Update from the Sleepless Armchair Fiduciary

Well, my wife had our baby on August 15th. I have to say being a dad is the coolest thing in the world. Of course, it comes with its fair share of challenges too (like six hours of crying last night). In any case, I will probably continue to be rather preoccupied with the new baby and staying awake at work as opposed to the blog. Rest assured that I will return with more posts as things settle down and I learn relevant personal finance lessons. In the meantime I have received a number of request to review 401k options after people read the Generic Guide to Investing a 401k. I am happy to help in any way I can, keep the questions coming...

Update from the recently absent Armchair Fiduciary

Sorry folks, but I have been quite busy preparing for the arrival of our new bundle of joy and generally settling in to our new house. These crazy markets have also kept the new job busy. In any case, it is already clear to me that the arrival of our daughter will limit the frequency of my posting. I have shared a lot of what I have to share in the last year or so, so from now on it will likely just be incremental stuff. In other news, our house in Denver closes tomorrow. We managed to get it under contract in a mere 7 days and after quite a wrangling period over the inspection (I mean who really expects a 1906 house to be like new construction? Seriously!). Ulitmately, we are selling for about 5% less than our asking price. We bought the place in 2003 and did a ton of work to it. All in we will make a modest profit despite selling in the worst housing downturn in years. It is also a good time to have some extra cash flowing in so I can average down on my recent purchase of mutual funds which is under-water for now. I intend to wait for the next major sell-off in the market before putting some money to work as I beleive this rally will not last for more than a month or two. I think there will be a chance to average in at the lows again in the fall.

Lots of Changes for the Armchair Fiduciary

It has been a while since my last post. There have been a lot of changes for the Armchair Fiduciary in the past few weeks. I quit my job, took a new job, and am moving from Denver to Dallas. There will obviously be plenty of posts to come about both the hunt for a new house and the sale of my existing house. Likewise chalk up a move to Dallas (where my wife's family is from) as an additional "cost of baby."

Why Are Taxes So Complicated? And a Simple Proposal to Fix Them.

The U.S. Tax System is broken. Any system that requires professional help, the use of a computer to file, and costs a bunch to file is broken in my opinion. The Federal Government estimates is takes 3 billion hours per year to comply with the tax code. The mean hourly wage in the United States is $18.84/hour. That means on average it costs at least $56 billion per year for Americans to file their taxes. We should absolutely scrap the entire U.S. Tax Code as it exists today.

What should we replace it with? I'd say a national sales tax is one simple solution. 45 of 50 states already collect a sales tax, so the incremental cost of implementing the system shouldn't be too much and we have already proven that collectin sales taxes CAN work. While I can't say I am an expert on it yet, the Fair Tax proposal seems to be a fairly evolved attempt at a flat national sales tax. It is supposedly bipartisan, though it appears to only have the support of two democrats in Congress which is not exactly a ringing endorsement. It gives rebates up to the poverty level, sheltering the poor from taxes altogether. It will dramatically reduce the cost of compliance since we already have a redundant sales tax system in place. Evasion will probably be no worse than under the current income tax system (some likely to happen under both systems).

Best of Armchair Fiduciary 2007

According to Google Analytics which I use to monitor traffic on Armchair Fiduciary for free here are the most read posts of 2007 (so far):

1) Wells Fargo PMA, the best financial combo package around? (146 views)

2) Should I Pay Down My House Early If I Can? (130 views)

3) How to Invest Your 401k: A Generic Guide. (115 views)

4) Got Loose Change? Thinking of Going to Coinstar? Forget about it. Save yourself 9%. (110 views)

5) 8 Random Facts About Arcmahir Fiduciary (103 views)


Thanks for making 2007 a great year and don't hesitate to suggest posts you'd like to see in 2008 in the comments!

Scalable Professions: Big rewards for the same amount of work

I recently read an interesting book called The Black Swan by Nassim Nicholas Taleb. Most of the book centers around the concept of fat tails. It is a bit of a dive into philosophy as well, which in my humble opinion made it tedious in parts. Overall though, it is a great read if you have some spare time. One part that was particularly interesting was a discussion about "scalable professions." Scalable professions are the ones that have big upside for the same amount of work no matter how many zeros start to follow the first $.

As I was browsing the Forbes 400 this weekend John Arnold struck me as the quintessential example of someone with a scalable career. At 33, he was the youngest member of the Forbes 400 this year. He has parlayed some good success in his Enron days and $8 million that came with it into a rather large fortune of $1.5 bil; greater than the GDP of Sierra Leone (population ~6 mil). John is an energy trader and his profession is highly scalable since it would require roughly the same amount of work to run a $100k portfolio as he would to run his $3 billion Centaurus Energy portfolio.

Non-scalable professions include dentists, doctors, and pretty much any profession where the rewards are directly tied to the time you put in. Taleb points out that it is the existence of scalable professions that has led to such a lopsided distribution of wealth in the world. It really does make one wonder. What happens when no one wants to be a doctor, or a lawyer, or a teacher because they could use their time and effort to get into more scalable careers? I don't have any profound answers as to what should be done about wealth distribution worldwide (though Jeffrey Sachs does) or how we keep people motivated to enter necessary but non-scalable professions, but if you do feel free to leave them in the comments. If you have some time read The Black Swan and spend a few minutes thinking about it.

Get Your Grocery Bag Rebate!

The Armchair Fiduciary spent the last week in Ireland on vacation. One thing that is abundantantly clear is that the Emerald Isles are green in more than one way. The landscape is, of course, incredibly green after what appears to have been a summer full of nothing but rain according to Irish radio stations. However, what is also clear is that this is a country full of recyclers. There are blue and red and green bins everywhere to recycle pretty much everything. Indeed, on a trip to the grocery store I discovered that they don't even offer grocery bags. You are supposed to bring your own. If you do want a bag you have to pay for it (I think it is a government levied tax). Now my hat isn't totally off to the Irish. I'm not entirely sure this policy is having the ideal effect because it seems like everyone makes 1,000 trips to the grocery store per week with only one bag in hand. What they are saving environmentally by using less plastic bags they are probably spending in gas for all those trips.


However, this got me thinking. Indeed bags probably do cost grocery stores a lot of money. In the U.S. how simple would it be for a grocery store to offer you a rebate to bring your own bags (the 10 a typical once per week U.S. shopper has)? The rebate could even be slightly less than the cost of the bags so it would be win-win for the store and the customer. Well the green geniuses at Whole Foods have already thought of this. If you bring your own bags to Whole Foods they will give you a 5 cent per bag rebate. Why doesn't every grocery store in the U.S. do this? This is a no-brainer. Write your local grocery store (if you can't afford only Whole Foods) and lets start saving some money and the environment people!

I Found a Wallet Today and Wells Fargo Wouldn't Help Me Get It Back to the Owner: What Gives?

So today I woke up and went outside (bed head fully intact) to pick up my newspaper. However, when I stepped onto my front lawn I noticed a wallet lying open there. I looked around and didn't see anybody so I went ahead and picked it up. Knowing how frantic I would be if I lost my wallet, I began looking for some way to get in touch with the owner.

Inside the wallet was some cash, a driver's license, a social security card, a Wells Fargo check card, a Saks employee ID, some various store credit cards, and the business cards of the boys Jane Doe met out at the bar last night.

Attempt #1 to return said wallet: I pop onto the Internet and go to whitepages.com. Enter Jane Doe's name. Not listed. Failure.

Attempt #2 to return said wallet: I jump in my car and drive the 10 blocks to the address on the license. I get to the apartment and look at the mail boxes. Jone Doe's box (#1) is blank. All the others have names. I ring the button for apartment #1. No answer. Damn. Failure.

Attempt #3 to return said wallet: I call Wells Fargo and explain the situation. I also explain that I understand they are not likely to be able to give me any information about Jane Doe. I ask may I please leave my contact information with you and can you call and give it to Jane Doe? No we don't do that sir, that is not our policy. Grrrr. Failure.

Attempt #4 to return said wallet: I go online and look up Saks. Thankfully there is only one in my city. I call Saks and ask for Jane Doe. I get connected to the cosmetics department:

Is Jane Doe there?
No she's not in today may I help you?
Well I have her wallet. Can someone call her with my contact information?
Sure let me take that down...

Needless to say 10 minutes later Jane Doe called and got her wallet back. It turns out she lived in an apartment next door and she lost it while chasing her dog through my yard. But what if she didn't work at Saks? Would I have had to give it to the police so it could sit in the lost and found forever? Would she have had to cancel all of her credit cards and get a new license and social security card?

It's all possible because Wells Fargo, which is a bank I am satisfied customer of, has a dumb policy in this regard. Here's just a tiny suggestion. If you want to build loyalty and have customers for life, help them get their wallet back if they lose it. That is if someone calls in and says, "I found a wallet will you please pass my contact information on to your customer?" For heaven's sake do it. I promise if I lost my wallet and you helped me get it back I would be a customer for life. This doesn't just go for Wells Fargo, all you credit card companies out there should be listening.

8 Random Facts About Armchair Fiduciary

Super Saver at My Wealth Builder has tagged me in a new blog project. This project calls for sharing 8 personal facts about myself, then tagging 8 other bloggers to do the same. Here are the rules , which were passed to me:

• Each player must post these rules first.
• Each player starts with eight random facts/habits about themselves.
• People who are tagged need to write on their own blog about their eight things and post these rules.
• At the end of your blog, you need to choose eight people to get tagged and list their names.
• Don’t forget to leave them a comment telling them they’re tagged, and to read your blog.

So without further adieu, 8 random facts about Armchair Fiduciary:

1. In addition to all things finance I like to run marathons (I have run 4 including Boston) and downhill ski.
2. Despite writing a comprehensive guide to investing a 401k, I contribute exactly $0 to a 401k.
3. The only reason I contribute $0 to my 401k is because my current employer doesn't offer one (otherwise I would max it out).
4. I have 3 cats.
5. My cats were cheap early on; $100 for two of them at the shelter and one of them my wife and I rescued from the street.
6. One of my cats had a bad kidney and that got really expensive in a hurry. I need all my money saver tips to make up for that $4000 surgery.
7. I still love my $4000 cat.
8. I drive a used Subaru WRX. It has comprehensive insurance.

Now it's my turn to tag. I tag:

Boston Gal

Personal Finance Guru

Prince Muddy Paws

Cool Cat Teacher (cats are cool, teachers are cooler)

Tom Roper

The IvyGate Summer Editors (Yes, Ivy League kids are idiots too)

Greg Hill (when he starts skiing again)

Subaru Maniac