock is typical: First, the broker didn't pay interest on
the funds generated when I shorted the stock; Second, it marked to
market daily, causing my cash balance on deposit to drop when the
stock price rose, which resulted in less interest being paid on my
cash on deposit. Do most brokers handle shorting this way?
(Editor's Comment - You don't own the stock. Your broker is borrowing the
stock. You are not entitled to dividends and your debt is the market
value of the stock. So if the stock doubles, you have to cover your sale
at double the cost of the short, and you've lost 200%. You can be caught
with your pants down. Is that why it's called "shorting"? -IK)
------------------------------
Date: Thu, 31 Jul 1997 10:23:43 -0400 (EDT)
From: "Ken Meinken" <kmeinken@one.net>
Subject: Re: Mutual Funds vs. Stocks - Remember the Tax Angles
Greg,
while I agree with you in general about the advantage of avoiding
(or defering) taxes on investment gains, I think there is a hole in
the book's premise: While this may have worked for the successful
people, it doesn't mean that the approach works in general. Many
people lose money in these approaches too. I could probably do a
study that shows that people who went from$10,000 to $20,000,000 in
a single year did it via the lottery, but that wouldn't mean that the
lottery was the way to get rich, would it?
To show that this is an effective approach, they would also have to
include the people who tried it and didn't become millionaires.
Without that, success might only be due to luck with the vast
majority failing.
Of course, eventually taxes are due before someone can actually _use_
the money they've made. Don't forget to calculate that factor in.
Ken
> From: Greg Panayoti <greg_panayoti@il.us.swissbank.com>
>...
> Basically, the book says that the vast majority of millionaires and
> people that are financially independent made their fortunes by investing
> in things that at the same time reduce their tax rate. For example,
> they invest heavily in their businesses and then only pull a small
> amount out to live. (Their studies show the average millionaire lives on
> only like $75,000/yr). They also invest in real estate that sits
> there and accrues value for many years. Both these methods decrease
>
------------------------------
Date: Thu, 31 Jul 1997 10:24:32 -0400 (EDT)
From: hrj@juno.com (Harold R Justice)
Subject: $50 liability on MC Debit Cards - MC Extending to Debit Cards
There has been much discussion lately on why debit cards are not as good
as charge cards and one of the reasons stated was that charge cards have
a $50 limit on liability if the card is lost or stolen and debit cards
have no limit on the liability. I heard on the news today that MasterCard
is extending the same $50 liability limit on their debit cards as they
have on their credit cards. Good news for debit card users since other
issuers will probably follow up with the same limits.
Harold
------------------------------
Date: Thu, 31 Jul 1997 10:25:10 -0400 (EDT)
From: "Ken Meinken" <kmeinken@one.net>
Subject: Re: SEP Situation
> From: Fred Schiff <f.schiff@ieee.org>
> His broker is a friend of his, who talked him into getting into a unit trust
> which invests in the DOW5 model. So far so good. His friend also had him
> go into a health care mutual fund, a pacific rim mutual fund and a
> technology mutual fund.
>
> Now I have a real problem with all of these things. I think he should dump
> this "friend" and go elsewhere. I've never been real
> crazy about unit trusts, and since they are the Dow5 model they have to
> be liquidated ever single year, probably racking up a commission. I told
> he could get a regular discount broker and just buy and sell these stocks
> directly. I don't know the benefit of the unit trust. I'm pretty certain
> that all the mutual funds are load funds, and probably have 12b1 fees.
> The main problem with them is that they are all too volitale and cyclical
> to be in a plan where the main point is that you shouldn't touch it until
> retirement.
>
> Any thoughts?
Fred,
since on several of the points you admit that you are guessing, I
think that decisions shouldn't be made on guesses. The Dow Dogs UIT
may or may not have high expenses. The normal Dow 10 UIT expenses
are reasonable for small investors, it would cost you that
much in brokerage commissions. Yes, a person might save more by
doing things himself via a discount broker, BUT if a person doesn't
know enough about all of that, it is unlikely that they will learn
and follow the plan. In that case, the UIT is probably better.
As for the mutual funds, what you named all sound reasonable. Of
course, with any mutual fund, the individual fund, performance and
expenses are of critical importance. Without knowing those details,
they could be great mutual funds, or they could be disasters.
Volatility and cyclical movement are NOT a problem for a long term
investment. They could even be an advantage. Where they become
important is for the short term investor.
Ken
------------------------------
Date: Thu, 31 Jul 1997 10:25:56 -0400 (EDT)
From: "Ken Meinken" <kmeinken@one.net>
Subject: Re: Mutual Funds are Better than Stocks for the Average Person
Wayne,
mutual funds seem to be bogged down with returns less than the
market in general. Trying to pick a few managers who outperform the
market over long periods in the future is difficult or impossible
(can you really do it?) Of course, this is somewhat understandable:
they -are- the market, and they charge fees, which reduce their
returns.
It seems that any manager who outperforms the market only does so for
s relatively short term, often until they become "discovered" and
their assets grow beyond what they can effectvely manage. OTOH, there
are many managers who perform great for a few years before the
averages catch up with them.
In addition to this, almost all mutual funds have high turnover which
hurts their after-tax performance. For example, the long term net of
16% buy and hold leaves me more money than a mutual fund returning
18%.
Personally I think a combination of one of the "Dow Dogs" strategies
plus selected long term "buy and hold" for selected stocks is a
better approach.
Ken
> Mutual funds offer huge advantages: easy diversification and professional
> management some of the biggest. I probably own shares in 200-300 companies
> in the dozen funds I own. To get that diversification by buyihg stocks
> directly would cost millions, and I can do it with as little as $50 a
> month times the number of funds I wish to dollar-cost average into. I can
> hire some of the most brilliant money managers to look after my money, and
> it cost very little. I can select the managers who have proven over time
> that they can achieve returns of 10-15% or more (sometimes much better)
> over long periods of time. I counsel everyone to invest in mutual
> funds,not stocks. This is a strategy that is making my rich. It's also
> making my wife rich, and she's totally a hands-off investor. there's
> another benefit of funds; they're totally no-maintenance (or should be, if
> you do 9t correctly).
>
> Comments? I may now get some critical e-mail from stock investors. that's
> okay. My strategy works great. I can demonstrate with my portfolio. It's
> safer and easy. that's good enough for me.
------------------------------
Date: Thu, 31 Jul 1997 10:27:13 -0400 (EDT)
From: Tony_Babb@notes.pw.com
Subject: Re: Driving across country
A recent postee was concerned about the cost of gas when driving across 2/3rds
of the country. It's really not that big a deal for example if you assume 2,000
miles at 25mpg that's 80 gallons. If you consistently buy gas for say 25cents
more than the normal price that's only $20 and if your budget is that tight
then you should reconsider taking the trip!! You'll probably find you get an
additional couple of miles per gallon (or more) just because you're driving for
long periods at a steady speed.
FYI, I drove from New York to San Francisco last year (basically just followed
I-80 for a week). The worst place for gas was easily Reno NV, which cost about
$2 per gallon, I don't remember the price anywhere else so it can't have been
that far out of line.
Here's a couple of hints that could save you $$$.
Join AAA and use their maps. They can give you (free to members) a map of the
whole US and various regions and states. They can help you plan the trip going
by the most scenic route or the most direct. Plan on roughly which state you
expect to be in each evening and get one of the AAA guide books for that
state(again free to members). It lists all the hotels/motels/restaurants by
town and gives you prices for each and interesting places to visit along the
way.
Each day I planned roughly where I wanted to get to that evening (usually
about 500 miles although one day I did 800 in the West where speed limits are
75mph). I drove until late afternoon and was getting tired then I stopped,
looked at the map and confirmed that I would make my destination or not. If not
I selected another town within say 100 miles and checked the AAA book for
reasonably priced motels, called them and made a reservation, on only a couple
of occasions was I unable to get into the first hotel of my choice. Many hotels
offer discounts to AAA members and when you're calling in the early evening
they are anxious to fill the rooms that night and will often offer discount
rates that they may not have offered the day before. Having made the reserv
ation and confirming late arrival with my credit card I could drive for another
couple of hours and get there in time for dinner.
I found many good and inexpensive motels around exits on the interstate and
they were usually accompanied by gas stations and restaurants. Wherever
possible, I avoided having to navigate around a strange town looking for a
motel that was more than a mile or so from the interstate.
Fill up with gas each morning, the hotel will probably be able to recommend
somewhere close and inexpensive, to be honest I didn't ask as there was usually
a gas station near the motel and I was usually anxious to get going. I usually
drove for about 2 hours at a time then took a break. Then if you drive for
another 2 hours you'll be ready for lunch - also probably ready to fill up
with gas again. I tried not to get below 1/3 of a tank of gas as there are some
remote areas where you may not find gas for 50 - 75+ mies.
There's no need to carry a lot of cash or travellers checks, just pay by credit
card (keep the receipts) and use an ATM as necessary for loose change.
Look for interesting places to go that you may not have planned to go to e.g. I
ended up one day in Wintersett Iowa where the Bridges of Madison County book
was set, the people were really nice and I visited John Wayne's birthplace,
none of which was planned until I stopped at a rest area and noticed it on the
map.
Take a cellular phone or CB radio in case of emergency, the CB passes the time
if you want to talk with truckers or just listen in on their conversations - I
used a portable CB with an antenna clipped to the window, it worked just fine.
If you're going somewhere hot keep a couple of gallons of drinking water in the
car for emergencies. Take cassettes or a CD player, there are parts of the
country where there are few or no radio stations.
Relax and enjoy the trip, the US is a great country to drive across.
------------------------------
End of persfin-digest V4 #67
****************************
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