Beware of deferred interest credit cards & deferred financing plans

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The holiday shopping season officially begins with Black Friday. Retailers are not only ready with sparkly merchandise and door buster deals but also with a certain kind of credit card offer. These offers, promising no interest payments for months or even years, can be enticing, especially for shoppers making big-ticket purchases for the holidays and retailers are busily rolling them out.

Deferred interest programs are a popular choice for consumers who need to purchase expensive items like refrigerators and dishwashers but don’t have the money or savings. They allow them to make the purchase when they need to and spread the payments over time without having to pay any interest. The overwhelming majority repay within the deferred interest period and benefit from a free loan.

But as with many promising deals, there is a catch. A single late payment or a failure to pay a balance by a certain deadline can trigger sizable financial penalties. If a balance remains, consumers will owe full interest from the purchase date on the original purchase amount.

“These offers are traps for the unwary,” said Chi Chi Wu, a staff attorney at the National Consumer Law Center. The terms are “confusing to the point of, we think, being a trap.”

“Consumers may believe when they take out these cards that they will pay off their balance in the time allotted, but that is not always the case, said Wu. Retailers issuing deferred interest cards “prey on this tendency in human beings to be optimistic about these things,” she said, but “life happens.”

Amazon, for example, offers six months of interest deferral on some purchases with fairly similar terms. Users will pay no interest if the balance is paid within six months, but those who do not pay the balance in full will owe interest from the purchase date. In addition, the annual average percentage rate (APR) is 25.99 percent.

Dell charges even higher rates. It has a 12-month deferred interest financing plan on certain products where interest, as high as 29.99 percent, is charged from the purchase date if a balance remains at the end of the deferral period.

According to rules and regulations enacted since the financial crisis, “any retailer offering deferred interest plans has to say the interest will be assessed from the purchase date. They have to have the APR in there,” said Jill Gonzalez, an analyst at WalletHub. “But there is no stipulation on where or how that is told to the consumer.”

Shoppers standing in a long line on Black Friday may feel pressure to sign up for a deferred interest deal without reading the fine print. Many retailers’ standard cards offer a so-called first purchase discount. Some discounts can be as high as 20% on purchases made the day a card is approved and the following day.

red flag

Deferred interest cards and deferred financing plans may look like a great way to keep down the final tally. Remember, there is no such thing as free interest! Some shoppers who are not careful will end up paying interest for everyone else. Make sure that it isn’t YOU!

Happy Thanksgiving to all my American readers!


The Fed wants to see wage growth but is the annual raise dead?


Did the “Great Recession” kill the annual raise and replaced it will variable compensation – the annual bonus? Base salaries are often a company’s major fix cost of doing business and can be a drag on corporate profits during recessions. In a perfect world, variable compensation allows companies to align corporate and worker incentives, it rewards high performers and hard workers. It also allows companies to pull back on employee costs during hard times without resorting to layoffs.

In reality, switching from raises to bonuses has mucked up a lot of things. For starters, it’s hard for an employee to make long-term financial plans with such short-term financial commitments from their employer. It’s nerve-wracking to take on a 30-year mortgage if your income is $100,000 this year but might be $80,000 next year.

Managers are caught in the middle, they feel the need to give something to everyone. In some cases, managers believe that the bonus is not related to performance but part of the employee’s salary. Ultimately, less money goes to the top performers and the poor performers are getting more than they deserve. This more humane approach throws a big monkey wrench into the big cost saving idea behind bonuses. Many corporations are having trouble holding on to their best employees.

The Towers Watson survey found that 40 percent of firms said turnover is rising, and 52 percent said they are having difficulty retaining “critical-skill” employees, compared to 41 percent last year. You’d think the solution to the problem of “talent mobility” would be relatively easy to solve — more pay.

Is it just my imagination or has corporate culture become more greedy? When did employees become liabilities instead of assets of the company. The captain of the corporate ship is getting well compensated for sub par performance by his bubbies sitting in boards room. Corporate boards are suppose to protect shareholders but they are allowing  financial engineering (share buybacks) to mask poor performance.

Are you prepared for your annual job review? I would recommend making a list of possible job perks that you may want if  your bonus or wage increase is lower than expected. You may want to read, Money Tip: Ask for Job Perks, to get some ideas on what to ask for.

A personal experience: As an owner of a small business, I have sat on the other side of the desk. I found the whole employee job review process to be very stressful.  The most uncomfortable experience that I had was seeing a grown man cry during his job review. He was not only older than me but had more industry experience. He expected to be fired but I decided before the tears to give him a second chance. In the end, we were both winners. 


What’s up with Apple?


One of my fellow bloggers, Howto$tuffYourPig found it hilarious that my golfing buddies asked for financial advice even though I was on vacation and officially retired. She was just kidding but couldn’t resist commenting. “Hey by the way, what’s up with Apple? “

For the record, I do own some Apple shares and couldn’t resist writing a blog post with my thoughts regarding the stock. It is, after all, one of the top ten stocks owned by both boomers and millennials.

In a phone interview with CNBC, Mark Yusko (chief executive and CIO of Morgan Creek Capital Management) said he believes Apple’s stock price could double, most likely in the next 18 to 24 months. Yusko cites a strong ongoing product cycle and the company’s ability to take share in China.

Goldman Sachs also added Apple to its “conviction buy list” on Wednesday, telling investors that share prices could rise by 43 percent over the next 12 months.

Why the stock price has been flat

Apple currently trades like a hardware stock at 11 times price to earnings ratio (PE). Investors still feel the scars from fallen hardware giants like Motorola, Nokia, BlackBerry and HP. They are worried that Apple’s growth has peaked and will have a negative impact on the share price.

Apple’s products are more expensive outside the United States because of the strong U.S. dollar and could hurt future profit growth. Plus economic growth in China is slowing down which could affect I-phone sales.

Why I own the stock

Apple will be launching services that will generate recurring revenue like Apple music which costs $9.99 per month. Apple pay is another service that is slowly being adopted. On-demand TV is a new service that could generate about $40.00 per month next year. The average revenue per user could be as much as $150.00 per month.

Apple generates a lot of cash and is trading at a discount if you remove the cash from the price to earnings ratio. This cash has been used to buy back shares and could also be used to increase their dividend.

The Apple brand in China has become a status symbol and the value of the Chinese Yuan is pegged to the value of the U.S. dollar which has no negative effect on pricing.

With the holiday shopping season now gearing up, many people will purchase an Apple Watch as a gift. The Apple Watch allows office types to make & take phone calls, respond to texts from their wrists and get notifications about email. Fitness devotees also like the watch to track things like heart rate and calories burned during exercise. This could be the driver of Apple’s share price over the next year.

Lastly, my fugal wife loves her I-phone and I find travelling with our I-pad more convenient than lugging my lap top.

Disclaimer: Please do your our research or consult with a financial advisor who isn’t retired. 

Don’t Ask for Financial Advice, I am on Vacation

Although I am no longer working as a financial advisor, sometimes I just can’t get away from being asked financial questions. I just got back from my annual golfing trip to Orlando. The conversations, over a few drinks, are usually about our golf game. However, some of my golfing buddies just have to ask for my opinion regarding their investing ideas.

Here are just a few examples:

Question # 1 – “I saw advertised on T.V.  an investment opportunity in real estate where your money is locked in for 3 years but they pay 8% interest on your money. What do you think”?

Answer:I would have to look at all the financial terms and conditions to give an accurate opinion. However, I have come across private funded rental real estate in the past. Developers can only get bank financing based on long-term lease agreements which are signed before construction begins. Your money goes to build additional units that the developer hopes to lease out within three years. It usually sounds like a safe investment but there are no guarantees that you will get your money back or that the rate of interest will not change.”

Question # 2 – “I own shares of Crescent Point (A Canadian oil & gas producer) and they are trading 40% below my purchase price. Don’t you think that the price of oil will go back up”?

Answer:No, there are 3 billion barrels of oil world-wide sitting in storage tanks and in oil tankers hoping that the price will go up. At $40.00 a barrel, Crescent Point is losing money. They have stop their dividend re-investment plan and are slashing costs, budgets and streamlining operations in order to cope with low oil prices. If they are not successful, they will soon be force to cut their dividend and the stock will fall even further in price.”

Question # 3 – “I have $10,000 in a play money investment account. I was thinking about buying shares in Bombardier (A Canadian manufacturer of planes & trains) because the share value is so low and the shares could bounce back up. What do you think”?

Answer:Not a good investment, just because the share price is only $1.28 doesn’t mean that it is a bargain. Bombardier has cost overruns on its “C Series” planes and can’t deliver them on time. The city of Toronto has an order for new subway cars that should have been delivered over a year ago. It is a poorly run family business with dual class shares so you have no say in the matter. The debt level is so high that there would only be $.03 a share left over if the company sold all its assets to pay off creditors.”

Last year I was asked about IBM. I told my friend that he should convince his wife who just retired from the company to sell her shares. The IBM shares were trading around $185.00 U.S. at that time.

This year I asked him “Did you convince your wife to sell IBM”?

He answered “No, she still owns them, she is emotionally attached to them and she is worried about paying tax”.

I responded “Not to worry, the stock is down to $132.00 and it won’t be long before the stock falls back down to her original purchase price eliminating any tax worries.”

Another friend of mine suggested last year, that I should buy some natural gas stocks because gas prices tend to go up in the winter time. He owned some shares in Encana at around $21.00. I told him that there was an over supply of natural gas due to fracking and that I was avoiding natural  gas stocks.

This year I asked him “How did you make out with Encana, did you have a stop loss order on it’?

He answered ” No, I still own it!”

I responded “Really, that’s too bad!”

(the stock is currently trading at just under $11.00)

Investing Advice

  • Do your homework on investment ideas that you see on T.V.
  • Oversupply of oil takes a long time to rebalance
  • The low price of a stock has no bearing on its true value
  • Don’t let tax concerns stop you from taking a profit
  • Admit you made a mistake and take the loss

I rarely give out stock picks to friends because no matter how many good quality picks you give them, they will always remind you of the one that was a poor performer. The average investor doesn’t realize that even the best stock pickers admit that they are lucky to be right 60% of the time. Financial success comes from letting your winners run and cutting your losses early.

In my experience, most people tend to have an aversion to losses. In fact, most studies in human behaviour suggest that losses are twice as powerful, psychologically, than gains.

Watch out for alligators when golfing in Orlando!

Dirty Money: The Big Profits of Pollution by Tony Sagami

I am currently in Orlando golfing with my buddies, taking my own advise of spending money to buy some happiness. I don’t believe in paying for advise by subscribing to newsletters. I do love reading free newsletters, so I thought this article is worth sharing. I haven’t done any research on the ETFs recommended in this article.



It started about two hours after I landed. “It” being a persistent, ugly cough that I developed a couple of hours after I landed in Shanghai.

Shanghai is an amazing city. Although it doesn’t have the political significance of Beijing or ancient beauty of the Forbidden City and Great Wall of China, Shanghai holds the key to the Chinese economic-growth engine.

With 24 million residents, it’s the largest city in the world and home to several of the world’s most iconic buildings like the Oriental Pearl Tower and the 128-story Shanghai Tower, the second tallest building in the world.

I stayed at the JW Marriott at Tomorrow Square. I even scored a free upgrade on the 34th floor and smiled in anticipation of some great views of the Huangpu River, the historic Bund, and the glittering, futuristic skyscrapers of the Pudong district.

My room was clean, modern, and luxuriously appointed. But when I opened the curtains, instead of an impressive view, I could barely make out the landmarks through the thick, gray clouds of smog.

The air pollution is as bad as I have ever seen in China… and I’ve been there a lot.

Salted Egg Yolk

The thick haze of pollution obstructed everything beyond 50 yards. I might as well have stayed on the ground floor because my “room with a view” had no view.

Shanghai’s air pollution is getting worse by the year.

  • Earlier this year, the level of airborne particulates in Shanghai soared to 360, or 15 times the World Health Organization safe level of 25 micrograms per cubic meter.
  • The neighboring city of Nanjing was forced to close all its elementary and middle school classes because the sky was the color of “salted egg yolk,” and the city of Qingdao canceled all outdoor activities.
  • According to official numbers from China’s National Bureau of Statistics, 90% of the 161 cities whose air quality was monitored in 2014 failed to meet official standards.

  • Berkeley Earth, an environmental research group, estimates that 4,000 people per day die in China from air pollution-related illnesses. “Every hour of exposure reduced my life expectancy by 20 minutes. It’s as if every man, woman and child smoked 1.5 cigarettes each hour,” said Richard Muller, scientific director of Berkeley Earth.

Heck, even the air inside Chinese buildings is awful. In 2013, the Galaxy Soho, an upscale retail/office complex, hired Malaysia’s Mayair and Honeywell (HON) to install massive indoor air cleaning systems.

Since then, dozens of companies like China Telecom and CCTV have inquired about installing similar systems in their offices.

There is more than one reason behind China’s air pollution problem, but the primary culprit is the fact that China gets about 64% of its electricity from burning coal, according to National Energy Administration data.

The Chinese government understands that it needs to “do something”; it has pledged to improve the air quality and has taken serious steps to do it.

For example, to cut reliance on coal, Beijing has set the goal to get 20% of its energy from renewables (solar and wind) and nuclear power by 2030, almost double the current share.

In fact, the Central Committee of China’s Communist Party kicked off its fifth plenary session on October 26, a key four-day meeting in which the nation’s economic and social policies for the next five years will be finalized.

(Note: Dirty air wasn’t the only pollution I found in Shanghai. The JW Marriott, one of the city’s nicest hotels, had a bright red sign above the bathroom sink warning “Water Not Potable.” Shanghai’s water is an interesting story with an entirely different investment opportunity. I’ll save it for another time.)

China is going to spend billions—yes, billions with a B—to clean up its air and water, which will make pollution control an industry in itself over the next few years.

How You Can Cash In

Of course, the money won’t all go to one company, but it isn’t hard to identify some of the big winners. Clean-energy providers (solar, wind, nuclear), natural gas producers, clean coal technology leaders, electric cars, emission control equipment, and air purification systems will have the government wind at their backs.

And that doesn’t even count the equally urgent water pollution problem.

If you’re an ETF investor, you have a fistful of choices, including:

  •     Guggenheim Solar ETF (TAN)
  •     PowerShares WilderHill Clean Energy Portfolio (PBW)
  •     iShares Global Clean Energy ETF (ICLN)
  •     First Trust ISE Global Wind Energy ETF (FAN)
  •     Market Vectors Solar Energy ETF (KWT)
  •     PowerShares Water Resources ETF (PHO)
  •     PowerShares WilderHill Progressive Energy ETF (PUW)
  •     PowerShares Global Clean Energy ETF (PBD)
  •     PowerShares Global Water ETF (PIO)
  •     PowerShares Cleantech Portfolio (PZD)
  •     Market Vectors Global Alternative Energy ETF (GEX)
  •     Market Vectors Environmental Services ETF (EVX)
  •     Market Vectors Uranium+Nuclear Energy ETF (NLR)
  •     First Trust ISE Water ETF (FIW)
  •     First Trust Nasdaq Clean Edge Green Energy ETF (QCLN)
  •     Claymore S&P Global Water ETF (CGW)

Clean air and clean water are big business around the world, but especially in China. I think they will be among the easiest, slam-dunk sector winners over the next decade, and this list of ETFs is a good place to start your research.

None of those ETFs really focuses on China, though, so I think you can do much, much better with carefully targeted individual stocks—such as a small-cap leader in clean coal technology that is doing big business in China, or a chip company making air quality sensor chips—than with the shotgun approach of ETFs.

For other stocks with great upside potential, check out my monthly newsletter, Just One Trade.

Tony Sagami
Tony Sagami
Mauldin Economics

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My 100th Post: If Money doesn’t buy Happiness, than you are spending it Wrong


I wouldn’t have worked as a financial advisor or be writing a financial blog if I didn’t believe that most people have a happiness number.  Your happiness number will be adjusted over time based on changes in your lifestyle choices.

You don’t need a degree in psychology to recognize that happiness is a state of mind. I have to admit that after a modest level of income, there isn’t really any evidence to suggest that people’s happiness increases with their wealth.  Money is not going to turn an unhappy life into a happy one. Some people are unhappy no matter how much money they have. However, I have also seen where spending money that you don’t have can turn a happy life into an unhappy one. Whether you are loving life or hating it, I do believe that it could really depend opon how you are spending your money!

“I’ve been rich and I’ve been poor. Rich is better.” This insightful bit of personal financial wisdom has been credited to entertainer Sophie Tucker, comedian Joe E. Lewis, comedienne Fanny Brice, actress Mae West and many others.

Some tips on buying some happiness:

Tip 1 – Buy experiences instead of things

Who we are as individuals is the sum of our experiences not the sum of our possessions. The joy of buying something new tends to deteriorate over time but creating memories last a lifetime. Sharing those experiences with family or friends can make you even happier.

Tip 2 – Many small pleasures might be better than a few big ones

Will you be happier saving money for a big-ticket item like a luxury car or indulging in small things like going to a spa or out to dinner with friends. You may be surprised at how many small pleasures can add up to a happier lifestyle.

Tip 3 – Spend on others and not yourself

There is a lot of merit to the saying “it is better to give than receive” The holiday season is just around the corner. Isn’t seeing the reaction of family & friends opening a gift that is thoughtful and unexpected, priceless?

Tip 4 – Rent a dose of happiness

You can enjoy something without having to own it. Rent a cabin hideaway if you enjoy the great outdoors. If you love the thrill of driving a luxury sports car, rent one occasionally or sign up for a weekend racing experience.

Tip 5 – Before you buy think about all the downsides

Often people buy with rosy colored glasses, they only see the good buying points and forget all the shortcomings. For example; some people think that owning a truck and a large trailer would be a great way to see the countryside. What they don’t see is having loud neighbours at camp sites, buzzing insects, traffic jams and vehicle breakdowns. Happiness is often in the small details.


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During my career as a financial advisor, I helped many clients find their happiness number. For some it was buying their first home, for others it was seeing their children graduate or get married will little or no debt. In my own case, my happiness number allowed me to retire early and spend more time with family & friends.

I am very fortunate to go south every November to play golf with my buds. We started 13 years ago with a total of 8 golfers, we now have 20 and there is a waiting list to join our group. We have so much fun that one of my house mates made a surprise comment. ” I would have to be on my death bed,  for me to miss this golfing trip” (Money well spent!!!)

When you think about it, money has no real value except that it can be exchanged for goods & services that we need and want. In my humble opinion, the whole purpose of having wealth is to use it as a tool to create a life you desire, enhance the lives of people you care about and hopefully leave a legacy that you are passionate about.