Peer-2-Peer Lending: Changes I'd Like to See at PROSPER.COM

Bottom line: I make three recommendations as to what Prosper should do to improve the lending experience.

(1) Offer IRA option... It's increasingly important to offer pseudo real-return investment alternatives.

(2) Provide metrics to grade groups, such as:

(a) Red/green light indicator next to groups to indicate if group's portfolio of originated loans as a default rate below or above Prosper.com averages. This is important to identify whether those groups screen applicants sufficiently (Indicator lights recommended b/c they provide a quick indication. There are obviously other ways to accomplish the same goal).

(3) Improve "search loan" filter to include:

(a) Lender rates greater than or equal to (enter value)

(b) Specific borrower credit characteristics (now delinquent, number inquiries last 6 months, etc).

(c) Include only those loans with picture(s) and write-up, while this may not have a material impact, it has an impact on the screening process experience.

PROSPER.COM

Just Bid On My First Two Prosper Loans (Yesterday and Today)

I finished bidding one half of my monthly allotment for Prosper loans. I deviated a little bit from my entering strategy in that I chose to bid on one loan where the credit rating was "E" signifying that on average, people with this credit rating default 10.4% of the time on their loans. The loan would pay a 21.5% interest rate and appeared to be an acceptable risk vs. reward spread.

The other loan applicant had an "A" credit rating signifying that they had an approximate likelihood of default of less than 1%. The interest rate on the loan was 10%.

Again, I deviated a bit from my strategy in that I bid each loan in equal amounts of $50. I chose not to do risk-weighted bidding amounts because I was only starting with $100 and wanted to dip my feet in the lending waters as early as possible.

In the end, my gut feeling on the loans are as follows:

Loan #6654 (A credit rating): Loan will probably run for nearly full 3 year duration (gut feeling)
Listing #7958 (E credit rating): I personally feel that the borrower will pay of this loan within the next 11 months or sooner.

You may not be able to easily see one of these two loans without signing in. You can bypass signing up for an account by clicking the lend tab and navigating to find "#7958" or #6654."

The blended (average) interest rate will be approximately 15.75% between the two loans.

You can follow my bids under my Prosper handle "WellVersed."

Wife's IRA Transactions: Bought BHP Billiton Today

As mentioned in a prior post, we set a $43.88 limit order for shares of BHP. Today, the order was filled at $43.85. I'm happy about the fill, even in light of China's interest rate hike.

Do people really think that China's growth will slow materially between now and the Bejing Olympics?

Will continue to let our mining stocks run.

The Silver ETF is Here: Starts Trading Tomorrow

It's time has finally come, the silver ETF from Barclays Bank starts trading tomorrow. I'll have to do some more reading to figure out my entry point.

Here's the article. The silver ETF will trade under the "SLV" ticker symbol on the AMEX.

Just Starting to Use Prosper Lending: Here's Our Strategy

Bottom Line: The wife gave her blessing for starting Prosper lending. Our first deposit to Prosper will be credited tomorrow (4/27). I outline our initial strategy for originating loans.

Entering assumptions:

(1) The funding date is the monthly due date for loan repayment

(2) Prosper’s 120 day default definition is modified to my own default definition of 15 to 30 days for the purpose of loan portfolio management and forming blacklists of Prosper groups.

Our initial strategy:

(1) Originate loans with funding dates of roughly the 1^st, 2^nd, 3^rd or 15^th, 16^th, 17^th of the month (borrower’s payment due date just afterthe 1st or 15th, typical pay-days)

(2) $200/month cap (my way of dollar cost averaging)

(3) Loan to only group sponsored individuals (marginal benefit of screened applicants)

(4) Develop a blacklist (based on groups sponsoring people who are > 15 days delinquent)

(5) $50-$100 loans only ($50 for highest risk, $100 for lowest risk)

(6) Originate loans to achieve an 8.4% real return after taxes, inflation, defaults and zero interest limbo periods. I roughly estimate the required rate at 11.25% (with no defaults and above 15% with defaults).

(7) Cease using Prosper (or re-evaluate required rate of return) if I experience a default rate greater than 1 out of 25 loans. Realistically, default rate should be less than 1 out of 50; however, Prosper has shifted the lending paradigm

(8) Loan to those whose monthly payment is at or below what I perceive to be an equivalent monthly car note for them. Thus, i'll avoid many loans over $10k. (IMO, individuals with larger loans are more likely to refinance).

(9) I will likely focus on loans for people with credit ratings of B, C and D

(10) Focus on loans to people with positive debt to income ratios

I do not yet have any spreadsheets to track effective yields on the loan portfolio. I’ll develop one or find one later.

For those of you who are unaware about Prosper, this is a site for consumer-to-consumer loans. The site utilizes reverse Dutch auctions for borrowers and lenders to meet and originate loans. The site's mechanism is somewhat similar to Ebay, yet a bit different.

** We've Updated This Strategy on the 21st of May. Here's the updated strategy. Recommend reading comments below before cycling to updated strategy.

I-Bonds Headed For a Plunge In Yield

Bottom Line: Yield is going lower. I would not buy I-Bonds until the fixed yield reaches high 2s or low 3s. An article written by Jeff Brown is posted to my blog. This article appeared in "The Record" out of Hackensack, NJ on 18 Apr 2006.

"After extolling the benefits of inflation-indexed U.S. Savings Bonds for years, I'm doing an about-face: Stay away.

Because inflation has been tame in recent months, new I bonds going on sale May 1 are likely to yield as little as 1 percent to 1.4 percent, while you can easily make three times as much in a certificate of deposit at a bank.Even the I bonds that are available until the end of April are a bad deal: They currently pay a generous 6.73 percent, but they will drop after you own them for six months to the rate that will be set May 1. That means you'd probably make only about 4.1 percent over the next 12 months.

To make matters worse, you'd pay a penalty equal to the final three months' interest earnings if you redeemed the bond after a year, cutting your yield to 3.7 percent or so. Again, that's less than the 4.5 percent you could get on a 12-month CD that could be redeemed penalty-free.

To understand all this, you have to know that I-bond yields come in two parts. First is a fixed yield that, once set when a batch of bonds is first offered, stays the same for those bonds' 30-year life. Currently, it's 1 percent.

That is added to a variable yield, which is adjusted every six months to match the inflation rate. After a big run-up in oil prices last summer and fall, the variable rate was set at an unusually high 5.73 percent on Nov. 1.Together, the two parts give the 6.73 percent being earned on the Nov. 1 to April 30 I bonds. That's an annualized rate over six months, the bond owner gets half that. It is paid for the first six months you own the bond. Then the variable rate adjusts to the rate set on May 1 or Nov. 1, whichever was most recent.

The problem now is that inflation has been all but non-existent during the past five months, says savings bond expert Daniel J. Pederson, author of "Savings Bonds: When to Hold, When to Fold, and Everything In-Between."

There is one more month's inflation data to be included in the calculation for the May 1 rate. Nonetheless, the variable rate set May 1 could well be zero, he said.

"That means that if the government doesn't change the fixed rate, which is currently 1 percent, you could end up with an I-bond rate of 1 percent," he said.

Pederson estimates there is a 50 percent chance the government will raise the fixed rate to attract investors to I bonds, but he doesn't expect it to go any higher than 1.2 percent to 1.4 percent.

The other type of Savings bond, the EE bond, doesn't look like a very good investment either, Pederson says. It currently pays 3.2 percent, and he expects no change May 1. EE yields stay the same for 20 years.

Isn't the I bond useful for anyone?

Well, some long-term investors might give it a look. Though I bonds might be stingy in the short run, they do guarantee returns that will always beat inflation by a margin equal to the fixed portion of the yield. I bonds thus offer a good way to assure that your money retains today's buying power no matter how high prices go. And the government guarantees you'll never lose principal.

Pederson suggests that long-term I bond investors postpone purchases until May 1 on the chance the fixed rate will be raised. That would mean giving up the 6.73 percent rate you could get for six months on bonds bought before May 1. But over the long run, you'd come out ahead with a higher fixed rate.

Remember that I bonds are no good for people who need steady income, since you don't receive the interest earnings until you redeem the bond.

An I bond cannot be redeemed until you have owned it for 12 months. And if it is redeemed within five years of the purchase, the owner loses the final three months of interest earnings.

Savings bonds can be bought at many banks, or online at http://savingsbonds.gov. The maximum annual investment is $30,000 for bonds bought at a bank, plus $30,000 for those bought online."

Our Pre-Planned Oil Based Investing Strategy Going Forward (Market Timing Based)

The following investing strategy is based on the rising crude oil price trend and my own personal prediction that the average regular unleaded price will reach something close to $3.33/gallon.

This strategy will be re-evaluated if we start sending Tomahawk cruise missiles into IRAN or take other military actions against them.

(1) Once light-sweet-crude oil hits $79.71/barrel
(a) Take profits & sell 67% of oil based stocks and mutual funds
(b) Transfer these funds as follows: 1/3 into BEARX (bear market fund), 1/3 into PHO (water index), 1/3 into high yield money market

(2) If light-sweet-crude oil hits $83.47/barrel
(a) Take additional profits and sell off remainder of oil related stocks
(b) If we have not yet had a significant market correction yet, further increase position in BEARX. Otherwise, i'll reconsider... perhaps establish initial positions in 3a, 3b and 3c (below).

(3) If timing of BEARX purchase goes well (occurs prior to a 10-20% market correction), I'll liquidate my BEARX position and transfer funds three new positions. New positions based on international stock ETFs trading at the lowest average price-to-earnings-growth (PEG) ratios (a) Brazil ETF (EWZ): PEG = 0.61
(b) Taiwan ETF (EWT): PEG = 0.455
(c) Emerging Markets (VWO or EEM): PEG = 0.70

Yes, market timing is difficult to do. Yes, the emerging market ETF has some direct overlap with the Brazil ETF. One of the key underlying reasons for selling into the rally is that oil based inventories are continuining to rise and should eventually cause a price drop. We're not completely writing off the trends in oil; however, we want to see a dip in crude prices before we re-establish positions.

Assuming no significant changes in world economy, we plan on eventually shifting our oil based investments to water based investments. PHO will be the first water based investment position.

We'll let our mining stock/ETF positions in Rio Tinto (RTP), BHP Billiton (BHP) and Gold (GLD) continue to run until the velocity of their price appreciation plateaus or slows considerably. Once this occurs, will consider shifting these funds to financials, utilities and/or health care. I envy those who invested in the silver sector. We missed the silver run (so far)... We're keeping our eyes peeled for good deals on sterling silver in the mean time (garage sales, estate sales, etc.)

Disclaimer: I’m not a day trader or other chart interpreting specialist. I’m just going on hunches and my own interpretation of global macro-economic trends.

Opinions?

What We're Buying With My Wife's New IRA Funds (2005 Contribution)

We're establishing two new positions ($1k) in BEARX, a bear market mutual fund. The other new position is TC Pipelines LP (TCLP), a 6.8% dividend stock. All other transactions are building upon existing positions.

Here are the other transactions:
(1) Buy $250 in UMESX, Excelsior Energy and Natural Resources Fund
(2) Limit Order - 20 shares of BHP Billiton @ $43.88
(3) Limit Order - 40 shares of TC Pipelines LP (TCLP) @ $33.50
(4) Buy $250 in PCRDX, Pimco Commodity Real Return

Limit orders are set for 30-100 cents below current price. Thus, orders may or may not be filled.

Comments on above stocks:
(a) UMESX - I expect more record oil company earnings
(b) BHP Billiton - I expect the bull market in metals to out live the oil bull market
(c) TCLP - offers a 6.8% dividend, has record of increasing dividend at 3% average over last 5 years. Finally, Morningstar and the braniacs running the Yale endowment investment believe in it too.
(d) PCRDX - I feel that oil is going to at least $80/barrel by end of hurricane season, other commodity prices expected to remain reasonably strong. Be careful w/ this fund; the fund's method for investing is changing this summer because of an IRS ruling.

This will leave $275.40 left over (assuming limit orders processed) for later no-fee mutual fund transactions. Why so many commodity related stocks? Answer: The area is hot and overall we still have less than 10% of net worth in commodity related stocks and funds.

Investment decisions for 2006 ROTH IRA contributions are to-be-determined.

Wal-Mart's Disservice To Frugal America (My Trip to Wal-Mart Today)

Next time you walk into your local Wal-Mart with a small shopping list, look for one of the small carry baskets (instead of shopping cart). I bet you'll have a hard time finding one. I spent 15 minutes (not kidding) today looking for one at my local Wal-Mart during off-peak shopping hours. While, I could have done without one, it became a mission to get to the bottom of why they weren't available up front.

Here's what I did (i'm on vacation, so I have the time):
(1) I checked with the greeters at both the household and grocery sides
(2) I looked in the front of the store (outside)
(3) I walked by each register once
(4) I made a second trip to each express lane and self-check out lane and looked again
(5) I walked the outer perimeter of the store looking down the rows to see if anybody was using one
(6) I went to customer service to ask where I could find one (no luck). Their response, I think people may have stole them. The few that we might have are probably already in use.
(7) In my opinion, the response received was rather uninformed. I picked up a prepaid envelope at customer service titled "Tell Us How We're Doing." The envelope goes straight to Bentonville, AR. I figure that i'll transfer some of my thoughts to paper and mail them in.

In the end, I resisted the temptation of grabbing a shopping cart and picked up only those things on my shopping list. I was a bit disgruntled when I thought to myself that the store that touts "always low prices" isn't as friendly as it could be to frugal shoppers.

Don't get me wrong, I'm not naive. I know why Wal-Mart may be doing this. However, it's a bit unfair to those that only want to shop for a small amount of items and don't want to push the bulky carts around.

Throughout this entire ordeal, I did not see one single shopper carrying a basket. If my local Wal-Mart is an accurate barometer, one could infer that Wal-Mart might be on a mission to force people with small shopping lists to use shopping carts. The use of these larger than desired carts could be changing shopping habits at the door (while adding unnecessarily to aisle traffic problems). Whether people realize it or not, I feel that people showing up with small shopping lists may be changing the list at the door when they realize that the small carry baskets are not available and that they have sooo much extra space for purchases.

A Surprising Bevy of Info Under One CNNFN Article/Link

Look at this article if you: hate to pay taxes, interested in a new job, move frequently and/or like to follow real-estate. CNNFN's article "Tax Friendly Places in 2006" actually has 10 separate sub-articles.

Some of the articles may be repackaged from other sections of the site (not sure); however, they are simply wonderful.

The Articles:
(1) Live in Northeast, pay through the nose
(2) State-by-State rankings
(3) Big-city taxes
(4) Big tax breaks from around the country
(5) Tax freedom day comes later this year
(6) Think you pay a lot in taxes
(7) AMT 101
(8) Best jobs in America
(9) Best places to live
(10) Best companies to work for

Here's where to look

Integrating Your CD-Money Market Strategy: Recommend Using BankRate.com's Top Tier Awards

Time is money and it's great to see BankRate.com's quarterly top tier awards. These awards represent a concise one page listing of those banks that tended to have the best money market and certificates of deposit rates during the prior quarter. Rankings are provided based on investment periods.

While past rates aren't always representative of current and future rates, the rankings serve as a good starting point for an integrated CD-Money Market strategy.

Typically, you won't find this information consolidated onto one page. Recommend you take advantage of these rankings now to put into perspective future cash accounts and investments.

Top Tier Ranking

The Federal Government’s Attempt to Improve Financial Literacy: National Financial Literacy Website (“.GOV”)

Bottom Line: Mymoney.gov offers so much financial literacy content, that it cannot be summarized in one simple post… While it isn’t as flashy as cnnfn or yahoo finance, it’s just as useful, perhaps more in some cases.

The sole purpose of MyMoney.gov is to improve the financial literacy and education of persons in the United States. To reach the widest number of people, the site can be used in either English or Spanish formats; it also offers a toll-free number for requesting materials. The site provides educational materials from across the spectrum of federal agencies that deal with financial issues and markets. (Source: MyMoney About Us)

Website: www.MyMoney.gov

Summary of Results From Master’s Thesis on Perceived Financial Conditions (PFC)

I completed my MBA Master’s Thesis in March 2006. Basically, I took a subjectively defined variable called perceived financial condition and determined what demographic and attitudinal characteristics affect it. I constructed two models to represent married and single personnel. I utilized a survey data set from 1999. Yeah, it’s a bit dated; however, it was a good survey. Monetary values can be roughly adjusted for inflation by multiplying by 1.13.

Perceived financial condition (PFC), was constructed via measuring frequency of response to each of five choices: 1) in over your head; 2) tough to make ends meet; 3) occasionally have some difficulty making ends meet; 4) able to make ends meet without much difficulty; and 5) very comfortable and secure. Categories one and two were collapsed into a single “adverse” PFC tier. Categories four and five were collapsed into a single “best” PFC tier.

STATISTICALLY SIGNIFICANT BENEFICIAL VARIABLES

Single Model Variables (% Lower Likelihood of Being in Worst PFC Tier, Relative Base Case), Less Than 0.1 Significance Level

(a) Satisfied w/ Occupation (6.0)
(b) Black (4.1)
(c) Some College (3.7)
(d) Savings (3.6 per one unit increase)
(e) Other Race (3.4)
(f) Hispanic (3.4)
(g) Female (2.5)
(h) Income (0.8 per one unit increase)

Married Model Variables (% Lower Likelihood of Being in Worst PFC Tier, Relative Base Case), Less Than 0.1 Significance Level

(a) Hispanic (7.4)
(b) Spouse Employed (7.1)
(c) (4.6 per one unit increase)
(d) Satisfied w/ Occupation (3.5)
(e) Income (1.6 per one unit increase)

STATISTICALLY SIGNIFICANT ADVERSE VARIABLES

Single Model Variables (% Higher Likelihood of Being in Worst PFC Tier), Less Than 0.1 Significance Level

(a) Thirties Age Bracket (7.1)
(b) Twenties Age Bracket (7.1)
(c) Single w/ Dependents (4.6)
(d) Unsecured Debt (2.4 per one unit increase)

Married Model Variables (% Higher Likelihood of Being in Worst PFC Tier), Less Than 0.1 Significance Level

(a) Married w/ Dependents (8.7)
(b) Dissatisfied w/ Occupation (7.6)
(c) Own Primary Residence (3.2)
(d) Unsecured Debt (2.6 per one unit increase)

Principal differences between the “single” and “married” models included the effect of age and education. Single personnel in their thirties had a 7.1 percent higher likelihood of being in an adverse PFC tier. In contrast, Married personnel in their thirties had a 3.6 percent lower likelihood of being in an adverse PFC tier. Education was only significant in the single model.

There were many similarities between the married and single models. Single and married personnel who were satisfied with their occupation were 6.0 percent and 3.5 percent less likely to be in an adverse PFC tier, respectively. Single personnel of Hispanic, black, or other non-white race/ethnicity were between 3.4 percent and 4.1 percent less likely than whites to be in an adverse PFC tier. Married Hispanics were 7.4 percent less likely than whites to be in an adverse PFC tier. Finally, the pecuniary variables of savings, income and debt affected PFC similarly in the married and single models.

PERCUINARY VARIABLE TIERS

Household total gross income:
(a) $1-$2,000; (b) $2,001-$3,000;
(c) $3,001-$4,000; (d) $4,001-$5,000;
(e) $5,001-$6,000; (f) $6,001 and up
Net household savings:
(a) $0 - $5,000; (b) $5,001-$10,000
(c) $10,001-$20,000; (d) $20,001-$50,000
(e) $50,001 and up
Total unsecured debt
(a) None - $5,000; (b) $5,001-$10,000
(c) $10,001-$20,000; (d) $20,001 and up

BASE CASE (MARRIED/SINGLE)

Base case:
(a) White
(b) E7 to E9
(c) Male
(d) Neither satisfied nor dissatisfied
(e) High School Graduate
(f) Spouse High School Graduate
(g) Over 39 years old
(h) Owns primary residence
(I) No dependents
(j) No time away from homeport
(k) $2,000 or less gross monthly income
(l) $5,000 or less in savings
(m) $5,000 or less in unsecured debt

By the way, there were a few statistically significant military specific variables; however, these were omitted from my blog entry because they don’t related directly to this blog’s primary audience.

Summary of Results From Master’s Thesis on Perceived Financial Conditions (PFC)

I completed my MBA Master’s Thesis in March 2006. Basically, I took a subjectively defined variable called perceived financial condition and determined what demographic and attitudinal characteristics affect it. I constructed two models to represent married and single personnel. I utilized a survey data set from 1999. Yeah, it’s a bit dated; however, it was a good survey. Monetary values in Table 3 can be roughly adjusted for inflation by multiplying by 1.13.

Perceived financial condition (PFC), was constructed via measuring frequency of response to each of five choices: 1) in over your head; 2) tough to make ends meet; 3) occasionally have some difficulty making ends meet; 4) able to make ends meet without much difficulty; and 5) very comfortable and secure. Categories one and two were collapsed into a single “adverse” PFC tier. Categories four and five were collapsed into a single “best” PFC tier.

Tables 1 and 2 show the variables that have the most beneficial and adverse effects, respectively. Table 3 provides increments for savings, unsecured debt, and monthly gross income. Table 4 presents the base case. The base case is essentially what everything else is compared to. I omitted several significant military variables from Tables 1 and 2 they are outside the profile of my typical reader.

Table 1. Summary of Significant Variables Ranked by Level of Beneficial Partial Effect on PFC (<0.1>1999 DoD Survey of Active Duty Personnel).

Single Model Variables (% Lower Likelihood of Being in Worst PFC Tier, Relative Base Case)	Married Model Variables (% Lower Likelihood of Being in Worst PFC Tier, Relative Base Case)
Satisfied w/ Occupation (6.0)	Hispanic (7.4)
Black (4.1)	Spouse Employed (7.1)
Some College (3.7)	Savings (4.6 per one unit increase)
Savings (3.6 per one unit increase)	Thirties (3.6)
Other Race (3.4)	Satisfied w/ Occupation (3.5)
Hispanic (3.4)	Income (1.6 per one unit increase)
Female (2.5)	-
Income (0.8 per one unit increase)	-

Table 2. Summary of Significant Variables Ranked by Level of Adverse Partial Effect on PFC (<0.1>1999 DoD Survey of Active Duty Personnel).

Single Model Variables (% Higher Likelihood of Being in Worst PFC Tier, Relative to Base Case)	Married Model Variables (% Higher Likelihood of Being in Worst PFC Tier, Relative to Base Case)
Thirties Age Bracket (7.1)	Married w/ Dependents (8.7)
Twenties Age Bracket (7.1)	Dissatisfied w/ Occupation (7.6)
Single w/ Dependents (4.6)	Own Primary Residence (3.2)
Unsecured Debt (2.4 per one unit increase)	Unsecured Debt (2.6 per one unit increase)

Principal differences between the “single” and “married” models included the effect of age and education. Single personnel in their thirties had a 7.1 percent higher likelihood of being in an adverse PFC tier. In contrast, Married personnel in their thirties had a 3.6 percent lower likelihood of being in an adverse PFC tier. Education was only significant in the single model.

There were many similarities between the married and single models. Single and married personnel who were satisfied with their occupation were 6.0 percent and 3.5 percent less likely to be in an adverse PFC tier, respectively. Single personnel of Hispanic, black, or other non-white race/ethnicity were between 3.4 percent and 4.1 percent less likely than whites to be in an adverse PFC tier. Married Hispanics were 7.4 percent less likely than whites to be in an adverse PFC tier. Finally, the pecuniary variables of savings, income and debt affected PFC similarly in the married and single models.

Table 3. Pecuniary variable tiers

Income	Household total gross income: (a) $1-$2,000; (b) $2,001-$3,000; (c) $3,001-$4,000; (d) $4,001-$5,000; (e) $5,001-$6,000; (f) $6,001 and up
Savings	Net household savings: (a) $0 - $5,000; (b) $5,001-$10,000 (c) $10,001-$20,000; (d) $20,001-$50,000 (e) $50,001 and up
Unsecured_Debt	Total unsecured debt (a) None - $5,000; (b) $5,001-$10,000 (c) $10,001-$20,000; (d) $20,001 and up

Table 4. Base Case (Married and Single Model Variables Combined)

“Base Case”

Base case was: (a) White (b) E7 to E9 (c) Male (d) Neither satisfied nor dissatisfied (e) High School Graduate (f) Spouse High School Graduate (g) Over 39 years old (h) Owns primary residence (I) No dependents (j) No time away from homeport (k) $2,000 or less gross monthly income (l) $5,000 or less in savings (m) $5,000 or less in unsecured debt

I Haven’t Yet Filed My Taxes: My Situation & Advice For Those Considering Extensions

We delayed filing this year’s return because we noticed that we owed money. This year additionally marks my first year of using TaxCut (H&R Block). I typically use Quicken’s Turbo Tax but switched this year after getting TaxCut for much less than what I would otherwise pay for Turbo Tax. I prefer Turbo Tax more; however, my preference may be due, at least in part, because I’m so use to using Turbo Tax and am just now learning TaxCut.

Ok, now to the advice for those filing extensions:

My advice: Don’t do it unless you have some extenuating circumstance(s) that preclude you from doing it by Apr 17th. It will likely cost you more time and money in tax preparer fees. You should ignore this advice and consider an extension if there are pieces of information missing that would preclude you from filing your return with confidence.

Other Advice (Source: H&R Block, Fleishman-Hillard):
(1) EXTENSIONS – Filing Form 4868 will get you an extension until October 16th.
(2) LIVING ABROAD - Taxpayers living outside the US have an automatic two-month extension to June 15th. These taxpayers can get an additional 4-month extension by filing Form 4868. They may get extensions beyond this but should consult a professional or other reference for additional info.
(3) PAYMENT RESPONSIBILITY - Extensions do not give taxpayers more time to pay their tax bill. Taxpayers should estimate their tax liability and pay as much as they can by April 17. Underpayments are subject to penalties and interest.
(4) FILE EVEN IF YOU CAN’T PAY – If taxpayers complete their returns but are unable to pay the tax due in full, they should file their returns by April 17, and submit with as much of the tax due as possible. The IRS will send the taxpayer a bill or notice for the balance due. Installment agreements are another option. The IRS charges a $43 fee to set up an installment agreement. It will also charge interest and, sometimes, penalties on the unpaid balance.

These pearls of tax wisdom were handed to me with some imbedded advertisements for H&R Block. In all fairness, I’m passing through some of those advertisements below:

(1) Taxpayer may visit www.hrblock.com to file an extension electronically or to find the nearest year-round H&R Block office.
(2) If you want to pay your taxes with credit card, H&R Block will reduce the 2.49% fee to a 1.99% if you use a Visa credit card
(3) More than 4,000 H&R Block offices nationwide are open year-round.
(4) For more H&R Block help may be obtained at http://www.nationaltaxadviceday.com

(Disclaimer: I’m neither an H&R Block shareholder nor receiving any other forms of compensation from H&R Block. Additionally, I’m not a licensed tax professional)

Seeking Out Special Dividends: A Hedge For Those Now Buying Into Natural Resources

Companies in market segments that have already rallied (i.e. mining companies) will likely not buy out other companies or mineral fields now and instead wait in favor of buying at cheaper prices (in my opinion).

This bodes well for the accumulation of cash on the company balance sheets and an increased likelihood of special dividends.

For the first quarter (2006), I'm receiving a special dividend of $6+/share from Rio Tinto (RTP). This amounts to approximately 3% of the stock price. I'm banking that more special dividends will continue and that this may provide a slight hedge against downside risk since special dividends are somewhat attractive to investors.

My advice, invest in these sectors with the understanding that they are inherently volatile. Consider the amount of cash on the books and the likelihood of special dividends when buying some of these types of companies. If they don't pay a special dividend, they may just as well buy back shares which will also increase share value.

Bottom line: Above you’ve read one philosophy/hedge. There are others to consider. Good luck w/ your investments.

Making Your Search For Blogging Content Easier: One Tip For Getting Ideas

Try using “NewsBank.” NewsBank is a one-stop shop for searching more than 1500 U.S. and international sources.

NewsBank users can run a query on any topic, much like a regular internet search, and pull up content from newspapers around the world. NewsBank’s data is updated daily.

It appears that NewsBank has a broader resource collection (newspaper-based) as compared to Google News. I believe that this is due, at least in part, to the fact that NewsBank probably has a subscription fee that covers access costs to newspapers that Google News would otherwise not pay and therefore not have access to.

Don't fret about the subscription costs. NewsBank is available via many public and university libraries. I recommend that you ask your local public or university library how you can access NewsBank. It could make your search for content easier.

Consider the playing field leveled, at least somewhat for how bloggers find content. The idea is to improve personal finance blogging content throughout the blogo-sphere rather than hoard content/ideas.

If you have any other ideas or methods for finding content, please share via the comments section.

NewBank homepage

Today's Answer to the CNBC Squawk Box Maserati Gransport Giveaway/Competition

Question: The CEO of which company told Becky he's working WITH cable companies in the battle for your living room

Answer: Sprint-Nextel

This is my first question attempted. So far i'm 1 for 1

Details on competition can be obtained here.

I'll start posting answers to all the questions I answer. Answers will likely be posted to the discussion thread for this entry.

Our Household 61% Savings Rate is Taking a Hit

Just before we moved to Memphis, TN we were saving 61% of our household income. We were living in a 2 bedroom apartment in California and lived modestly in most every way. Our biggest secrets to saving 61% of our income are: 1) If married and no infants, both spouses must work, 2) Mind your own business and become a home-body.

Now, we've moved into a 3000+ square foot house (got a great deal) and have no substantial furniture and no second income (wife temporarily unemployed).

We'll work hard to eek out a 20% savings rate. Over the last 2 days we've spent about $2k ($900 went to a mattress, $400 on landscaping materials/lawn care equipment, etc). We've agreed to limit further house expenditures to $500/month. This should be reasonable since both of our cars are paid for and we will not buy a new one until we’re done spending on our house. Once my wife gets re-employed we should be able to goose up our savings rate to around 40%. Time will tell on whether or not we stick to the budget and how successful we are in closing the gap between the 20 and 61% savings rates.

BTW: This is a repost. This article ran for more than 24hrs on my website w/o being picked up by pfblogs.org. Article re-posted to help ensure that it gets cataloged at pfblogs.org.

What ING Direct's Non-Competitive 4.0% APY Savings Account Rate Means to Me

First off, I’m an ING Direct user; however, I’d exclude them in CURRENT recommendations to others. Right now, I’d recommend Emigrant Direct, HSBC or GMAC Bank.

Some observations about ING Direct's 4.0% APY:

(1) There switch to a 4.0% APY tells me that they have grown their customer base to a sufficiently large level that earnings growth going forward will likely have a large organic component (from within existing customer base), as opposed to from new customer acquisitions.
(a) ING Direct will probably try (experiment) and keep their rates at this competitive but modest level so as to not lose significant existing customers and concurrently increase profit margins. They're counting on poorly informed customers (not knowing about Emigrant Direct, HSBC, GMAC Bank, etc.).
(b) Customers not lost, will likely be targeted for other products that are perhaps more profitable (more favorable to gross margins).
(c) ING Direct strategy probably includes expectations that customers disappointed in the 4.0% APY may be too lazy to switch to a different hi-yield account but will lock in their money into ING Direct CDs to compensate.
(d) ING Direct will probably continue to offer and possibly increase existing cash based referral incentives (to compensate for sub-par 4.0% APY).

(2) ING Direct's lack of rate competition appears to be an early indication that at least one internet bank is predicting an end to FED rate hikes.

Disclaimer: I've never worked in banking. These are my humble opinions on how ING Direct's 4.0% APY savings account may be part of their underlying strategy.

I'm in Internet Service Provider (ISP) Purgatory

I'm now living in a suburb of Memphis that is large enough for a super Wal-Mart, Starbucks and Lowe’s. However, the town has only one high-speed internet service (ADSL) which is widely available and they charge $59.99/month. I can't believe it!

I've temporarily set-up a T-Mobile account and will blog from Starbucks until I find a decent ISP. I don't want to switch to dial up, especially after living for 4 years with DSL or cable broadband. Has anybody had any luck with satellite broadband? I'm considering this. However, the big two (Dish Network and Direct TV) are not offering it (installing it) in our area.

I'm considering starting a T-Mobile annual contract for $30/month, but don't like the idea that I have to come to Starbucks (1.5 miles away from house) every time I use the internet.

Any recommendations? Any dial-up ISPs that have surprising speeds?

Getting Free Cable Channels (Legally)

If you've got some patience and are willing to experiment, ask your cable company for "broadcast basic" cable service. This includes (on paper) only about 20 channels. However, there is disparity among cable providers on the filters used to block the remaining analog channels. From 2001-2003, I paid only $18/month and got 70 analog channels.

For 4 months in 2004 I tried this again in Monterey, CA and was able to get 40 channels for about $20/month (or less). I eventually switched back to full analog cable since I wasn't able to get my two favorite channels (ESPN, CNBC).

Finally, if moving in to a new residence, check to see if the cable service was ever turned off. On one occassion, I had full cable and didn't even know it until just after calling in my service request.

We don't yet have any cable service ordered for our new residence, and we are still getting about 6 channels (weather channel, ABC Family, FOX, PBS, CBS, NBC).