J.P. Morgan Forced To Take Bailout Money?

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Former Senator Barney Frank was on CNBC today talking about Dodd-Frank act, but that’s not what interested me today. What interested me today was that Barney Frank said that both J.P. Morgan and Wells Fargo (via Wachovia) were forced to take the bailout money.

Former Senator Frank said that both banks did not want to take bailout money because they (the banks) said that they didn’t need it and that they were solvent.  Pretty much they were forced to take that money for the betterment of the country, and the world.  So those banks that realized the risk involved with CDOs and the whole sack of “you know what” back then did their part in helping solve the financial systemic crisis that the world was experiencing at the time.

J.P. Morgan then helped the world by purchasing the insolvent firms Washington Mutual and the Bears Stern assets.  So J.P. Morgan was wearing the big “S” on their chest, and what happens, the government decided to go after J.P. Morgan shareholders in the form of lawsuits because of the Bears Stern (and maybe WM) previous risky moves that J.P. Morgan saved.  And that’s what’s confusing me…  It’s kind of like a dog biting the hand that feels it no?  Or maybe you save someone from a burning building and they sue you because some other guy started the fire but you put it out.

I hear the Media and the “one percenters” complain about J.P. Morgan (and indirectly Jaime Dimon) taking the bailout (which they were forced to do), and then questioning Jaime Dimon, who by all accounts President Obama and Barney Frank support.

This is why I think that we live in Bizarro world sometimes.

I think there is so much misinformation and added confusion by large media channels and political advisors, not to mention comedy shows like John Stewart’s show, that the truth and reality of the such issues get lost and twisted, at least in my opinion.

I think that when sources like Barney Frank (a Democrat), come out and support a business (JP Morgan), then we are probably getting a pretty good picture of the truth on what happened…

That’s my two cents on why neither Jaime Dimon or the business J.P. Morgan should have any lawsuit brought against them for saving us.

Bests,

Don

 

Why Are Auto Insurance Rates Different In Some States?

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Every wonder why Auto Insurance Rates differ in some states?

Car insurance costs far more in some states than others. Insurance industry experts reports that average annual premiums range from $934 in Maine to nearly $2,700 in Louisiana. Rates also exceed $2,000 in Georgia, Michigan and Oklahoma. A variety of factors influence prices in each state.

State Laws

Rules about insurance and driving vary from one state to another. Some legislatures have established high caps on auto-related medical claims. Insurers reacted by raising premiums so that they could fully compensate injured motorists. States also require different amounts of liability coverage; this has a significant impact on the minimum cost of insurance.

Young and elderly motorists frequently cause traffic accidents. Some states test these drivers more rigorously when they obtain or renew their licenses. If a state confirms that vehicle owners have adequate eyesight and driving skills, the roads are safer and people make fewer insurance claims. This allows insurers to charge lower premiums.

Risk Factors

Severe weather and other natural disasters also affect car insurance rates. This is particularly true in the southeastern U.S. Drivers can expect to pay more in regions that regularly experience floods, hurricanes or tornadoes. Natural disasters primarily affect the price of comprehensive auto coverage.

People tend to pay larger premiums in states with high property crime rates. Insurers must consider local theft and vandalism statistics when they issue quotes. States with numerous urban areas often experience more crime. Some drivers avoid the extra cost by installing anti-theft devices; this usually results in an insurance discount.

A few of the states with cheap auto insurance simply have less traffic. For example, there aren’t many large cities in Vermont or Maine. This greatly reduces the number of traffic accidents. Motorists may need to avoid the occasional farm animal or pothole on a country road, but they travel at low speeds and encounter few intersections.

Competition

Drivers typically receive lower quotes when more auto insurance companies have to compete for customers. Favorable climates, regulations and legal systems attract insurers to certain states. A competitive market may also encourage them to offer extra bonuses, such as roadside assistance or pet injury coverage.

It may seem unfair that some drivers have to pay much more for insurance than motorists in other states. However, it’s important to realize that people who pay higher premiums are more likely to make claims and recoup some of their money. State law may ensure that they also receive more compensation.

Hope you enjoy this hash of why car rates vary from state to state!

Scott

 

Last Quarter Cash Flow Changes

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I’ve been overzealous in my desire to save and invest more this year!

My plan was to max out my both my 401k and my Roth IRA, but with a twist.  The idea was to use my employer’s ESPP to save for my Roth IRA (and this has been successfully done), but also to take more out of my paycheck for my 401k contribution, the thought being that I would max my 401k contributions so that we could breeze though Christmas since my 401k contributions would be finished in November.  Unfortunately, that’s not going to happen, and that is all part of financial planning.  I underestimated my expenses and overestimated my income (slightly) and now it’s time to make some end of year cash flow changes.  Luckily, I control the dials on my financial engines, and all I have to do is make a few small adjustments to put myself back on a track that is realistic.  Below are those changes!

Getting Paid for recycling

Cash Flow Changes

  1. I now plan on back off the amount I’m saving for my 401k Contributions by 1 or 2 percent.  This alone will make an instant and dramatic impact.  Since I was shooting to get my 401k maximum paid off in November, this really won’t affect me other than make Christmas a bit tighter.
  2. I already kicked up my withholdings for taxes at the beginning of the year.  This is an easy dial to adjust, I reduced the amount by $25 and that move freed up an addition $50 a month.  Not a huge number, but it counts.
  3. The most important one is my ESPP.  I’ve saved enough from it to cover my Roth IRA, so now I’ll be able to transfer the amount from my ESPP saving into my checking account to cover the rest of the year, and the bills next year in January for Christmas 2013.  Originally, I had hoped to use this money for investments, but it obvious that the original path is not going to happen now.

Cash Flow Thoughts For Next Year

My basic plan is that I’m going to throttle my 401k contribution percentage down by 3% to 5% less than what I’m currently saving.  This will make a big difference I believe.  Then midyear next year, I’ll reevaluate how I’m doing and then maybe adjust the amount up if all is going better than I believed or do whatever is needed to make life for my family good.

On the ESPP front, I will continue to use it as a forced savings account for both my Roth IRA, and then later for investments or more than likely for basic living expenses since this is what I have to do this year.

I think the above cash flow changes should put me back on track to free up the flow of money for the rest of the year.  If it doesn’t, then I’ll adjust my budget again next month.

Bests,

Don

Both Best and Worst Personal Financial Times This Year So Far

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“It was the best of times, it was the worst of times“, the quote from the book: A Tale of Two Cities by Charles Dickens best described my cash flow activity pattern for this year, so far.

Let me explain…

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“Best of Time” Financial Perspective

First, I now consider myself at the threshold of barely being in the “Upper Middle Class” as I wrote in my article called “My Personal Finance Pyramid Update Lower (Upper Middle Class)“.

I’m doing much, much better than last year in the stock market.  In fact, I’ve already beaten my “secret wealth goal” of increasing my by increasing my net worth this year by more than my annual salary.  In fact, I met this goal a few months ago before the market started to go sideways.  So a big booyah on the net worth increase for this year!

I’m trying to max out both my 401k and my Roth IRA for the year.  This isn’t an easy task, but so far I’m on track to do both.  While this is a positive action for the year, I have to admit, I’m really starting to rethink this goal.

While saving like a mad man, I’m also having my employer take out an ESPP contribution so I can earn that sweet 15% per quarter (not I said quarter, not year!) that program offers as an incentive!  Because of the bull market and my delaying my sale of the stock option, I’ve been able to achieve a bit more than 15% return on each quarterly contribution (not to mentioned that gain off of the money I reinvested after selling my ESPP options for the year).  While there is no doubt that the ESPP is sweet, I think it has more of an impact during a slow or even a bear market.  There would be nothing sweater than gaining 15% per quarter on the money than when the market is down 10%…

“Worst of Times” Financial Perspective:

So looks like I’m doing pretty good from the “Best of Times” piece above, and I am, no questioning it, it’s been a good year for everybody…

The main problem that I have is that I’m “Cash Flow” constrained.  Actually, cash flow constrained might be an understatement.  You see, each month I’m about 600 dollar short from break even.  Now a negative 600 hundred dollars cash flow adds up and hit one hard about… right now!  Yes, my checking account cash buffer has been depleted and it looks like I’m going to have to hit some of my investments to make it through the year!

Eating my investments, is definitely a negative, and feels a bit like I’m moving backwards (because I am).  Now I probably won’t need more than $2,000 to tide me over for the rest of the year, but I need to change my financial plans now instead of later, since it’s a self-induced financial problem instead of a spending/earning problem.

My next post will have a more detailed financial action plan, to reverse my cash flow stream, making it a positive flow again instead of a negative one.