AskDong

I’ve alwasy been an advocate of selling stuff on Craigslist or Ebay. Reselling items is the oldest, and still the most effective way of recycling. I just sold my TV. I’ve been thinking about selling my TV for the last year, and replacing it with an LCD. It was 27 inch flat tube TV weighting a few thousand pounds (or so it felt). I sold it for $100. A comparable new Flat tube TV would cost between $200-$300. The TV was in great condition, and about 4 years old. I was able to get it sold  and picked up in less than a day.  I believed I priced it appropriately, and got an offer without any haggling. When selling stuff on Craigslist, I’m a big believer in unloading items quickly. It shouldn’t be about getting the best price, but getting a good price and transacting fast.

Now I have empty space in my tv cabinet. Ideally, I would like to sell my cabinet and get a wall mount LCD, but given I’m renting and don’t expect to be my in apartment another year, I’m ambivalent of about going through the hassle and expesne of doing a wall mount. I want a TV that can fit in my cabinet (32 inches, or possibly a slim 37 inch tv), and supports 720P resolution. I don’t need 1080i or 1080p. While HD-DVD and Blueray both support upto 1080p, I don’t have any immediate plans on getting either types of players (especially before one format clearly becomes the standard). Besides, I’m looking at this current TV purchase to be one that holds me over for 2-4 years rather than the TV I purchase for the rest of my life.

My plan right now is to go to Costco and pickup a 32 inch Vizio LCD TV.  Vizio is basically a no name brand company that makes cheap flat screen TVs.  Between them and Westinhouse (another no name company that co-opted the Westinghouse tag) they have nearly a quarter of the flat screen TV market.  Costco lists a 32 inch Vizio at about $600. On Craigslist, people try to sell their brand name 32 inch (and smaller) LCD TVs for any range between $500-$1000. The problem is flat screen TV prices have come down so much that people offering their “old” LCDs for half of the purchase price are being outpriced by new TVs.

I’m semi-actively looking around to buy real estate. I don’t have broker and don’t have plans on getting one at the moment. I’m not pre-approved. I’m not even sure exactly what I want to buy. I’m a tire kicker. I go to open houses, and take notes. I think everyone who is at all thinking about buying should be doing some research at all times if they’re anything like me. I purchased a condo 5 years ago. I rent it out now. I’m generally pretty happy with the purchase, but didn’t do everything right when I picked it out. On my next purchase, I want to make sure I get exactly what I want for the price I want. Currently renting in Boston is actually more economic than buying - hence no rush on my part to buy a place, and it’s not like the housing market is hitting new highs.

• Redfin.com
• Zillow

When I first discovered Zillow, I was in love. Zillow is fantastic for comparing real estate in your neighborhood, but it’s not designed to find properties. Zillow is great for window shopping but not actual buying. Redfin.com on the other hand was designed to help match buyers with properties. If it weren’t for two major shortcomings, Redfin would be enough for me. Redfin does not allow me to search for open houses. Redfin also doesn’t let me search specifically for multifamily homes. While I’m not exclusively looking to buy a multi-family home, I’m certainly interested. I’m also interested in Condos. I want to be able to segment my searches by those two categories

While I’m a fan of both of those sites, I find that I still use Realtor websites.

• Realtor.com
• ZipRealty.com
• ColdwellBanker.com/NewEnglandMoves.com

Realtor.com I actually find the most useful. Both ZipRealty and Realtor.com allow me to can save multiple searches into one account unlike the Coldwell Banker site.  This allows me to login to my account quickly look for a multifamily in Cambridge (the city on the other side of the river from Boston), and then just as quickly search for condos in Boston. Personally I prefer the Realtor.com website, and the fact they don’t assign an Real Estate agent to you upon registration. The only problem with Realtor.com is that I still can’t find open houses. From my limited research, I’ve found that open house listings don’t seem to be shared.  Coldwell banker has a large market share in the Boston area and as a result is the best site for me to find open houses.  However for me to find all open houses, I need to visit multiple Realtor websites.  While there are a number of sites that purport to list open houses, I found them ineffective.

Right now might be a great time to buy TIPS, especially in a tax advantaged accounts such as Roth IRA or 401k.   For those who aren’t familiar with TIPS.  TIPS are Treasury Inflation Protected Securities.  So what are they?  They are U.S. government bonds similar to the 2 Year Note or 10 Year Bond offered in 5,10, and 20 year maturities.  The difference is unlike regular government bonds which have a fixed interest payment, the “interest” payment on TIPS has two parts, the “regular” interest and an inflation portion.

The regular interest portion behaves mostly like interest on any other U.S. Bond.  The payments are made semi-annually.  The tricky part is that the underlying “face” value of the bond varies.  Typically a bond with a face value of 1000 will have it’s interest payments, say 5%, based on that face value.  Hence annually the interest payment would be $50 on a $1000 bond.  With TIPS that face value is adjusted for inflation.  So if inflation rate 5% in one year, the interest payment instead of being 5% of 1000, would be 5% of $1050 or $52.50. $1050 is the principal amount adjusted up to reflect the 5% inflation that has occurred.

The problem with bonds, and especially TIPS is a problem of taxes.  Even though U.S. Government issued securities are exempt from state and local taxes, you still have to pay federal taxes on them.  This is a problem with all bonds, but especially a problem with both TIPS and Zero Coupon Bonds, bonds that do no make annual (semi-annual) interest payments.  In the case of the Zero Coupon Bond, all implied annual interest is effectively paid out when the entire bond matures.  However taxes on that implied interest must still be paid even though the Bond itself makes no annual interest payments.  In the case of TIPS, taxes need to be paid on both the interest payment, and the principal adjustment.  Like the interest on the zero coupon bond the principal adjustment does not actually become realized until the bond matures.  As a result, taxes need to be paid on income that never actually gets distributed in that year.

So why am tipping towards TIPS?  As I’ve indicated before I’m concerned with the health of the U.S. Economy even with the half point cut the Fed made earlier this September. I’m about as invested (in the stock market) as I want to be given the prevailing economic conditions.  I even took some steps to hedge my exposure to the stock market in August.  Those hedges haven’t worked out so well, but that’s what hedges are suppose to do (or at least that’s what I tell myself).  As a result I have some cash in my IRA account sitting in a money market fund.  Inflation despite relative benign numbers as of late, remains a substantial risk especially if the Fed continues to cut rates.  By putting my money into TIPS, I can protect myself a bit from both inflation risks, and interest rate cuts.  TIPS like regular bonds appreciate when interest rates go down.  Given that there’s a decent probability that rates which might lead to higher inflation, TIPS are an excellent way to take advantage ever so slightly both of those risks.

Investing in TIPS is not a no brainer though.  There are many people including myself who are skeptical of the use of the CPI (consumer price index) as the best gauge of inflation which happens to be the index that TIPS use.   I would also be very hesitant to invest in TIPS in any kind of taxable account or as a primary investment strategy.  In taxable account, taxes eat away at the inflation protection.  The CPI could be 10% and the TIPS adjusts by 10% just to keep up, yet after taxes of 30%, the investor is down after adjusting for inflation.  Also for most individual investors the best way to invest in TIPS are through bond funds such as VIPSX (Vanguard), FINPX (Fidelity), and PRRIX (Pimco).  I actually haven’t done much research into the different funds as I make my inflation protected investments through my 401k which only offers one option, a flavor of the Vanguard fund.

You know that guy. You work with him. You hear him working the phone. Sometimes I’m that guy too. Who is that guy? He’s the guy who’ll spend 2 hours fighting a $20 fee. His time measured by how he’s paid might be much closer to $70 an hour. He might be worth over a million dollars, but he’ll fight tooth and nail to get a surcharge removed, or a fine forgiven. He might even spend hours bargaining for an extra $50 when purchasing a car. The question is, do we want to be that guy?

Yes:
There’s no question that the squeaky wheel gets the grease, and grease is good. I probably spend a few hours a year trying to fight extraneous charges. Sometimes it’s quite easy as it was when I rented a car in St. John and I was double charged my $100 deposit.  All it took was two phone calls, and I got the extra $100 credited back to my card. There are low hanging fruit that need to be plucked.  It’s always worth asking, the question is do you relentlessly pursue?

No:
Sometimes you can spend hours and have countless exchanges to no avail. The best example of this was a telephone bill I received after I canceled service about 5 years ago. I spent at least 1 hour on the phone.  Sent around 6 emails.  Sent two physical letters.  I never paid my bill, but the company never admitted it’s error.  For all I know I was sent to collections on a $9.37 charge. I would gladly trade $9.37 for the two hours of time I spent on the whole endeavour, and the potential damage to my credit score.

Maybe:
Obviously there’s no one answer on if you should spend your time fighting the Man or the Woman. Every situation is different, but from what I’ve learned it’s important to go into every situation with a preset of idea of how much time and effort you want to spend.  Like anything, it’s also important to both understand the specific dynamics and have an exit strategy.  For instance my biggest problem when dealing with the Telecom company was my inability to get a hold of anyone who had any real decision making power.  That’s also why it’s never an effective strategy to get mad.  Anger is rarely effective.  Getting mad at a poor customer service representative rarely leads to results. This is not to say that you shouldn’t clearly make your needs heard, but do so nicely. Ask for a manager nicely. Don’t make threatening demands. Representatives are trained to block, but instead of getting irate, just ask how it’s possible to get around those blockades. Also with my disputed telecom bill, I failed by not having an exit strategy. I should have paid the bill to avoid any potential credit damage. Had I wanted to continue to the fight I still could’ve done so even after paying the bill. Risk vs reward always needs to be gauged.

Reading BussinessWeek at the Gym during my visit last week was a treasure trove of information. In addition to learning about Chuck Feeney, I learned something new about the Mortgage Deduction that I didn’t know about. Of course this piece of information is less than beneficial.

Most people typically think of all the mortgage interest as deductible, assuming it falls under the 1 million dollar cap. However this is not true for the many individuals who have refinanced to take cash out of a highly appreciated home. Refinanced mortgage interest is only deductible to the amount of the original mortgage.  For instance let’s say I purchased a house 20 years ago for 100k with a 80k mortgage, and now it’s worth 500k.  I then do a cash our refinance for a total of 300k.  I can only deduct the interest on the original 80k, not the new balance of 300k. However, according to the article in BusinessWeek and my own reading of the IRS Publication 936, it’s possible to deduct the interest on another 100k if it’s in the form of a second mortgage, or home equity line.

I’m generally not a fan of the cash out mortgage, and this is yet another reason not to do it. As is, I don’t advocate taking a course of action purely because of tax issues, and too many people push taking out large mortgage because “it’s deductible.” Taxes are an important part of the financial decision of making process and tax consequences should shape decisions. Decisions should not however ever be made solely to avoid taxes.  In this case taking a cash out mortgage may not even be the tax deduction boon one would think.

Also, I’m under the Big Tent at My Two Dollars in the 106th Carnival of Debt Reduction, my article on Mary’s Ann’s Makeover is featured.  Please take some time to visit David’s blog, My Two Dollars.