The Haphazard Blog

This week I received a statement for my Capital One credit card for $0.00. It even says my payment is due by May 19. Also at the top of it?

BE SAFE!

Your trash could be an identity thief’s gold. Manage your account online and end the paper trail.

This reminds me of a story a software engineering professor told me. Every month she would receive a Visa bill for $0.00. She would call and ask them to stop sending them and there was nothing they could do about it. How did it finally stop? She actually wrote a check for $0.00 and sent it in as a payment. They processed the payment! I would hope their computer systems would be more advanced by now, but apparently not. On the upside, there are no blackout dates…

Yesterday, I received a call from E*TRADE’s concierge service about some cash in my Roth IRA. She was seeing if I needed any help with investing it. There were a lot of odd moments. For many of the questions I asked her, she said she couldn’t give me an answer because she wasn’t allowed to give financial advice. But most of the questions were about what products do you have that meet this criteria. I wasn’t asking where I should invest, just what options they had. To make it weirder, she started to tell me about E*TRADE’s active money management. I don’t see the difference between her telling me all about that and telling me about other products.

I pointed out to her the only reason I had the cash in my account was because E*TRADE closed their S&P 500 index fund, but I’d be willing to look over some materials on the past performance of the actively managed accounts. On the surface, it seems pretty simple to determine if it’s worth it. They will charge a 0.75% annual fee to manage your assets (If they manage $10,000, they will take $75 no matter what happens) plus the fees from all the funds they choose to invest those assets. Are they any better than an index fund? My other question is, if you couldn’t manage a S&P 500 index fund, how can I trust you to actively manage anything more complex. Anyone can manage a S&P 500 index fund, and somehow E*TRADE couldn’t. I really look forward to the answer to this question.

Inspired by my brother, I got my credit cards in order this week. I had 4 non-store specific credit cards. It turned out that 2 of my accounts were closed (both at Bank of America). One was my New England Patriots Visa and the other my West Virginia University Visa. I only used each card once (back in 2002 and 2003) so it’s not much of a big deal, but I did lose the credit lines ($5,000 each) on the two cards. That could have a minor impact on my credit score.

I also had a Sony card with a larger limit along with a Chase Freedom card. The Freedom card is the card I use pretty much exclusively. The Sony card was also with Chase, and considering it somehow had -9600 points it was pretty much useless for rewards or buying Sony products. I have no Sony products now anyways. I called up Chase and tried to have them move the credit line to my Freedom card and was told they no longer do that. My only other option was to request an equivalent raise in my credit limit on the Freedom card and then close the other account. It seemed like a good idea until she told me the request was denied one minute later.

Thanks to a helpful post on the FatWallet Finance forum (lots of good information there) I called up the lending department and mentioned I had other accounts and wondered if they could move the limit from one account to the other. A few minutes later, the credit line was moved and my Sony card account was closed. I got what I wanted, but I did have to have a hard pull on my credit report to get that initial denial. But from what I’ve read, that initial denial is necessary to get help from the lending department.

Also, I recently made an international purchase and didn’t even think about any type of fee until my brother asked me about it. I looked into it, and I was hit with a 3% fee. It’s odd though, because I was in Vancouver in 2008 and I don’t remember ever getting any fees. I wondered if the fees were just built into the currency conversion and the Credit CARD Act of 2009 has exposed the fees as a line item. I tried to do some research on it, but I didn’t see anything specific to foreign transaction fees, but some banks have said that the fee would begin to appear as a separate line item. However, I came across an interesting article talking about how the credit card companies are trying to recoup all the lost fees. It looks like in an effort to protect consumers from predatory practices and excessive fees by the credit card companies, the credit card companies are going to find ways to ensnare the consumers who pay their bills on time and in full every month. This isn’t a shock but it does suck.

So at the top of my list now is get a Capitol One credit card since they have no foreign transaction fees. I’m really late to the game on this and I have a feeling it won’t be like this much longer, but it is now something on my radar to watch out for when choosing a credit card in the future.

The big news today was the 1000 point drop of the Dow. Early blame is being placed on a bad order for Proctor & Gamble stock. So that makes sense. If a bad order for P&G is executed it’s one of 30 stocks that make up the Dow Jones Industrial Average, so it would send it down a fair amount. But that doesn’t explain all the other stocks dropping.

At 2:45 PM. the DJIA moved from 10,236 to 9,872 (fell 3.6%) )and back to 10,203 (gained 3.4%) in 5 minutes. The NASDAQ, which has over 3,000 components fell 2.6% and gained 2.7% in the same period. The Russell 2000 fell 2.3% and gained 2.7%. Lastly, the S&P 500 fell 1.7% and gained 3.5%.

So it wasn’t just one stock, it was the entire market as a whole that had a very quick drop and a subsequently quick recovery. I believe that the only way that the markets could move that fast and that much is through computerized trading. There was not a massive sell off by humans placing sell (or short) orders.

Instead, the primary culprit was High Frequency Trading and Flash Trading followed by automated trading and the triggering of stop-loss orders. I think it is this last thing that is going to have human investors very upset.

To put it simply, investors will place a stop-loss order to try and limit their losses. What happens is an investor will buy a stock like Apple at $250/share. They will then place a stop-loss order at say $220 to limit their losses to roughly $30/share. The problem here is that computers caused an artificial and drastic move downwards by mostly trading amongst themselves that pushed Apple down below $200. So the investor had their stock sold at $220 as Apple plunged because of this fiasco. Then the market quickly corrected and Apple was back to $246 (and really was under $220 for less than 5 minutes. The investor has lost over $26/share and Apple stock went back to a proper price.

Congress has already been talking about financial reform and tomorrow, and maybe over the next week, they will be pointing to this event as another reason it is so badly needed. This won’t end at a bad trade.

Through TD Ameritrade I recently was able to gain access to the Investools Investing Foundations course. I’m through about 25% of the course and thought I’d share some thoughts on the course. I only have access to the course materials and trading rooms. I do not have access to any coaching (by choice). So those are really the main areas I can currently review.

First, their stuff is expensive. Talking to them, the Investing Foundation course starts at $300 with no coaching and 6 months of access. The Options courses are over $1,000 and the high probability trading course is over $6,000. You could’ve guessed this since they do not reveal any pricing information on their web site.

I think the materials (course manual, videos, web seminars (they call these trading rooms)) contain good information. So far, it’s all stuff that I had learned from day trading index futures in the past: trading plan, risk vs. reward, psychology of trading. But it is all good information, especially for a new trader or someone who is struggling to trade. The course will teach a lot of things that are important to successful investing and for the struggling investor may help them identify where their struggles are.

For the experienced investor, the investing foundation course would serve as a good refresher (I believe it is included with the purchase of other courses). I’d have to leave the ultimate decision on whether the course is worth the price to the purchaser (we all value money differently). I was certainly taken aback by the pricing when I heard it. We’ll see if this course is able to help get me more active in the markets. Ultimately, my two biggest weaknesses in investing are my risk-averse personality and staying an active investor, not a lack of knowledge/understanding.