Archive for April, 2007

When not to pay off your mortgage quickly

Sunday, April 29th, 2007

This is an interesting article that argues a 6% mortgage is really like paying 4.5% interst due to tax breaks. Instead of paying off that loan some (but not all) people are better off investing the money. This is especially true for people who have to choose between maxing out a 401k and making extra mortgage payments.

The right move for GE

Saturday, April 28th, 2007

Peter Lynch wrote that once companies reach a certain size, their stock has very limited potential. A company like GE simply can’t double their earnings so how can the stock price double?

Here’s an interesting article on GE, a pretty boring stock that hasn’t done much in recent memory. The article recommends spinoffs and I think that’s the way to go – they often create immediate shareholder value.

For example I remember when Eaton (ETN) spun off Axcelis Technologies (ACLS). Eaton shares stayed the same and ACLS were gravy. I don’t see why the same couldn’t happen if GE spun off its real estate or finance parts.

Advice for new real estate developers

Wednesday, April 25th, 2007

Here’s an interesting article with advice for new reat estate developers. This was the most interesting part to me:

One way to begin is with four-unit rental properties. These properties can be financed with 20 percent down payments and single-family mortgages. If your credit history is good, you should be able to obtain financing at attractive terms.

You should be aware, however, that such property in the D.C. area is currently rather expensive to buy relative to the rental income it generates. Prices are much lower in Baltimore, Philadelphia and Richmond, but managing properties from a distance can be difficult.

Some actual numbers would be helpful here, but it’s good to know which markets show better rental income relative to your investment.

If you are moving to Colorado then some Colorado real estate resources could be very helpful, like a Colorado home finder or various other tools and articles on real estate in the area, whether you’re interested in Denver real estate or some other areas.

Americans jailed in Indonesia and Kazakhstan = tough environment for investors

Tuesday, April 24th, 2007

Investors need to think about where their money is as Americans are running into legal trouble in places like Indonesia where Richard Ness is about to learn the outcome of his trial:

Foreign investors are already anxious about doing business in Indonesia, which boasts some of the world’s largest gold, tin, copper and nickel deposits but is also considered among the most corrupt nations. Red tape and rising prices add to their concerns.

There’s also trouble in Kazakhstan where Mark Seidenfeld, a 39-year-old American telecommunications executive who’s probably more innocent than Richard Ness was jailed in Siberia. Apparently in Kazakhstan the courts work to help locals with connections:

“Of course we have a judicial system that can be abused,” said Oraz Jandosov, co-chairman of Ak Zhol, an opposition political party, and the former chief of the central bank. “Our courts are not only corrupt but competence is an issue. Not only can Americans be squeezed but vice versa. It’s the natural result of the country’s current political system.”

newspapers being acquired by real estate moguls

Sunday, April 15th, 2007

I thought this was an interesting look at the recent acquisitions of newspapers led by real estate moguls. Interestingly, these seem to be fairly low-risk deals:

Zell is gaining effective control of Tribune in a complex deal that calls for him to inject only $315 million of his own money. By converting it to employee stock ownership, the company also will no longer be subject to corporate income taxes that now total hundreds of millions of dollars annually, making it easier to pay off $5 billion in new debt.

With all the talk about newspaper stocks, I want to take another look at Washington Post stock.

Perspectives on Housing’s best and worst 25 real estate markets

Friday, April 13th, 2007

First, take this stuff for what its worth – when I did a News search for “housing predictor” I didn’t get many results. I published links to the two useful ones below. Most results were press releases and that’s often a bad sign as the company may be trying to create hype when there really isn’t much interest.

But what did I find? Philadelphia is just happy not to be listed in the bottom 25. You have to wonder if they need to fix their pension problem before we see real growth there.

San Diego was in the bottom 25 (2nd worst) – expects about a 13% decrease.

Luckily for San Diego, Miami was seen as the worst housing market (although single family homes under 250,000 are expected to perform comparatively well).

And of course, there’s always India.

Mortgage company error = no insurance on my home: legal advice please!

Thursday, April 12th, 2007

My mortgage company F’d up big time and I need legal advice?

My old lender was recently bought out. The new lender contacted me several weeks ago asking for homeowners verification, and for the policy info, which I provided. I received a letter from my homeowners insurance company last week (I’ve been with this company for 10 years) informing me that they had not received payment and my policy was due to be canceled within a week if payment was not received.

Since my policy is paid through my lender via my escrow account, I had a total cow. It turns out that the mortgage company sent the premium to the wrong insurer. I was on the phone with both my lender and my insurance company all week last week trying to get this straightened out and, at the 11th hour, it looked like my lender had cut a new check and overnighted it to my insurer.

I learned from my insurer this morning that my lender shorted the check $11 and my policy is now canceled. Now, as I said, I’ve been with this insurance company for 10 years and no other insurance company around can come close to touching their rates. If I’m forced to go with another insurer, wouldn’t my lender be liable for anything above-and-beyond what I was paying?

The underwriters at the insurance co. already extended the policy 1 week past the cancellation date and our lender screwed up a second time, causing the policy to automatically cancel. We have no insurance right now, and my lender is supposedly overnighting payment to get the insurance reinstated. I plan on getting an escrow statement ASAP to ensure that I’m not paying for all of this overnighting and canceling of checks.

I’m so freaking angry right now I can’t think straight – what would you do?

Answer #1: I had a similar situation a number of years ago and basically what happened is that the lender can cure the deficit with the insurance company, but the policy will start new from the point that full payment is made. Whatever time has passed between the cancellation and the re-instatement is a liability to you and there are two options. One, you can sign an affidavit that states that you have no claims and will not file any claims for the liability period and move on, or, you will have to pressure your lender into agreeing to cover any liabilities you incurred during that period. I chose the former because it was 10 days and I had no claims. If you choose the latter it could take a while as you haggle with the lender.

Answer #2: Insurers are usually forgiving when it comes down to these issues unless you have a prior history of claims against the policy. I would send them the $11 dollars and ask them to ensure the policy is retroactive to the renewal date so you have continuous coverage for peace of mind.

PS. I hate it when people at these companies screw up, and then we have to spend a bunch of time on the phone doing their job. I think we should get paid for our time and effort from the company that screwed up.

Answer #3: Something similar ahppened to me : Rob in Boston : 4/11/07 10:55 AM
basically I had to drive and hand deliver a check at the 11th hour so as not to get booted from the policy.

Answer #4: One better: My mortgage company was paying 2 insurance companies for a couple of years. In addition, they paid property tax on the wrong parcel for several years. I received a tax notice from my county, saying that I was 2 years behind. Anyway, my fault for not paying closer attention to my escrow payments, and in the end, I had to do all the legwork because the mortgage company really couldn’t care less. ABM-Amro is anyone cares to know.

Sorry, no advice there. But at least you know you’re not alone.

5 star ratings from Mornginstar and held by Berkshire Hathaway

Wednesday, April 11th, 2007

I wrote this one a while ago and forgot to publish it. Maybe it’s not finished but this is all it will ever be…

Here’s an interesting article that summarizes stocks being bought and sold by Warren Buffet’s Berkshire Hathaway. They go into a little detail on 5 that Berkshire hathaway likes and that Morning Star rates 5 stars. These are:

American Express (NYSE:AXP)
Johnson & Johnson (NYSE:JNJ)
United Parcel Service (NYSE:UPS)
Wal-Mart (NYSE:WMT)
Western Union (NYSE:WU)
White Mountains Insurance (NYSE:WTM)

I’m most interested in WTM and AXP for further research but for now I don’t own any of these directly. I do have about half my stock money in the S&P 500 index however…

Aftermath of Korea US FTA

Monday, April 9th, 2007

Before the US-Korea FTA I said that Korea would not and could not really allow free trade. Now that the agreement has been reached and the various industries have sounded off, I know I’m right.

While South Koreans are busy protesting in the streets and going on hunger strikes, American companies, especially the auto industry are complaining to anyone who will listen (but they aren’t in the streets). There are some who disagree:

Unfortunately, Ford and Chrysler don’t see the benefits. They, like the United Auto Workers, have said the South Koreans haven’t done enough. So have U.S. Sens. Carl Levin and Debbie Stabenow. General Motors is withholding comment.

Obviously, there must be a reson why Ford and Chrysler are lobbying against the FTA. Clearly they don’t think that business in Korea will pick up substantially even with the new tax system. Let’s say American car companies do twice as much business in Korea – they sell 10,000 cars a year instead of 5,000. Who cares?

Of course, GM might be in a better spot than Ford and Chrysler thanks to its acquisition of Daewoo:

GM Daewoo, created in 2002 after GM acquired the now-defunct Daewoo Motor, could be in a unique position to benefit from both ends of the deal. The company accounts for about 13 per cent of General Motors Corp’s total group production and exports some models, such as the Aveo, to the United States. The company exported 116,761 vehicles to the US last year.

The FTA doesn’ really change my stock strategy. It doesn’t turn me bullish on US automakers anymore than Ford and Chrysler are bullish on the agreement itself.

Philadelphia city’s economic mess from large pension payments could mean trouble for real estate

Sunday, April 8th, 2007

Here’s an article that says Philadelphia could end up in trouble like Detroit has gotten itself into because they spend so much money paying pensions there’s not enough left to run the city properly:

This reality prompted one veteran city executive who is familiar with the impending budget crisis to liken Philadelphia to a “Bos-troit”: a rapidly regenerating downtown, like Boston’s, ideal for affluent tourists and new-comers, but surrounded by square mile upon square mile of dying neighborhoods, impoverished residents and relentless urban ruin, just like Detroit. And that situation is probably not sustainable, either – at least, not for long. No matter how good it looks, Center City cannot survive if it’s totally cut off from the rest of a desolate, crime-ridden Philadelphia. That’s no better than living under a state of siege, even if you are enjoying the view from the balcony of a million-dollar condo.

Scared yet? The article mentions other problems such as a lack of affordable housing, and a relatively uneducated population. The author paints a very bleak picture of Philadelphia’s future.