Planning Your Life Finances

In 1980, I had my BS and AAS degrees, my house, and new car. It was time to pay off my debt. Nearly all of us have some kind of debt, whether it’s a mortgage, student loans, medical bills, credit cards, or even a loan to our father-in-law we still need to pay back. Let’s look at freedom from debt and think about how we can get out of debt faster – or at least make sure we’re managing the debt we have most effectively:

• Some mortgages are definitely subject to being renegotiated. If you feel that your mortgage payments are unreasonable, your financial situation has changed, your rate is higher than current market interest rates, or other factors have made your mortgage too burdensome, look into refinancing your home mortgage.

• Whether undergraduates or PhD candidates, the one thing many students have in common is the student loan debt they’re accumulating. And like credit card debt, the traditional advice has been to pay off the highest interest loans first, especially if they’re variable interest rates that can rise or fall. One course is to consolidate private loans, but do so only if you have an excellent credit score, since many consolidation loans carry variable interest rates.

• Credit card debt, since it is usually the highest rate and nondeductible, is traditionally the debt financial advisors suggest tackling first, and with good reason. High interest rates and finance charges can keep you from putting money away toward retirement, a home, buying the car of your dreams, your children’s education or countless other significant expenses that may have to wait until you get “out from under.” Look at your credit card debt honestly and see if you can find more effective ways to manage it, whether it’s asking your card issuer for a lower rate, trying to get a better balance transfer rate, or credit consolidation.

Explore your options for more freedom from debt in these areas and you might be surprised at how relieved you’ll feel. You will also be surprise that you will have more money to do other things with.

Investing Using TV and on the Internet

The World Wide Web

About 99% of my stock and bond transactions are done on the internet. But don’t think that I am not careful who I use as my online broker.  Since I was in my early 20s, I ran into some character brokers as well as brokerage firms in my day. In the day of cyberspace and media hype, people have to be very much alert as to what is going on behind the internet curtain.  

You probably remember the media hype behind “Facebook.” They talked about this company going public for almost a year.  The week of May 14^th, all news networks on all the major stations and the financial news stations on cable talked about it like the world had no other news. By the day it was to open, that was all the news people talked about, like the world’s future depended on this company. They suggested that this stock was going to go up and that the people who got in on the ground floor were going to be rich. The news people gave others the idea that if you are not in on this good thing, you are going to miss the boat. 

The stock opened on Friday May18, 2012 at $42.05 and collapsed from there and so did the volume on the stock. By the morning of May 22, 2012, the media was asking, “what happened? “  The answer was simple; the public did not buy into the media hype. They were burned in the market down turns of 1989, 1999, and 2008. They were burned in the housing and internet stock bubbles. The insiders who bought the stock before Facebook became public got a big surprise.  These insiders thought they were going to dump the stock on the unsuspecting public but they found that they had no buyers. By the opening on May 22, 2012, it was every insider for themselves to get what they could out of the current stock price. At 10:00 AM the price stood at $30.98.  

When I first started investing in the markets in the 1970s, it was illegal and unethical for the major media to advertise a company’s stock on TV. Today, they participated in this Facebook “Pump and Dump” scheme. “Pump and Dump” schemes are run mainly by unscrupulous companies, market making brokerage or large shareholders.  The goal is to interest unwary investors, who then drive up the stock price through a buying surge. The schemers stand to make substantial profits when they sell their cheap shares. After the price collapse, talk of the company ceases and the schemers move on, hyping a new stock.    

This type of thing goes on in cyberspace all the time. I wish I had a dollar for every email I received about a hot stock to buy to make me rich. As the internet gets more popular so will fraud using the internet as its tool. 

Beware and be realistic when it comes to the Internet. 

1.       Don’t expect to get rich quickly. That mess only happens in the movies. If you can trade in nanoseconds on the internet successfully, then you may have a good chance of striking it rich just like I have a good chance of becoming the King of England.

2.       Don’t assume your investment bulletin board is policed. Nothing prevents a con artist from posting stock tips for a swindle.  Only if people start complaining about something on the board does the cyberspace police do anything about it. 

3.       Don’t buy thinly traded, little-known stocks on the basis of online hype. These are stocks that are most susceptible to manipulation. With low volume, market makers and other interested parties can make the stock go up as well as down.   “Penny Stocks are good scam targets.” 

4.       Don’t act on the advice of a person who hides there identity.  They can be people with an interest in getting you to buy or sell a stock for their own interest. These people might be undisclosed brokers, investors, or company insider’s intent on driving the stock price in their direction by using false or baseless speculation that is difficult or impossible to disprove.  Don’t assume that two or more people talking up a stock are different people.   

5.       Don’t get suckered by claims about “Inside information.” It is extremely unlikely that genuine insider information will be broadcast on an investment bulletin board. Federal insider-trading laws prohibit such practices. 

6.       Don’t assume that all claims have been proved by information or visits. People who hype stocks make all kinds of claims that they say are backed up by visiting the company. Most of the time they don’t tell you who it is that is making the claims. In the case of Facebook, the media claims that Facebook is going to make a lot of money because of who they are. By the time Facebook became public, these claims were not realized. So the market trades are based on speculation of what Facebook may earn in future years.  Here is the reason for the stock drop.

7.       Don’t forget to look for potential conflict of interest. A growing number of online stock analysts receive cash or shares in exchange for a glowing comment about the company in question. Federal Law requires analyst to disclose this fact but some make little effort to do so. 

8.       Check out your investment opportunity first with your state or federal securities commission. In Pennsylvania this would be the Pennsylvania Securities Commission (1-800-600-0007). If you are in another state, check the internet for information for your state or contact the Federal Securities and Exchange Commission.  www.sec.gov

A Good Credit Score is to Your Best Advantage!

I have over 25 active VISA and MasterCards but I only use one credit card.  No, I am not crazy, I use them to increase my credit score and reduce any interest rate charged to me on future loans.  

I can identify people who have no clue how credit works just by listening to what they have to say.  If you feel like you’ve got too many credit cards in your wallet and you’re thinking about closing some accounts and you want to cut up the cards, forget about it.

It is a good idea to look at how the credit scoring process works and what affect closing credit accounts have on your score first. Pay close attention to your Credit Utilization Rate and the terms of the credit cards that you want to cancel.

Credit Utilization Rate 

One of the factors that figures into your score are your credit utilization rate, which measures how much debt you have compared to the amount of credit you have available. In other words, the more credit you have access to but don't use, the better your score. Consumers with the highest credit scores typically only use a small amount of their available credit at any given time. 

By closing a credit account, you have less credit available. This makes it look to credit bureaus as if you're using more of your existing credit, even though you might not have made any other changes in your credit behavior. And that raises your credit utilization rate, which could put a dent in your credit score. 

Terms of the credit card

Understand the terms of the credit card account you wish to close. To attain the optimum score, you need to have open, positive accounts that demonstrate a diverse mix of credit. 

If you do Still Want to Close Accounts 

When I do close an account, I close the accounts that carry a substantial annual fee; especially after a balance transfer introductory rate has expired. I suggest you do the same. Just be sure, if you feel you must close accounts, you're not about to make any major credit-dependent purchase, such as applying for an auto loan or even a mortgage. 

You’d be better off closing them once you’ve secured your mortgage. The lower your Credit Utilization Rate, the better your score, the lower your potential interest rate for new loans. 

A slightly lower credit score could result in a higher interest rate than you deserve and end up costing thousands more over the life of a loan.

****

This is the end of the first 60 days of 2013 so how is my Individual Junk Bond IRA investments doing? My chart shows that my portfolio increased by 1.723% in the past 60 days (does not include my yearly contribution). Savings accounts at bank increase yearly at .5%. So far the stock market in general is ahead of me with a 7.52% for the past 60 days. If you pick the right stocks you can have that return.

Mommy and Daddy Will Not Be Around Forever!

OK family, read this and take action!

For you people who are just getting into the work force for the first time, I want you all to know that your mommy and daddy will not be around forever.  I know that is a shock but I thought that I would bring that reality to you. Mommy and daddy, you are not doing your children a favor by ignoring the fact that they will achieve retirement age one day and will have to have a retirement plan to deal with it. You should be or should have taught them that they have to start investing for retirement today. Just look around at all the people who have not done so today. Many are looking for help and are not finding any. Have your children read this information that I am making available free to the public. This free information may be the difference between living in a retirement home and a “falling down, shootem up” Ghetto at age 65.  

Anyone with earned income to report on a tax return is eligible to set up a tax sheltered IRA. You can put aside up to $5,000 a year.  If you are 50 or over, you can put additional money into your IRA as a “catch up” contribution.

The advantages are that you can deduct all of it from your taxable income if you are not covered by a pension plan or you meet certain income tests.  Even if you do not qualify for the deduction, you owe no taxes on the earnings in the IRA until you withdraw the money.

This is the real deal of an IRA. Your earnings accumulate tax deferred and increase your IRA compounding. A yearly $4,000 nondeductible IRA contribution earning at a rate of 10% per year compounded annually over a 20 year period will grow to about $252,000. If the account were taxed annually at a 25% tax bracket, the account would grow to only around $186,000.   

The disadvantage of an IRA is that if you withdraw money from an IRA before 59.5 years, you are subject to a 10% penalty tax, plus regular income tax on the amount withdrawn, except under certain circumstances.

They are:

1.       Paying certain college or other higher-education bills for you and your family
2.       Withdrawing money to buy or build a house
3.       Paying medical expense that equal 7.5% of your income
4.       For Regular IRA to Roth IRA conversion. 

You may not make contributions to your IRA once you reach 70.5 year of age.  In that year, you must start withdrawing your funds from your IRA.

Full Call on Chiquita Brand International Inc.

In 2008 I bought several Chiquita Brands Intl. Inc. 7.5% of 11/01/2014 Sr. Notes at $650. If you recall, the economy went into the “shitter” in 2007 and was in full decline in 2008. The economy took the stock and bond markets with it. So in late 2008, I saw the opportunity to start a very aggressive retirement program. I was saving for retirement since 1980 but other events like saving for children’s college, cars, and houses took priority. So I was not able to put away large amounts of cash until I started working full time and other financial distractions were taken care of.

Chiquita Brands gave me a yearly return of 11.538% for the last 5+ years. The bond is a “B-“rated bond that matures on Nov. 1, 2014. But then I got a shock. The bond is being “called” at $1,000 each. So now I am crying all the way to the bank. I am only going to receive a “Yield to Maturity” of 12.517%. That means I will or have received 12.517% return on each bond for 5+ years.  I will receive my money on March 16, 2013. At that time, the money from this bond will be turned over into a new High Yield Corporate Bond.

This lesson is important because many brokers looking to make money for themselves will tell you that bonds get called like that is some crime punishable by 25 year in federal prison. Now you are armed with information that proves that the brokerage myth about bonds is a lie.  

According to Chiquita Brands International Inc., Chiquita’s history is a story of unique and positive transformation. From the company’s founding by Captain Lorenzo Dow Baker in 1870 to the addition of the Fresh Express brand in 2005, Chiquita’s dedicated employees have transformed the company into one of the leading socially and environmentally responsible produce companies in the industry.

Although Chiquita’s history includes storied moments in its past(over through of governments and economic slavery), the company now proudly focuses on extending labor rights, protecting our environment and investing in the communities in which they live and work. The company’s core values of integrity, respect, opportunity, and responsibility serve as the basis of their business performance and guide their everyday activities. As you may know, Chiquita Brand is known for its world-famous bananas, but they also offer all kinds of other fruits and vegetables.

Amerenenery Generating Co. Sr Note 7% of 04-15-2018

 

This is January 2013. That means it is time to allocate new IRA money for my retirement. I usually look for S&P rated bonds of BBB to BB- before I look for B+ to B- bonds. I could not find bonds that are rated better than  S&P B rated. Fitch cut the rating to B-. The business risk is greater with this bond than with a BB bond. But the 16.532% return on my investment is worth the risk. So I bought Amerenenery Generating Co. High Yield bonds.

Amerenenery Generating Co. Sr Note 7% of 04-15-2018 bought at $694.98. This bond is rated B by S&P and B2 by Moody’s rating service. My current yield is 10.526% and yield to maturity is 16.532%. They pay me $35 every 6 months on April 15 and Oct. 15 until the last payment on April 15, 2018

This means that at maturity, they pay me $305.02 at maturity and $420.00 for a total of $725.02. Don't forget, I get the $685.03 back for making the original investment. I put in my pocket $1,410.05 in total. 

Ameren Energy Generating Company operates a merchant electric generation business in Illinois. It also owns 42 miles of transmission lines. The company was incorporated in 2000 and is based in Collinsville, Illinois. Ameren Energy Generating Company is a subsidiary of Ameren Energy Resources Company, LLC.
1500 Eastport Plaza Drive
Collinsville, IL 62234

United States

Founded in 2000
618 Employees
Phone: 618-343-7700
Website: www.ameren.com
 

Ameren Energy Generating Company Announces Unaudited Production Results for the Third Quarter and Nine Months Ended September 30, 2012

Nov 9 12

Ameren Energy Generating Company announced unaudited production results for the third quarter and nine months ended September 30, 2012. For the quarter, the company produced 5 megawatthours of electricity against 6.3 megawatthours a year ago. For the nine months, the company generated 13.6 megawatthours of electricity against 16.5 megawatthours a year ago.

Ameren Energy Generating Company Announces Management Changes

Feb 9 11

Ameren Corporation announced that Charles D. Naslund will relinquish his positions as Chairman and President of Ameren Energy Generating Company, effective March 2, 2011. Also Steven R. Sullivan, currently the Senior Vice President, General Counsel and Secretary of Ameren, Ameren Missouri, Ameren Illinois Company, Genco and Ameren Services, was elected to the positions of Chairman and President of Ameren Energy Generating Company, effective March 2, 2011. Gregory L. Nelson, currently Vice President, Tax and Deputy General Counsel at Ameren Services, was elected to the positions of Senior Vice President and General Counsel of Genco, effective March 2, 2011.

Mon Jan 28, 2013 6:21pm GMT
 

Jan 28 - Fitch Ratings has downgraded the Issuer Default Rating (IDR) of
Ameren Energy Generating Company (Genco) to 'CC' from 'B-' and removed the
Negative Rating Outlook. According to Fitch's ratings definitions, a 'CC' rating
implies a very high level of credit risk such that default of some kind appears
probable. 

Fitch has also downgraded Genco's senior unsecured debt ratings to 'CCC-/RR3' 
from 'B+/RR2', based on an updated recovery valuation. Fitch has affirmed the 
'BBB' IDR of Ameren Corp. (AEE), 'BBB+' IDR of Union Electric Company (UE), and 
the 'BBB-' IDR of Ameren Illinois Company (AIC). Fitch revised AIC's Outlook to 
Stable from Positive. The Rating Outlook for both AEE and UE remains Stable. A 
full list of rating actions follows at the end of this release. 

The downgrade to Genco's IDR reflects Fitch's belief that, absent parental 
support or access to external borrowings, the merchant's business model, in the 
long-run,, is not sustainable. 

The ratings recognize that Genco's parent holding company, AEE, no longer 
intends to provide financial support to Genco, including funding for the 2018 
debt maturity of $300 million, and the significant capital spending required at 
the Newton coal-fired plant to be compliant with Illinois environmental 
regulations. 

Genco has the ability to exercise a put option that permits the company to sell 
three gas-fired plants to an affiliate for the greater of $100 million or fair 
market value. While the cash inflow from monetizing the plants would provide 
financial flexibility, the core fundamentals of the business remain weak, driven
by sustained depressed power markets, prolonged low natural gas prices, and 
anemic customer demand. 

Fitch considers the exit from the merchant business to be credit positive to AEE
as it lowers the company's business risk and allows it to focus on growing its 
more stable and predictable regulated utility businesses.     

The revision of AIC's Outlook reflects the unfavorable rate decisions decided in
late 2012 in the company's first two formula rate plan (FRP) proceedings, 
suggesting Illinois continues to be a challenging regulatory environment, in 
Fitch's view. The first two rate decisions resulted in an aggregate $53 million 
electric distribution rate reduction.  

In light of the ICC's rate decisions, particularly reliance on an average rather
than year-end rate base, Fitch expects regulatory lag to persist. The 
methodology to calculate rate base and capital structure are on appeal.

Under the FRP framework, AIC is required to invest more than $600 million over 
10 years, above historical levels, in its transmission and distribution systems,
with recovery of these investments to occur in the context of annual FRP 
proceedings, subject to ICC approval. AIC announced it is likely to defer 
approximately $30 million of infrastructure capex in 2013, until more clarity is
provided in future FRP proceedings. 

Fitch expects AIC's credit protection measures to be strong for the current 
rating category in the forecast period. Fitch expects FFO-to-interest to average
4.5x and FFO-to-debt 21% over 2013-2015. Those credit metrics alone would likely
warrant a one-notch upgrade, but Fitch remains concerned about future rate 
proceedings. Fitch will closely monitor the next FRP proceeding to be filed in 
May 2013. A more constructive outcome could lead to a one-notch upgrade. 

Fitch expects UE's credit protection measures to remain adequate for the current
rating category and in line with utility peers with a similar risk profile. 
Fitch forecasts FFO-to-interest to average 5.1x and EBITDA-to-interest 5.2x over
2013-2015. FFO-to-debt is projected to average 23.1% and Debt-to-EBITDA 3.4x 
over the same time frame. UE's financial profile is bolstered by the recent 
balanced outcomes of its last four rate cases.

On Dec. 12, 2012, the Missouri Public Service Commission (PSC) authorized UE an 
electric rate increase of $259.6 million, approximately 80% of the company's 
updated request. The tariff increase is based on a 9.8% ROE, and a 52.3% common 
equity ratio. The PSC permitted UE to continue to use its fuel adjustment 
clause, subject to existing sharing provisions, and its vegetation 
management/infrastructure inspection tracker. The PSC also allowed UE to 
implement a storm cost tracker. Regulatory lag remains an issue in Missouri. The
PSC relies on an historical test year with limited post-test year adjustments, 
and is prohibited from allowing construction work in progress (CWIP) in rate 
base. 

UE plans on spending approximately $3.2 billion in capital investments over 
2012-2016, including $2.8 billion in utility infrastructure and energy 
efficiency, and $400 million in pollution control equipment at its coal-fired 
plants. Fitch considers capex to be manageable.  

Fitch forecasts AEE's consolidated credit protection measures to be in line with
Fitch's target ratios for the current rating category. Fitch expects 
EBITDA-to-interest to average 4.4x and FFO-to-interest 4.3x over 2013-2015. 
Debt-to-EBITDA is projected to average 3.8x and FFO-to-debt 19.9% over the same 
time frame. Importantly, these ratios incorporate the negative effect of Genco's
financial results. It is likely that, on a deconsolidated basis, AEE's credit 
metrics would be stronger than currently forecasted, which Fitch would take into
consideration in its next credit review. AEE's credit protection measures are 
supported by current and projected utility tariff increases, and relatively low 
leverage at the parent level and utilities. 

Fitch considers AEE's liquidity to be strong. The funding needs of AEE's 
regulated subsidiaries are supported through the use of available cash, 
short-term intercompany borrowings, drawings under the bank credit facility, and
inter-company money pools. In November 2012, AEE renewed a $2.1 billion credit 
facility that matures in November 2017. Under the 2012 Missouri bank credit 
agreement, $1 billion is available for borrowing, and under the 2012 Illinois 
credit agreement, total available for borrowing equates to $1.1 billion. As of 
Sept. 30, 2012, AEE had approximately $2.38 billion of available total 
liquidity, including $298 million of cash and cash equivalents and $2.08 of 
unused credit facility borrowing. 

Consolidated debt maturities are considered to be manageable with $355 million 
due in 2013, $534 million due in 2014, and $120 million due in 2015. 

 Genco Recovery Analysis:

The unsecured debt ratings are notched above or below the IDR, as a result of 
the relative recovery prospects in a hypothetical default scenario. Fitch values
the power generation assets that support the entity level debt using a net 
present value analysis. The generation asset net present values vary 
significantly based on future gas price assumptions and other variables, such as
the discount rate and heat rate forecasts. 

For the net present valuation of generation assets used in Fitch's recovery 
valuation case, Fitch uses the plant valuation provided by its third-party power
market consultant, Wood Mackenzie, as an input as well as Fitch's own gas price 
deck and other assumptions. 

The 'RR3' senior unsecured debt Recovery Rating indicates Fitch estimates 
recovery of 51%-70%.  

 

Part 4: My Financial Affection for Suze Orman

                                        Suze Orman

Don't Buy It: "Only multimillionaires need a trust. You're all set with a will."


Oh, no, you're not! A will designates where your assets go after your death. But what if you become sick and incapacitated and need someone to oversee your financial affairs? Your will won't help, and court proceedings will be required to establish a guardian to act in your stead. A trust functions for your own use and benefit while you are alive—including designating someone to handle your affairs in the event of incapacitation—and when you die, the courts aren't involved in the transfer of your estate.

In my opinion: You need;

1) A Revocable Trust to allow your assets to pass to others without legal problems or long probate procedures. The transfer of assets will take effect automatically after your last breath. No probate or court cases are needed.

2) A Power of Attorney so that someone can carry on your affairs while you are still alive. It helps when you can’t carry on your everyday affairs for some medical or physical reason. This document dies when you take your last breath or when you terminate it.

3) You need a Will as a catch all, taking care of anything that might fall through your legal safety net. It comes alive when you lie.

Suze Orman’s Idea: Pay a lawyer to draw up a revocable living trust. Also arrange for a durable power of attorney—a document that enables you to appoint someone to manage all your financial and legal affairs on your behalf should you become incapacitated. Finally, you'll need a "pour-over" will as backup, covering any assets (like furniture and items of strictly sentimental value) you haven't put into your trust. The little extra time and money that go into these steps are well worth it, for your sake and that of your loved ones.

In My Option: You should discuss what Suze is telling you with your family so that family feuds and fights do not break out when you fall ill or upon your death. That is how many families loose their property when a key person in the family dies.

What did they do for the month of January 2013

The stock market measured by the Dow finished the first 31 days of the year with a 6.91% return. My High Yield Corporate bond portfolio only went up .958%, a little less than 1%. At the beginning of the year, a large share of the IRAs and 401Ks in the United States were funded. Fund managers have to do something with the cash. With most sellers out of the market, the portfolio managers of the funds buy what is hot in the market place causing stock indexes to go up.

At the same time, I fund my IRA at the beginning of January but high yield corporate bonds do not fluctuate that much. This is why I rely mostly on interest given by the bonds in my portfolio for appreciation of my portfolio. This caused my portfolio to appreciate in January. I rely mostly on interest payments and bond appreciation over the life of the bond as a secondary return on my investment.