Am I Cheap?

Just wondering - Am I cheap, frugal, or very wise?

I got a renewal notice for my Runner's World magazine subscription which just expired.  The notice offered me a "special price" for $21.97 for 12 issues or $1.83 per issue.  The notice also indicated that I could get 18 issues for the same price if I renewed online.  So being FRUGAL I decided to go online to renew and to get the price per issue reduced to $1.22 for a total savings of almost $11.00.

So I go online, press subscribe (couldn't find a renew button) and what comes up is a new subscriber price of $24 for 24 months or only $1.00 per issue.  Now I'm kind of ticked off.  Why should a new subscriber get a better rate and an existing customer?  So what did I do?  Picked up the phone and called customer service.  The call was this quick.

CS rep:  How may I help you?
Carl: I want to renew my subscription but I don't want to pay more than a new subscriber would pay.
CS rep:  How much was the offer?
Carl:  $24 for 24 issues
CS rep:  OK, I can give you that rate.  How would you like to pay for it?
Carl:  Send me a bill please.
CS rep: OK.  Is there anything else I can help you with (they are trained to say that)?
Carl: No - Thank you.

So by making the call I saved $21.97.  Does all this effort make me cheap, frugal, or wise?

Stock Market Recovery

Recently the government confirmed that we are in a recession (2 quarters of negative growth). This has been evidenced by the housing problems, the dramatic drop in the stock market, and the rise in the unemployment rate.

So how does one know when to anticipate an increase in stock market prices? Should one wait until the signs of an improving economy are in place? The answer is NO. The stock market, in the past, recovers a full six months before the "economy" shows signs of life.

So what does this mean to the average investor? To me it says that any money you have that is earmarked for the stock market should be in the market now! No one, and I mean no one, can predict when the economy will improve. Six months, a year, two years or more, no one knows. So grit your teeth put your money in the market.

How recency hurts investors

I"m currently reading "The Intelligent Asset Allocator" by William Bernstein and a comment he makes in the book is especially true given today's market.

"... but this [making investment decisions based primarily upon current market conditions] is a perfect example of so-called recency, the single biggest mistake that even the most experienced investors make. This referes to our tendency to extrapolate recent trends indefinitely into the future."

I've spoken to a number of folks concerned about today's weak stock market and they are considering pulling all of their money out of the market and putting it in something "safe". They are falling victim to recency by thinking that the weak market will extend forever into the future. Most investors, especially those that are not close to retirement, should be doing the exact opposite. They should be putting money IN the market now. To sell now they are buying HIGH and selling LOW - not a way to retire comfortably.
Picture taken by Lori Fisher in Estes Park, CO

Mortgage Mess

I read a letter to the editor in the March 2009 issue of Consumer Reports (a great magazine, BTW) discussing a previous article in the magazine about the mortgage crisis. I've struggled for the last few months trying to determine a clever way to express what I see as a large part of the problem. The letter writer, John Leonard of Seattle, expressed it nicely.

He said that the most important reform that was needed because of the mortgage crisis was to "Reform the consumer." We should start with these steps:

1. "Thou shalt not covet more house than thou canst afford"
2. "Thou shalt not use thy credit card for long-term debt"
2. "Thou shalt not bear false witness on thy mortgage application"

This is not to say that the consumers of debt are totally at fault for the meltdown but I would opine that consumers are more to blame when it comes to not being able to pay their debt. Lending organizations (banks, savings and loans, etc.) are in the business of lending money and NOT in the business of managing individuals personal budgets.

If an individual or family borrows money to buy a bigger house than they can affordand then they can't make their monthly payment - who's fault is that? In most cases it's not the mortgage company - it's the unrealistic expectations of the home buyer.