Small Business Lines

Share Your Favorite Financial Websites and Win $50

Fri, 06 Feb 2009 05:56:10 +0000

There are a lot of financial websites out there. Unfortunately, there are some really good ones that you may not have heard of before. Over the past few months, I have been trying to collect these financial sites into my Personal Finance Directory (please check it out, explore, rate, and review these sites). But I am just one person and the 50 sites listed are just the tip of the iceberg.

In order to find and add more sites to the directory and share the best resources with my readers, I need your help. Please add a comment with your favorite financial sites below. If you are a blogger or a webmaster, please let your readers know so that they can pitch in and get a chance to win up to $50. Specifically, you’ll get 1 chance to win when you leave at least one comment, and an extra chance to win on each site/blog you announce this giveaway to your readers (please email me with link(s) to the announcement).

At the end of February, I will randomly pick two winners to each win a $25 Amazon gift card, and if you’re really lucky your name could be picked twice.

My Favorite Financial Sites

Here are some of my favorite financial websites to get you started.

Money Management

Quicken Online — Nice and simple expense tracking and money management software. Here’s my review of Quicken Online.
Mint.com — Another site similar to Quicken Online. More powerful, but a little more complicated as well. Here’s Mint.com review.
NetworthIQ — Keep track of your net worth and compare yours with other users.

Investing

Google Finance — A nice portal to keep track of the market, news, and portfolio tracking.
Wikinvest – Up and coming Wiki specifically designed for investors
MoneyAisle — Let you find the best interest rates for High Yield Savings and CDs. Here’s my review of MoneyAisle.
Lending Club — A social lending network where you can invest by making person to person loans. Currently Lending Club boast an average returns of 9.05%.

Credit Report and Credit Score

Credit Karma — Free credit score estimation.
AnnualCreditReport.com — Free credit report portal where you can get credit report from TransUnion, Experian, and Equifax.

Shopping Rebates and Discounts

RetailMeNot.com — Great coupon portal where you can find discount and free shipping coupons.
Ebates — Online rebate portal that pays you to sign up and gives you rebates for over 900 retailers. It even works in combination with RetailMeNot.com for even more savings.

Other

Zillow — Free home value estimation and property search
PFBlogs.org — Stay on top of what’s going on in the Personal Finance blogging world.

I’ll stop right here and let you tell me about your favorite web sites. Feel free to throw in some blogs and other smaller sites too.

What are your favorite financial, business, and personal finance websites and/or blogs?

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Lost Money In The Stock Market, What Should I Do?

Fri, 06 Feb 2009 05:56:10 +0000

In this Ask The Expert With Larry Swedroe article, the reader (Larry) lost a lot of money in the stock market. He detailed his plight and complained about his full service brokerage firm. It’s 2009 and he only have half of what he did a few months ago. What should he do? Here’s the question from Larry:

In June of 2008 my stock portfolio was worth around $800,000. Now it is around $400,000. I am freaking out. About $300,000 was evenly divided in Exxon and Chevron, which over the last 20 years have been a very good choice. The balance is with Merrill Lynch in their “Private Client” group. They had me in a fairly aggressive private fund that has lost around 44%. On top of the losses I will see capital gains in the fund and a stiff commission to Merrill.

I don’t expect you to say anything about them, but I will say they should have called me into their office with advice to rebalance my exposure in equities. Instead I got no advice. In my opinion, it is advice I pay for via a full commission broker service. What should I do? I feel like rolling everything from Merrill into a cash account until late ‘09. Suggestions are greatly appreciated. Thanks.

Larry, sorry to hear about your situation, it is an all-too-common one. And in my opinion it happens because our education system has failed the public. Despite the fact that money is the third most important thing in our lives (after family and health), unless you get an MBA in finance it is likely you have never taken a single course in capital markets theory (and by the way, neither have most stock brokers whose investment education is mostly SALES training). And because Americans seem to be very lazy (they would rather watch some reality TV show than spend time reading books like my “Only Guides” series (equities, bonds and alternative investments). So that lack of education leaves them like sheep ready to be sheared by the wolves of Wall Street. It is usually the investment bankers that end up with the trips to Hawaii (financed by the fees paid by investors), not the investors. So my best advice is to get an education. You might start with my book Wise Investing Made Simple. It is a collection of 27 short stories that will give you an “MBA” in investing pretty quickly. At least you will understand the way the markets actually work and it will also provide you with the winning strategy.

In the meantime here are a few things you got wrong in my view.

First, no one should own any individual stocks as that has more to do with speculating than investing because it involves taking what economists call unsystematic risk — risks that can be diversified away and thus you do not get rewarded for taking. Solution, build a globally diversified portfolio of passively managed funds like index funds and then stay the course, only rebalancing and tax loss managing. Several of my books show you how to do that.
Second, my book on Alternative Investments shows the evidence on private equity and the results are not good. In aggregate, it is the purveyors that make the big returns, not the investors. And again it involves taking unsystematic risks.
Third, your portfolio did not have sufficient diversification. And perhaps more importantly it may not have had even the right equity to fixed income allocation. My book The Only Guide to a Winning Investment Strategy You’ll Ever Need will help you understand the right way to invest and will also help you to develop your own Investment Policy Statement. It also explains why one should NEVER work with a commissioned investment advisor and also never work with an advisory who does not provide what is called a fiduciary standard of care. Both the “Winning Investment Strategy” and the Wise Investing books have sections on how to choose an advisor.

What amazes me is why anyone would trust their investments to a Wall Street firm. Haven’t they demonstrated that they cannot manage their own risks, let alone yours? And they really don’t have your interests at heart, they have theirs. That is why so few are willing to provide a fiduciary standard of care — because they would be required to provide advice that was in your best interests.

Here is a good question for you. In providing advice did the firm ever have a “discovery meeting” with you to find out your goals and ability, willingness and need to take risk? Did they explain fully the risks involved in investing in individual stocks and private funds? Did they show you the academic evidence on funds that try to beat the market (it is horrendous)? Did they write an investment plan for you? If none of the above was done then how could they give proper advice tailored to your situation? If there was no plan, how could they rebalance to targets that did not exist? My bet is they did not do even one of these things. The reason is that they are SALES people, not investment advisors.

Bottom line is the best recommendation I can make for you is to “invest” a bit of time and money in your own education. Reading books like the ones I have written will be the best investment of time and money you will ever make. Other authors I would recommend are John Bogle and William Bernstein. Good luck.

Disclaimer

Mr. Swedroe’s opinions and comments expressed are his own, and may not accurately reflect those of the firm, nor Moolanomy and its owner.
Not all questions will be answered
By submitting a question, you grant us the right to publish your question.
The answer is given based on the information provided in your question. Please seek professional assistance for more personalized advice.

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Zecco New Free Online Stock Trading Policy

Fri, 06 Feb 2009 05:56:10 +0000

I received an email from Zecco over the weekend stating that they are changing their free online stock trading policy effective March 1, 2009. In case you don’t know who Zecco is, it’s an online discount broker that’s famous for offering its customers cheap online stock trading (at $4.50 per trade), and free trades if you’re eligible.

Currently, you are eligible for 10 free stock trades per month as long as you maintain a $2,500 minimum account balance. Under the new rule, you must maintain a $25,000 minimum balance in order to be eligible for the 10 free stock trades. If you have less than $25,000, but you are an active trader who trades more than 25 times a month, you’ll also be eligible for 10 free stock trades. Please note that there is a maximum of 10 free stock trades per month and you cannot earn more than 10, or roll over unused trades to the next month.

Otherwise, the fee structure remained unchanged. Equity trades still only cost $4.50 each, which is still one of the lowest commission you can find for online trading (TradeKing is a close second at $4.95 per trade). Options trades cost $4.50 per trade plus 50 cents per contract, and mutual fund trades cost $10 each. There are no account minimum balance fee, or inactivity fee.

Why Did Zecco Increase The Minimum Balance Requirement

Zecco indicated that after 130,000 accounts and over 2.5 million free trades, Zecco can no longer maintain their current pricing structure due to the economic downturn and poor stock market condition. However, the true reason behinds this change is probably the historically low interest rate. Like other banks and brokers, Zecco makes some of its money through interest rate arbitrage — specifically, earning more on the money sitting dormant in its client accounts than it pays to the customers.

What Does This Mean To You

If you are an active trader with less than $25,000 in your account, or a typical investor who took advantage of the free stock trading, you’ll miss the free stock trades. However, if you have more than $25,000 or if you are a hyper-active trader who trades more than 25 times a month, it won’t affect you at all. In any case, the $4.50 per trade commision is fortunately not that expensive; however, it will be noticeable.

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What Is A Reverse Mortgage?

Fri, 06 Feb 2009 05:56:10 +0000

Reverse mortgages are one way senior homeowners who are 62 years and older may be able to tap the home equity. A reverse mortgage gives the homeowner money they need without having to leave the house and without having to repay the loan until the owner dies, the home is sold, or the house is no longer used as the primary residence. As such, a reverse mortgage could be a good alternative to selling your home, home equity loan, and HELOC.

How Does A Reverse Mortgage Work

Reverse mortgage loans let you borrow money against your home equity. No payment is required as long as you live in your home. When the last living borrower dies, sells the home, or permanently moves away, the loan must be repaid in full along with all interest and other charges. The remaining equity in your home, if any, belongs to you or your heirs. However, you or your heirs will never owe more than the home’s value.

Regular Mortgages versus Reverse Mortgages

With a regular mortgage, you build up your home equity with each payment you make to the lender. With a reverse mortgage, your home equity decreases each time the lender gives you money.

In a reverse mortgage, the homeowner makes no payments and all interest is added to the lien on the property. As such, the amount you owe grows larger and your equity ownership grows smaller over time. However, it’s important to note that as a reverse mortgage borrower, you continue to own your home. So you are still responsible for the property taxes, insurance, and maintenance of the property. Your loan could become due and payable in full if you fail to carry out these responsibilities.

Who’s Eligible For A Reverse Mortgage

Borrowers must be at least 62 years of age for most reverse mortgages and must occupy the home as a principal residence. Some programs require that you own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan.

All reverse mortgage programs accept single family home. Some programs also accept 2-4 family home as long as the owner occupies one of the units, along with some condominiums, cooperatives, planned unit developments, and manufactured homes. Mobile homes are generally not eligible.

Unlike traditional second mortgage, or a home equity line of credit, a reverse mortgage is available regardless of your current income, your debt-to-income ratio, and credit score. The amount you can borrow depends only on your age, the current interest rate, and the appraised value of your home.

What You Get From A Reverse Mortgage Loan

When you take out a reverse mortgage loan, you have three options of getting your money:

Line of credit, which let you take money from your reverse mortgage account as you need it. This is similar to HELOC, but without immediate loan repayment requirement.
Regular monthly payments, which is similar to monthly mortgage payment in reverse or an annuity.
Lump sum payment, in which you get the total amount of the loan upfront.

Some lenders will also let you choose any combination of these payment plans. The amount of cash you can get from a reverse mortgage generally depends on your age, your home’s value, location, and the cost of the loan. Older borrowers with more equity in the home generally qualify for a larger loan.

Reverse Mortgage Lenders

There two main types of reverse mortgage lenders — private sector and public sector:

Private sector reverse mortgage lenders are banks, mortgage companies, and savings associations. These private loans can be used for any purpose, but are generally more expensive.
Public sector reverse mortgage lenders are your federal, state and local governments. For example, the HUD’s Federal Housing Administration (FHA) offers a reverse mortgage program called the Home Equity Conversion Mortgage (HECM). HECM is federally insured and often provide much greater loan advances than other reverse mortgages. However, there are usually some restrictions on the use of these public sector loans — e.g., must be used to pay for home repairs or property taxes.

The Costs of Reverse Mortgages

The total cost of your reverse mortgage depends on your lender. In general, a reverse mortgage will cost you less with public sector lender than a private sector lender. Commercial reverse mortgages are usually very expensive and include a variety of costs — i.e., higher interest rate, application fee, appraisal fee, credit report fee, origination fee, insurance, monthly servicing fee, and other closing costs. These costs usually can be paid as part of the loan, which mean your loan balance will increase more than what you get in cash.

In addition to the obvious, there are hidden costs that you must consider:

Appreciation – Some reverse mortgages come with an equity-appreciation or an equity-share provision. This usually gives you slightly higher advances, but you could lose some or all of the home price appreciation.
Unexpected changes — If you are forced to sell your home or have to move to a long-term care facility, you’ll be forced to end your contract and repay the loan in full.
Counseling – There are also unscrupulous lenders or advisors that will charge you expensive counseling fee to walk you through the process of getting a reverse mortgage. If you need counseling, find an independent HUD-approved expert or hire a fee-based financial planner or CPA — not a counselor affiliated with a bank or lender.
Federally insured loan – In most cases the best choice is to work with HUD’s FHA through the HECM program. When you work with the FHA, your reverse mortgage is federally insured and your are guaranteed that the loan advances will continue, even if your lender goes bankrupt or your home’s value drops.

One way to better understand the costs is to use a reverse mortgage calculator, for instance one provided by AARP or NRMLA.

Advantages and Disadvantages of Reverse Mortgages

The article wouldn’t be complete without covering the major pros and cons of reverse mortgages.

The Pluses of Reverse Mortgages

No immediate loan repayment (probably the biggest factor for borrowers considering a reverse mortgage)
Readily available source of cash
Because a reverse mortgage is a loan and not income:
- No income taxes due on the money you received
- No reduction of Social Security benefits
No capital gains tax because there’s no sales involved

The Minuses of Reverse Mortgages

Reduces equity in your home
Loan must be repaid when the termination conditions are met
Depending on the contract, you may not get the full benefit from additional increases in the value of your home
High interest rates and closing costs
Reduces estate to leave your heirs

Summary

Just like any other financial products, a reverse mortgage could help you achieve your goals and give you the financial freedom needed — or it could be bad for your finances. The only way you can make better decision is to learn as much as possible about various financial products, their pluses and minuses, and chose the ones that best fit your needs.

More Reverse Mortgages Information

The subject of reverse mortgages is rather complicated, especially when you are dealing with different lenders who offer different options and have different requirements. This article only covered the basics and you should seek out additional information. Here are some resources that you can start with:

U.S. Department of Housing and Urban Development — search for “reverse mortgages”
AARP Reverse Mortgages Center
Reverse Mortgages Demystified
FTC: Reverse Mortgages

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Online Savings Banks Lower Interest Rates

Fri, 06 Feb 2009 05:56:10 +0000

This is one of those times that I wish my money were in a 5-year certificate of deposit instead of a high yield savings account. About a week ago, I got news from WTDirect that they lowered their savings account interest rate to 2.81% APY. Then HSBC Direct followed suit and lowered their online savings interest rate to 2.45% APY. And just tonight, I got news that Etrade Complete Savings Account interest rate will go from 3.01% APY to 2.50% APY effective February 2nd. I think it’s time we stop calling these savings accounts high yield.

This prompted me to look around for other options. The first stop was MoneyAisle CD and High Yield Savings Auction Site. According to MoneyAisle, I can move my money to First Trade Union Bank’s High Yield Savings and get 3.25% APY. Alternatively, I can open a 12-month CD with Flagstar Bank at 3.25% APY. I am not familiar with these financial institutions, but both of them are FDIC insured so my deposits are safe up to $250,000 per bank.

Note: auctions were based on a $10,000 deposit.

I also check out BankRate.com and it looks there are a few banks that offer above 3.25% APY for the high yield savings. Treasury securities interest rates are also very low right now. Looks like Lending Club is the only one paying decent interest rates; however, I have to keep telling myself that peer-to-peer lending is not as safe as high yield savings and CDs because of the default risk. And the default risk could rise significantly if the economy continues to weaken.

Are you affected by these interest rate changes? What are you planning to do?

This article was featured in the Carnival of Saving Money at Deposit Account.

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Weekly Highlights: January 29, 2009

Fri, 06 Feb 2009 05:56:10 +0000

Earlier this week, I wrote that FreeCreditReport.com is not free, and promptly got a personal finance lecture from Abigail at I Pick Up Pennies. She said, “If you’re not clear why a site needs your credit card information is needed, don’t give it out.” She also said that I should be reading and re-reading Terms and Conditions carefully before signing it. Guilty and guilty. Yes, she’s absolutely right about these points. May be FreeCreditReport.com is more transparent NOW, but back then it wasn’t very obvious. Anyway, thank you for the feedback Abigail.

Highlights

Dealing With A Job Loss: What To Do When You’re Laid Off at Bible Money Matters — A great and timely resources. I’ll be bookmarking this one because I may need it later this year…unfortunately.
Secondary Income: The Shoebox Money Chronicles at Finance Your Life — I always make me feel good to positively affect someone. Here’s a success story about how one of my article helped someone reached a financial goal.
52 Ways to Make Extra Money at Prime Time Money — I haven’t made any list for a long time, but here is a good one on making extra money.
Should You Cash Out Your 401k? at Good Financial Cents — Here’s another take at explaining why you should not cash out your 401k.
5 Legendary Investors Whom You Are Sure to be Interested In at Investing School — Learn more about the 5 legendary investors: Warren Buffet, Jim Rogers, Peter Lynch, Bill Miller, and Benjamin Graham.
100 uses for Vinegar at Wide Open Wallet – There is nothing greater than the power of human imagination. If you can think of 100 things to do with vinegar, imagine what else you can do with other things.
How to Make a Price Book at Green Panda Treehouse — You won’t hear me talk much about price book here, but this is a good article to read if you’re interested in saving money.
Avoid the Worry- Don’t Just Pay Bills on Time, Pay Them Early! at Think Your Way To Wealth — I used to pay my bill at the very last minute. Not because I don’t have money, but I want my money to earn as much interest as it could before going somewhere else. Now that I am older and life is a little more complicated, I pay my bills right away so I don’t forget.
Financial Crisis at The Filipino Entrepreneur — A nice follow up to my article about the global economic crisis.
Job Loss, Pay Freezes, and 401k cuts at Passive Family Income — Another perspective on the economic crisis, career, and passive income. This article could have been written by me. That’s how similar our situations are right now.

Ask The M-Network

Here are a few Ask The M-Network articles that was published recently.

Frugal Business Clothes Shopping at I’ve Paid For This Twice Already…
Health Savings Accounts with High Fees at Cash Money Life
Should I do a balance transfer? at Gather Little By Little

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What Is An Inverse ETF?

Fri, 06 Feb 2009 05:56:10 +0000

Inverse ETFs are a class of ETFs that rises in value when their underlying asset falls. For example, the ProShares Short QQQ ETF (whose underlying asset is the NASDAQ) will rise, if the NASDAQ falls. So, if you expect companies in the NASDAQ to perform poorly, you could buy the ProShares Short QQQ. Recently, Inverse ETFs are gaining in popularity because the overall sentiment of the market is bearish, and everything seems to be going down (except the unemployment numbers).

Types of Inverse ETFs

Although Inverse ETFs are a relatively new phenomenon, there are already many Inverse ETFs that cover almost all major indices and sectors. This means you can pick a class that you are bearish on, and buy an appropriate Inverse ETF. For example, if I think that the financial sector is doomed, and I want to go short on the whole sector, I can buy the ProShares UltraShort Financials ETF, which bets against the Dow Jones U.S. Financial Index.

Similarly, there are other ETFs that short the Consumer Services Sector, Industrial Sector, Technology Sector, Oil and Gas Sector and also other classes like Emerging Markets, etc. You name it, they have it.

Inverse ETFs Can Be Leveraged

Thanks to Lehman, leverage is no longer a financial jargon, but has entered the lexicon of the common man. Many Inverse ETFs are leveraged and aim to return twice or thrice the fall in the index value. For example, ProShares UltraShort Financials ETF gains 10%, if the underlying Dow Jones Financials index falls by 5%. The ETF will gain twice the amount that the index falls, and vice versa.

One way of doing this is by employing leverage. However, this is quite dangerous because the risk of counter party default is very high in today’s economy. And there’s also a bigger risk with leverage when combined with another phenomenon known as Daily Returns.

Inverse ETFs Seek Daily Returns

Daily Returns mean that the fund value at the end of each day becomes the base value of the next day. Suppose, you invest in an UltraShort Inverse ETF, which aims to return twice the fall of the underlying index, a hypothetical situation can look something like this:

Day	Index	Inverse ETF
1	100	100
2	95 (down 5%)	110 (up 10%)
3	100 (up 5.26%)	98.42 (down 5.26 x 2 = 10.52%)

Basically, the index didn’t move at all after three days, but you lost money! I have taken an example in which the ETF loses money (just to drive home the point), but you can make money with zero change in the underlying index in a given period as well.

Inverse ETFs Are Not Meant for Hedging

Be wary of using leveraged Inverse ETFs to hedge your position, because leveraged ETFs are not good for hedging as explained above.

Inverse ETFs Are Ideal for Short Term Trading

Inverse ETFs are best for short-term trading, if you have a bearish view on a particular segment in the market.

Some other benefits of Inverse ETFs:

You can short the index, but are exposed to only the amount you invested in the ETF.
You don’t need a margin account, which is normally needed to shorting.
You don’t need to buy fancy options in order to take a bearish view of the market.
You can take advantage of the volatility of the market.
You can buy a leveraged Inverse ETF, and increase your odds of a large profit with a small loss.

Bottom line

If you have a bearish view of the market, and want to trade short-term this product is good for you. However, if you shun volatility or if you are more of a long-term investor, then you should not dabble in this product.

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Carnival of Personal Finance #127 - Wonders of the World

Portfolio Rebalancing and Buying Underperforming Assets

Fri, 06 Feb 2009 05:56:10 +0000

This article is part of the Ask the M-Network series. The question in this article reference my prior article, Everything You Ever Wanted To Know About Asset Allocation. The question is about how an investment portfolio can become unbalanced and why should you buy more underperforming assets. Here is Botong’s question:

Hi, I was just reading your article on asset allocation, and I don’t understand this paragraph.

This is where the magic happens with asset allocation. When your allocation shifted from it’s original percentage, you are selling some of the assets that have been doing well and use that proceed to buy more shares of assets that have been underperforming to restore the original percentages. This is basically a “buy low, sell high” technique.

Two questions:

How does the portfolio become unbalanced in the first place?

Why buy more underperforming stock? How do you know they will regain performance?

Here’s a response from Mrs. Micah:

Great questions. 1) The portfolio becomes unbalanced when one asset outperforms all the others. Suppose that I have a very simplistic asset allocation of 50% stocks and 50% bonds. In the last year, let’s say that my bonds did decently but my stocks crashed. Now when you look at the overall money in my investing account, 70% of it is in bonds and 30% is in stocks (bonds didn’t increase by 20%, but I have less money overall such that that the original 50% plus its earnings now represents 70% of my total portfolio).

2) It’s important to distinguish between underperforming assets (individual stocks and bonds) and their asset classes. This was a bad year for stocks, mutual funds, and index funds. Does that mean that you shouldn’t ever buy them again? No. In other years, stocks and funds have brought in great returns, the market is cyclical that way. Buying more while the class is underperforming is actually the buy low part of the “buy low, sell high” goal that most investors have (or buy low, hold forever, sell higher).

In a year when stocks are a runaway success, it’s also important to rebalance periodically. That way, you don’t end up with 80% in stocks and 20% in bonds in a year like this one.

When it comes to underperforming individual assets (stocks, specific funds, etc), you shouldn’t throw good money after bad by buying more. Just because you invested in them before doesn’t mean that it’s a good idea to continue investing in those particular ones. You have to re-evaluate them the same way you did when you first bought them before you buy any more shares.

Here’s a response from Patrick at Cash Money Life:

Mrs. Micah hit the nail on the head, especially regarding why the portfolio became unbalanced in the first place. The various parts of the market rarely move at the same pace, so a balanced portfolio is bound to become an unbalanced portfolio over time.

Regarding your second question, “Why buy more underperforming stock? How do you know they will regain
performance?” the answer depends. Underperforming may mean “undervalued,” or it may mean “Bad! Stay away!”

The key to this is to look at the investment as if it were a new investment. Would you put money in it now if you didn’t already have money in it? Do you see value in the investment? This may be a difficult question to answer if you are investing in individual stocks, but if you are investing in an index fund, then you may just be buying the entire market at a discount. Even though the market is down roughly 40% over the last few months, now may be a good time to invest — so long as you are investing with a long term goal.

Here’s a response from Plonkee at Plonkee Money:

Yep, everything Mrs Micah said is right, and then Patrick.

Usually, your asset allocation doesn’t allocate assets to individual stocks/funds — that’s generally where the good money after bad comes in. But in general, if stocks are cheap now they’ll be expensive in the future and so on, and you want to try and maintain a certain asset allocation. At your stage your desired asset allocation for retirement investments shouldn’t change much over say 5 years.

Please remember that our answers are opinions and should not be considered professional advice and we assume no responsibility of any kind. Please consult a certified financial expert as needed.

Do you have a question you would like to have us try to answer? Send it in to Ask The M-Network!

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Cash is liquid. Is barter?

Fri, 06 Feb 2009 05:56:09 +0000

We know that when we consider the liquidity of an asset cash is number 1. Of course the flow of that liquid is generally out. Like water running downhill cash goes out of the business with ease, it’s getting that liquid uphill and into the business that requires ingenuity.

Barter is different. Finding a buyer willing to purchase your goods or services using barter dollars is not difficult. After all who doesn’t want to purchase something with little to no cash out of pocket?

So barter can flow into your business with ease, like water running into a valley, but getting it to flow up the valley wall to purchase what you need for your business can be a challenge. After all not everyone participates in organized barter.

Although a barter dollar or trade credit is taxed the same as a US Dollar you cannot pay your taxes with barter dollars. The descrepency between a barter dollar and a cash dollar is obvious; cash is easier to spend and more difficult to acquire while barter dollars are easier to acquire yet more difficult to spend. This is due to the fact that not everyone will accept a barter dollar as means of payment for goods or services rendered.

What does this mean for the trader?

Well the first thing it means is that in order to barter successfully you must have a plan. You should know how and where you will spend you barter dollars before collecting large sums. You need to account for the less liquid state of the barter credit and adjust your plan accordingly. Rather than looking in your barter account with thousands of credits and calling your broker asking for x y or z. Call your broker and find out what is available, if you find something that you want or need, then proceed to sell your goods and services to purchase that item.

Another option is the barter credit line. Some barter companies offer their clients a credit line. This can be a valuable tool in properly utilizing barter. Remember barter and cash are different, and remember how. Barter credits can be harder to spend yet easier to acquire. So credit lines can be used more liberally in the barter world due to the fact that getting the credits to pay them down would be easier that getting cash to pay down a cash credit line. Look for interest free barter credit lines for an even better solution.

Also remember that the goods or services that you are interested may not always be available in your barter system so use your credit line to make the purchase while you can. Then work with your exchange to market your offerings to the barter network being sure to note before hand the amount of barter work your business can handle in a given month.

Barter and cash are similar in many ways and they differ in many ways. Understanding how barter and cash differ in liquidity can help immensely in successfully utilizing barter to benefit your business.

Posted in Uncategorized Tagged: barter, barter exchange, cash, liquid assets, small business

Test driving Google Chrome on older hardware

Fri, 06 Feb 2009 05:56:08 +0000

So for the last couple of weeks I’ve been test driving Google Chrome on an old laptop running windows XP. A Toshiba Tecra 8200 with a 750mhz cpu and 512mb ram. This laptop has been working overtime offering up web pages as a development system with apache installed…. so the first thing I noticed was Google Chrome was quicker at loading localhost web pages than firefox…. a lot quicker.

Not exactly a scenario that most people with older hardware find themselves in! So what about general browsing of the internet? Well ‘jolly’ good also! Some content rich blogs for instance with flash banners and pictures littered over the screen are smoother to scroll through.

Then twitter! Indeed I am a twitter user and with firefox found typing updates painful on my old laptop. Reminding me of the days of using mainframes via a very slow modem and waiting for the updated inputs to actually be processed…. you know…. type one character and wait for it to be displayed or type a series and hope you didn’t make a mistake! Again Google Chrome works smoothly with twitters ajax system on my overworked old laptop.

I intially thought I wasn’t going to get used to Google’s display. It shows in a new tab a selection of my most visited web pages for me to choose from. Being a chap who generally just uses bookmarks, I didn’t see the point. Yet obviously there are certain pages or sites I visit more often than most and I’ve gone a couple of days at times without even using my bookmarks.

Now sorry folks, I have not used Google Chrome for https, ftp etc. So can’t talk about security or ftp transfers etc. However for breathing new life into older hardware running windows, I thank you Google. Now I can’t wait for Google’s linux port of Chrome to use on my primary machine and indeed older linux systems.