Author Archives: Money Reasons

About Money Reasons

A offbeat personal finance blogger that comes from the tech world.

Icahn vs Ackman

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OMG, I just saw a life changing fight on TV!  The billionaire battle between Bill Ackman and Carl Icahn was incredible!

During my lunch break, I was watching CNBC and I lucky enough to see the live verbal fight (via phone) between Bill Ackman and Carl Icahn.  It was by far the most incredible thing that I’ve ever seen on CNBC!  Two billionaires with bad blood between them fighting in a way that we never see “the really, really rich” fight!

Both billionaires use similar technique in the stock market, so they are really too drastically different in the ways that they make money.  Amazing…

If you do watch the clip above, remember that emotions often make people say things that they wouldn’t normally say in their day-to-day communications.  Mr Icahn definitely got emotional about it when he called in when Mr. Ackman was dissing him on the TV.  Mr Icahn said things that I’m sure tomorrow that he’s probably regret.  Especially when he attacked the news reporter in the middle of the phone fight.

The gist of the billionaire battle was when Ackman was doing an online interview and started attacking Icahn.  Icahn heard and called in to defend himself.  Carl was fuming and came into the fight holding back nothing.  He was swearing and took the attack very emotionally.  Bill kept it very proper and didn’t swear, at least as far as I could remember.  Now just because Ackman didn’t swear doesn’t mean that he’s right or wrong (same for Ackman), but he protected himself from any future lawsuits.

I have to admit, I wasn’t happy when Bill Ackman announced his short as a big public event, to me if felt like he was going a pump and dump kind of maneuver.  After all, he’s in the stock (shorting it), and he tell everybody knowing that it will cause a flooding of sell trades.  This instantly makes him money, and thus seems like a pump and dump kind of maneuver.

While Carl Icahn doesn’t go as public as Bill Ackman, his moves still has a drastic effect on the market too.

I’m not here to judge, but based on the emotional response of Carl Icahn, I get the feeling that Mr Ackman used his education and the law to out maneuver Mr. Icahn in their feuding sometime in the past and Mr. Icahn, being tough, still has extreme dislike for Bill Ackman.  But really how knows.  Unless others come out of the woodwork that are reputable (like maybe a Warren Buffett) who support one or the other, we’ll never really know who is more likely right or wrong…

Again, amazing!  Watch the video, I’m pretty sure you probably never have seen anything like it.

Don

 

Dark Side of an HSA

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There is a dark side to the Health Savings Accounts (HSAs) that practically nobody mentions, and today I’m going to speak from my personal experience with this instrument.

Dark Side of an HSA

If you live on a middle class salary and have a family with kids, an HSA has one huge disadvantage.  It’s subtle and mostly affect those of us in the middle classes (for the rich this is a non-issue, and perhaps soon the poor too).  The Dark Side of an HSA is that you as an adult, and especially if you are a parent, don’t get proper medical treatment on “non-major” problems for fear that you’ll run out of money in your HSA before the company takes over the payments after certain money amount thresholds.  This fact makes you hold onto the money contributed to your HSA in case your children need the money instead.  As was the case in my Son wounded article.  Believe it or not, but the puncture wound that required stitches cost us over $2,000.  It was just him lying in bed unattended (except for me and my daughter) for hours and then maybe a 20 minute stitch job on the puncture wound.

After 5 years of participating in an HSA, I now have a few medical problems that I can’t kick by myself over for not getting treatment.  They are nagging injuries and in so non-life threatening, but not wanting to deplete all the money in the account, I wait for a year when one of my kids get a serious injury that I hope will never occur.  It’s a strange, quite queer feeling to be waiting for something that with all your heart you hope never happens… It is my own self imposed version of hell, and a very dark side of an HSA Account.

Ironically, I was going to switch back to a PPO this year so I could take care of some of my problems, but my employer totally did away with that option and now the only option provided by my employer is an HSA account.  Now I, as a member of the middle class, will receive less healthcare and yet at the same time more of my take home money will be spent (or saved) for my health.  In many ways, it’s the middle classes that are feeling the pain of the new Healthcare programs.  If I were a bit more wealthy, I’d be able to not worry about it, but with kids I am.  You see, I always put my kids first because that’s what responsible parents do.  And with both of my kids in very physical sports, I sit in limbo waiting from something that I hope never happens.

Perhaps I’m looking at this new HSA problem all wrong, perhaps this will push me into a higher income class out of desperation?  I have to think that the odds are against me though.  Anymore it seems like it become harder and harder to exist in the middle class.

Take a hard look at going the HSA route if you still have other options (which unfortunately, I doubt you’ll have if you are middle class and married with a family like me).

Good luck,

Don

Is it Okay for the Government to Cook The Books

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Business has it rough compared to the government!  So I have this question “Is it Okay for the Government to Cook The Books”?

First let me say what Businesses aren’t allowed to do!

  1. Manipulate the bookkeeping records to alter their financial statements.  In Accounting, this was called “cooking the book” or creating accounting, and this process was often used to change the bottom line depending on what a company wants their financial records to state.  It goes both ways, sometimes a company (especially private ones) want the numbers to show little profit so they don’t have to pay high taxes.  On the other hand, a company will inflate Sales and other income sources to make their stock more appealing to investors or potential buyers of the company.  Both forms of manipulation are against IRS rules and basically fraud (if my memory serves me correctly).  The excerpt at the end of this article sounds a lot like cooking the books to me.
  2. Now granted that I’m not a lawyer, I believe the employers aren’t allowed to borrow from the employee pensions plans that exist at the company.  I believe this is a no-no that history has proved to be a horrible move!  But ironically it’s not stopping the government from borrowing from the federal employee pension fund.  Oh, the federal employees don’t have to worry about their retirement nest because if there is a shortcoming in the “federal employee pension fund”, you can bet your bottom dollar that it would be a priority for the government to refund.  On the other hand, with Social Security… well we all know that state of that public (as in us) fund is doing.

Read the yahoo article titled “US taps pension fund to avoid passing debt limit” to read the full article, but below is the except that explains how it sounds like the government may be cooking the books?

WASHINGTON (AP) — Treasury Secretary Timothy Geithner says the government has begun borrowing from the federal employee pension fund to keep operating without surpassing its debt limit.

Geithner says in a letter to congressional leaders that the move will free up $156 billion in borrowing authority while Congress debates increasing the $16.4 trillion debt limit.

The government reached its borrowing limit on Dec. 31, but began using bookkeeping maneuvers to keep from surpassing it. Geithner has told congressional leaders that Treasury expects to exhaust those measures by mid-February to early March.

What say you?  It kind of reminds me of that old saying “Do as I say, not as I do”.

Don

My Secret Wealth Goal

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Okay, obviously this isn’t going to be much of a secret wealth goal soon, but here it is anyway…

My “Secret Wealth Goal” is to have a Net Worth amount that is larger than the total amount of my “After College” income amounts for each year that I’ve been working.

An example would be if you worked for five years after graduating, and had a salary that was 20k for the past five of those years, your “After College” total amount would be 100k.  So if you invested those past five years too, and your Net Worth was 50k, you would be 50% of the way to accomplishing my secret wealth goal.

sunshine

Now in my case, my “Net Worth to Accumulated Salary” Ratio is 37.4% (my house equity isn’t included in my net worth number).   While the 37.4% is nice, I’m more excited that my yearly investment amount is growing fast each year!  This year’s investment return plus the amount I contribute to my 401k, Roth IRA, regular brokerage account and “side income saved” should come to over 70% this year.

Obviously a more immediate wealth goal is to have my “investments plus contributions” vs my current “earned” income ratio be greater than 100%.  Until I cross the 100% threshold there is no way that I can conquer the “Net Worth to Accumulated Salary” Ratio.  Much like my mortgage payments milestones, I’m thinking of creating another milestone spreadsheet to track both of these goals.

Seems like an impossible goal huh, but it’s not.  As my investment income keeps increasing, there should be a turning point where my investment and contributions amount will pass my salary (earned) income.  While it will be an awesome day when my investment and contribution amounts surpasses my salary income, the big goal is when my investment amount surpasses my accumulated salary income.

Much like a “coming of age” test, at this crossover point I should be financially independent!

Bests,

Don