Credit bureau drops access to credit score

One of the three credit bureaus, Experian, is dropping access to their FICO score. This means only 2 of the 3 scores used to judge consumers on their loan-worthiness will be available to the public. MSN's Liz Pulliam Weston describes what this means in this article.

I personally am going to be contacting my congressmen about this. Congress finally got its act together in the past few years and gave everyone access to their credit report via annualcreditreport.com (no, freecreditreport.com is not the correct site, and is somewhat of a scam, regardless of what the catchy jingle says). However they need to go further and give everyone access to their FICO score for free. I recently noticed a mistake on my credit report, and got it fixed, but only after I payed $13 just to see my score. In this economy, I have a hard time believing people will be able to fork over almost $40 just to see their most recent credit score.

The link to your House Representatives and Senators can be found here and here.

You can copy and paste this text into the box:

Dear Congressperson or Senator, please lobby for reform in regards to FICO scoring. Consumers
should have access to BOTH their credit reports AND credit scores, from all
three credit bureaus (Experian, TransUnion, and Equifax) for FREE. Consumers
should also have access to the secret scores keep by insurance and other
financial service companies. This article details why this is best for
consumers, i.e. your constituents.
http://articles.moneycentral.msn.com/SavingandDebt/ConsumerActionGuide/tell-congress-no-more-secret-scores.aspx?page=1

UPDATE: Some of you may be wondering how this affects your investing? Well, higher credit scores translates to lower interest rates on debt, meaning more money left over to invest. As Martha Stewart would say (in the ultimate sense of irony), "It's a good thing!"

Outraged? Disagree or don't care? Share your thoughts in the Comments section.

Bylaws-Setting the Table

Our club has recently begun drafting bylaws to go along with the general partnership that we drafted, ratified, signed, and got notarized earlier this month.

The process of drafting bylaws will be long and nuanced, but we really want to make sure that we have our bases covered. As we grow beyond our current four members we want to assure the ideals and goals that we formed the club upon will be passed on to new members--as well as making sure all the legal loose ends are tied up in case of any uncomfortable situations.

No one wants to have to kick a club member out or have someone quit over a disagreement, but if our club stays around as long as we hope, these things might come to pass. It is better to put in the hard work up front in drafting the partnership and bylaws than to rush to expand and then find out we have no adequate recourse to police the club.

Sly has been invaluable in writing the first draft of the partnership and the bylaws thus far, but the rest of the club members will also be writing sections of the bylaws--to make sure that we are all accountable in the legal and logistical foundation of our club.

UBS, or how I learned to love the offshore bank account

Recently, UBS has been back in the news as the United States government is trying to pry loose the names of 52,000 account holders that are ostensibly using the Swiss bank as a tax haven.

This comes a year after UBS officials admitting wrongdoing (including criminal cases) for aiding in tax avoidance cases.

So why's this news to you or I who don't have Swiss bank accounts? The percentage of people who misreport their income in the US is between 7 and 15%. In this economic climate, when the government needs every penny they can get to finance the $787 billion economic stimulus, you can bet they're going to tighten up on tax enforcement to get some of what's coming to them.

Bush was lax for years on tax enforcement, but this UBS action may be a signal to tax cheats: if we can take down UBS, we can take you down too.

Divi-doo and Scrappy too!!!

Recently, I posted on the reasons why you might not want to own dividend paying stocks. Now I want to look at some reasons why dividends might just be a good idea right now.

• If you are in need of income from your stocks (for example, a retiree), the dividend yield on stocks right now is much higher than that on bonds. GE was at over 11% about a week ago, and with the recent drop in the stock, is now at over 13%. US Treasuries are below 3%, and other corporate bonds are around 4%.

• Assuming the stock is at or near the bottom, the high yields make for a great return even if the share price stays flat for the next few years, and help support the value of your portfolio. Now this assumes that the company won't cut their dividend, a possibility due to this economy, but in general, there is too much shareholder pressure to keep the dividend, if the company has any sort of strength to it.

• In value investing, the dual taxation of reinvesting dividends hurt your long term return, but if your goal is income, dividends are taxed at a much lower rate, currently 10% or 15%, usually lower than a person's ordinary tax rate.

Agree/disagree? What other reasons do you see for dividend paying stocks? Share your comments below.

Quote of the Day - 2/21/09

"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it."

-The late Dr. Adrian Rogers, 1931 to 2005, Former Pastor of Bellevue Baptist Church

And so it begins...

Several states have begun measures to declare their sovereignty from the United States under the Tenth Amendment.

This could get interesting... http://www.campaignforliberty.com/blog.php?view=10775

Not sure if this is just a tie to the need for bailout funds or what's really going on, but this is a list I saw somewhere. Unsurprisingly, I haven't heard a peep about this on TV.

DECLARING SOVEREIGNTY
01. Washington
02. New Hampshire
03. Arizona
04. Montana
05. Michigan
06. Missouri
07. Oklahoma
08. Hawaii
09. California
10. Georgia

WORKING ON DECLARING SOVEREIGNTY
11. Colorado
12. Pennsylvania
13. Arkansas
14. Idaho
15. Indiana
16. Alaska
17. Alabama
18. Nevada
19. Maine
20. Illinois

Here's a link to the Wikipedia article on the Tenth Amendment... http://en.wikipedia.org/wiki/Tenth_Amendment_to_the_United_States_Constitution

These are the two areas that I keyed in on in that article...

1. Interpretations of the amendment can be divided into two camps. The first interpretation, as held by the Tenth Amendment Center, most of the Founding Fathers, the Libertarian and Constitution Parties, and a few Republicans including Ron Paul and Jeff Flake, is that the Constitution does not grant the United States any power that it does not expressly mention. This has been used as the basis for such court cases as Gonzales v. Raich, and for arguments in favor of repealing a large number of Federal laws, abolishing the Federal Reserve, and drastically slashing the Federal budget by 50% or more. It is also why amendments were necessary for the abolition of slavery and the prohibition of alcohol - without said amendments, Congress did not have the authority to do those things. The contrary opinion, as held by most of the current U.S. Government, is that the Constitution grants Congress the authority to do more or less anything that is not explicitly prohibited by the first eight amendments.

2. For this reason, Congress often seeks to exercise its powers by offering or encouraging the States to implement national programs consistent with national minimum standards. The mechanisms are discussed in the article on cooperative federalism. One example of the exercise of this device was to condition allocation of federal funding where certain state laws do not conform to federal guidelines. For example, federal educational funds may not be accepted without implementation of special education programs in compliance with IDEA.

So, this could be the start of the break-up of the U.S. (see Paul's stance in area #1 above) and possible formation of a North American Union of sorts, this could be a push towards socialism (see the contrarian stance presented in area #1 above), or this could have nothing to do with any of that and everything to do with the allocation of federal bailout funds (see area #2). Being that Ron Paul supporters started the push in Oklahoma, area #1 above becomes a very important debate. This could be a means for getting a ruling that the Federal Reserve, federal bailouts, etc. are unconstitutional and forcing the federal government to butt out of the current economic shit storm in order to allow the free market to try to restore order on its own. If that happens, look for a large number of job losses due to the collapses of the poorly run corporations, and as a result more people losing their homes. As an investment club, may want to buy some shotguns, ammo, bottled water, generators and learn how to short stocks.

Divi-don't????

With GE's dividend yield sitting above 11% right now, there was talk of GE cutting the dividend this week. Even in the midst of bankruptcy, a few months ago GM was looking to keep its dividend at $.01 so that its stock would show up on the radar of mutual fund managers that screen for dividend paying stocks. Retirees whose portfolios have been devastated by the market crash are hoping their quarterly dividend check will still be there to pay the bills. Dividends are on the mind of everyone right now as a means to get some sort of return in a time of uncertain and stagnant returns.

What are some reasons for a company to pay dividends? In my mind, the first is a purely aesthetic marketing ploy. Paying a dividend appeases shareholders who are used to it or who will only buy shares in dividend paying companies. Further dividend paying companies appear more stable.

The second is that the company does not have a good way to spend some of its profits to produce a return and rather than sit on the cash, decides to return it to the shareholder. Buffett does not pay a dividend on Berkshire Hathaway because he believes he can produce a greater return for his shareholders with that cash. Further releasing a dividend is not tax-efficient as it subjects the shareholder to a double tax, first on the corporate level via a tax on profits and second on the actual dividend being paid out. If the company is truly run well, the most efficient way to a return is by the company not paying out dividends.

This is not to say dividends don't have a place, depending upon the situation. Stay tuned for more discussion and analysis in this arena.

Agree/disagree/ferociously disagree...share your thoughts below.

Starting Your Investment Club.

We started our club with a Bogle-like mindset of minimizing operating expenditures. This mindset unintentionally led to a tiny profit in start-up costs. Here’s what we did.

(1) A How-To Book. Invest in a good book to guide you. We purchased the “Investment Club Operations Handbook” from the Better Investment Community. Cost: $26.95.

(2) Club Address. A nearby P.O. Box. Annual cost: $56.00.

(3) EIN’s/Banking Part I. We arrived at Chase bank to open a business account and were told we needed an EIN. What’s an EIN? It’s an Employee Identification Number issued by the IRS associated with your club. Every investment club is responsible for annual taxes and needs an EIN like individuals need an SSN. EIN’s are obtained free of charge through the IRS at irs.gov. Cost: Free. I called the IRS and their customer service agent was very helpful unlike those at Chase Bank...

(4) Banking Part II. We return to Chase with the EIN and were told we also needed a recognition of Partnership from the county. The Chase agent then handed us a self-contradictory page stating we only needed the EIN. I found myself irritated while Cadillac and crew more calmly found a temporary checking account giving us a $125 opening bonus. Awesome, beating the S&P already. Gain: $125.00.

(5) Partnership. The County Clerk helped us get through the correct forms properly. Cost: $10.00.

(6) Banking Part III. We used the personal account of the last visit to receive an additional referral bonus in setting up the Chase business banking account. Gain: $50.00.

(7). Business Checks. One box of duplicate business checks ordered online. Cost: $15.94.

(8) Trading Account. Scottrade seemed convenient, good for customer service, inexpensive ($7/trade), and included a referral bonus for 3 free trades. Woodcreek has an earlier post describing the various online brokers. Gain: $21.00.

In the end, the net cost of establishing the club was a gain of $87.11. --Schlitz