That Time We Fixed Wall Street…

 

Do you remember that time when Wall Street nearly destroyed the global economy? Perhaps so. Fortunately, we fixed all the problems and patched the holes, right? Not so much. The big problems were banks having no skin in the game while peddling ticking time-bombs ( mortgage-back securities and other fancy derivatives). There were also the issue of unregulated derivatives called Credit Default Obligations (CDO) and Credit Default Swaps (CDS) –  side bets on mortgage-backed securities. The leverage created by a CDO is like getting a $1 million insurance policy on a $50,000 car.

Who’s the Boss?

boss

Fortunately, we fixed the problem…right?  According to the new president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, we still have banks that are still too big to fail. It is important to mention that Kashkari is a member of Government Sachs – a Goldman Sachs alum that has walked through the revolving door from Wall Street to the Treasury Department then back to the private sector…and now to the Federal Reserve.

The key problems often cited as leading the financial crisis were consumer bank savings deposits being available for risk-taking (Glass–Steagall, repealed during Clinton Administration); unregulated risk-taking (CFTC regulation of derivatives was weakened during the Clinton Administration); and, easy credit and no-document loans that could be combined into “safe” products called mortgage-backed securities. These products, considered “safe” as AAA-rated corporate bonds, were sold to the next sucker (investor). Realtors, brokers, underwriters, and investment banks didn’t have to assume the full risk of holding these securities. The bag-holders (losers) were homeowners, investors that did not hedge (see The Big Short), and taxpayers.

Continue reading “That Time We Fixed Wall Street…”

Green Habits that Keep Green in Your Pocket

It’s hard to get motivated to be “Green” when you see the prices of Hybrid cars, and green cleaning products, and recycled, post-consumerism goods. But what if you were told that by being green, you can keep a lot of green in your pocket? No, this can’t be so, you say. This person must be one of those non-realistic hippies who expects us to wear hemp pants and drive cars made out of recycled soda cans. No, I have a love of designer labels like the next person. However, I have learned a few good tricks on how to keep your taste while not being a trash creator.

Speaking of taste, let’s talk about what you eat. The average human being throws away about 600 times their weight in their lifetime. A good majority of this waste is food packaging. Packaged food may seem like a deal, but on average, it comes with great costs. The packaging creates a great deal of waste, which requires multiple trash bags, and multiple trips out to the garbage can.
Also, take a look at prices on those packaged goods. It may seem like those microwave lunches, boxed pizzas, and soup cans have great prices, but they tend to have less food matter than a barrel of fruit at the same cost. Nature does a nice job in providing us food without packaging. Fruit and vegetables all come without packaging and can be easily recycled in a compost pile. Fresh meats can be packaged in a reusable container. You will actually have more food in your fridge, less weight around your waistline and less trash in your can if you stick to non-packaged or lightly packaged foods.

Next, take a look at your utilities. Energy efficiency can save you big bucks. You can make an immediate impact on your wallet by turning off lights, using cold water to wash your clothes, and taking shorter showers. Take it a step further by replacing all your bulbs with energy efficient LED bulbs or replacing your electric hot water heater with a solar one. Many electric companies offer energy audits, and for a very low cost will seal windows and door frames, and give you advice on better insulation tips to save money on heating or cooling costs.

Another large area that leaks money out of your pocket can be the outdoors. Lawns, plants, and bushes can require a large degree of chemicals that pollute the earth and water which can be precious and cost big bucks. Try to landscape with low maintenance plants, rocks, and fake grass. Build up low-maintenance stone or brick patios, walkways, and or gardening strips that do not require chemicals or water and can be enjoyed for years to come at no cost. Small investments in wood chippers, compost barrels, and rain barrels can have long-lasting effects in naturally caring for your outdoors at low cost and recycling lawn and food waste.

Clothes is another big area that gets neglected for recycling. There is no need to have massive amounts of clothes that eventually end up in the trash. Use old clothes, sheets and towels for rags around the house instead of sponges and paper towels. Take older clothes in good condition and trade them with friends or co-workers to own something new. This will keep you freshening up your wardrobe without spending the cash.

Living green is a way of life, and with some effort, it can be a way of life that saves you money. When you are creating less trash, you are not only saving your environment, you are also saving in the bank.

Spendology Launches Instant Budget App

Spendology has launched the Instant Budget App for Android. Instant Budget calculates a smart, local, and personal monthly budget in just minutes. Smart: we used crunched the numbers so you don’t have to. Local: we used zip codes and our U.S. Cost Matrix to connect to sales and use taxes, cost of living, and gas prices. Personal: we utilize the personal habits to develop the budget estimate.

In addition, Instant Budget provides a spending breakdown, a comparison to national consumer spending averages, and identifies ways to save money. The app is available for download for $1.99 in the Google Play Store. Spendology will be developing a version of the app for the Apple AppStore.

Spendology. Smarter You. Smarter We.

About the Company

Spendology activates intelligence in individuals and organizations. Smarter You: Apps that activate financial intelligence. Smarter We: Software and services that activate intelligence in organizations. Bank of America is a Spendology customer. The company is based in the Washington, DC metro area. Spendology was founded by K. Alexander Ashe. Mr. Ashe is a graduate of Florida A&M University and Columbia University. He previously worked as a management consultant at Booz Allen Hamilton and the Corporate Executive Board.

http://www.spendology.net

Contact: K. Alexander Ashe (240) 479-4705 contact@spendology.net

See the PR Newswire press release

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Reverse the No Budget Trend

61 percent of consumers do not have a budget according to an annual survey from the National Foundation for Credit Counseling.

Source: NFCC
Source: NFCC

Budgeting is Difficult

Cognitive bias gets in the way. Humans go for the default choice on difficult decisions. Most Americans are not organ donors because they don’t want to think about their mortality. Creating a budget is difficult because it forces consumers to actively face serious financial constraints.

Instant Budget App

Budgeting doesn’t have to be difficult. Spendology has been using psychology and advanced analytics to make budgeting super easy. We will soon be launching the Instant Budget App which will help consumers create a smart, local, and personal monthly budget in just a few minutes. Instant Budget is smart because it uses anchoring, a form of cognitive bias, to the benefit of consumers so that no invoices, contracts, or receipts are needed to create a budget.

Smart: We have crunched the numbers. If you tell Instant Budget that it takes you 30 minutes to drive to work, then we can calculate your transportation costs including gas for the entire month.

Local: We’ve conducted thorough analyses resulting in the Spendology Cost Matrix. We use your zip code to identify sales and use taxes, cost of living factors, and gas prices.

Personal: The resulting budget estimate is based on the personal habits of the consumer.

Follow Spendology on Twitter and Like us on Facebook for more info.

Get ready to help Spendology #ReverseTheTrend. Follow us on Twitter and Like us on Facebook to be first to learn about the Instant Budget App launch.

Do You Need A Financial Advisor?

You don’t have to be a millionaire to afford a financial planner, let alone benefit from their advice. People of vastly different incomes and overall wealth seek valuable help from financial advisors everyday.

Financial questions and decisions are a part of life. Financial advisors go to school and have experience finding the best methods for solving financial dilemmas, from paying off large amounts of debt to investing for retirement. So how do you know when a financial planner’s experience and knowledge can benefit you? Here are three instances where it might be a good idea to consult with a financial advisor.

Looking To Make Financially Smart Investments

Investments are an important part of your overall financial picture. Once you have enough money saved up to start investing it’s important to honestly ask yourself: Do I have the experience and knowledge necessary to make financially smart investments?

You can be a very smart, well-educated person yet still remain unqualified to properly invest money because it’s a niche industry that requires specified knowledge. Smart investments also take a good amount of time to research and follow up, and so it’s also important to consider if you have adequate time to keep track of your investments.

If you have the time and experience to make great investments on your own, there might be no reason to pay a financial advisor to do the work for you. Although, if you don’t have the knowledge or time, a financial planner could really help you upgrade dividends earned through investments.

You Own Your Own Business

There are so many different financial aspects regarding owning your own business. You have to figure out how much you can afford to pay yourself and employees while still keeping your business in the green. According to Forbes.com, hiring a financial planner can help your business prioritize goals and make financially savvy decisions that greatly pay off in the future.

You Have A Growing Family

Add a spouse and kids to the mix and finances become more complicated. Daily bills plus medical costs, childcare, saving for college, etc. all starts to add up and feel a bit overwhelming. There are a number of options you can take advantage of that you might not know about. Working with a financial planner can benefit you and your family in the short and long term.

Tips How To Find A Reputable Financial Planner

A reputable financial planner will be honest if they can or cannot help you out. Unfortunately, if you watch enough episodes of American Greed you know the world is full of dishonest scammers. The most important thing is to find a reliable professional you can actually trust. Here are a few tips you should keep in mind when seeking a financial planner:

-Financial planners specialize in different areas, such as retirement, savings, or investments. Find a financial planner specializing in what you need.

-Make sure your advisor has his/her CFP credentials, meaning they passed a rigorous test from the Certified Financial Planner Board of Standards.

-According to financial writer Trent Hamm, you should always ask about advisor fees upfront. Be leery of planners that only make money from commissions buying or selling stocks.

-Make sure that your advisor focuses on you and what works best for your financial picture. Your financial goals should his or hers, too.

-Listen carefully, ask plenty of questions, and take notes. Doing your own research to back up what your planner tells you can also help you more at ease.

A financial planner can help you identify rewarding ways to handle your money, but that doesn’t mean that you are completely free from your financial duties. You are the captain of your own assets. Protect your money by making sure no one else has full control of the steering wheel besides you, not even a financial planner.

Op-Ed: David and Goliath Trademark Dispute

My company, Spendology LLC, started using the SPENDOLOGY trademark first and applied for federal trademark protection 7 months before PNC Bank. Nonetheless, the bailed-out bank hired one of the largest law firms in the US to persuade me to “abandon the trademark and adopt a new one”. The PNC Financial Services Group, Inc. or PNC Bank has succeeded in its attempt to use legal action to prevent my company from registering its trademark and namesake. The story starts a few years ago when I decided to start a company that would use psychology and analytics to advance intelligence. I had an ambitious goal – I just need a name for it.

It was a bright summer morning in 2010 when I woke up and had an epiphany. It was on that sunny July morning that I finally put a name to it, SPENDOLOGY, the psychology behind why we spend and how we can spend more wisely. I searched to see if the name had previously been trademarked on the US Patent and Trademark website. I also conducted several Google and web domain searches to ensure the name was not being used by company. As it turns out, there were no registered trademarks, trademark applications, or search results showing companies using the SPENDOLOGY trademark in July 2010.

I had recently read Dan Ariely’s first book, Predictably Irrational, which looked at behavioral economics research showing that people don’t always make optimal decisions. I previously worked as a management consultant making decision support tools for senior executives. I thought it would be great to put these powerful tools in the hands of everyday people. I wanted to combine insights from behavioral economics with the power of smart algorithms to help people make better decisions. Next, I developed the Instant Budget Calculator, an online financial calculator that has enabled over 1500 Spendology customers to create a smart, local, and personal budget in less than 10 minutes. Creating a budget is difficult. The 2014 Consumer Financial Literacy Survey found that a whopping 61% of consumers do not have a budget.

I decided that I should protect the namesake of my company by seeking federal trademark protection. I submitted a trademark application October 25, 2011. The SPENDOLOGY trademark application was published in the US Patent and Trademark Office’s Official Gazette on June 12, 2012. The PNC Financial Services Group applied for the Spendology trademark on June 12, 2012 and sent me a cease and desist letter dated June 13, 2012. On October 10, 2012, PNC filed a Notice of Opposition with the USPTO’s Trademark Trial and Appeals Board with the goal of preventing my firm from registering its trademark. One of the largest banks and one of the largest law firms in the United States were successful in combining forces to cancel my firm’s trademark application.

I thought about quitting. I hired and fired several lawyers. Many lawyers I spoke with suggested that I give up. This was regulatory capture at its best. PNC Bank, a recipient of TARP bailout funds, was Too Big to Fail, Too Big to Jail and Too Big to Be Wrong. The Department of Justice and Federal Regulators refuse to take Wall Street to task for willfully crashing the economy. Main Street is still reeling from the financial crisis. PNC is continuing to wage War Against Main Street.

Big companies with deep pockets, like PNC, can use “legal force” to cancel the trademark applications and registrations of startups or small businesses – even if the startup used the mark first. The implications of this far-reaching. Moreover, the Supreme Court is scheduled to hear a landmark case (B&B Hardware, Inc. v. Hargis Industries, Inc.) on December 2, 2014. The Supreme Court’s decision will directly impact the matter between Spendology LLC and PNC Bank.

I founded Spendology so that I could empower people and organizations to make better financial decisions. Now, I am in a battle for my company’s namesake; albeit, the matter goes beyond my company’s property rights. I am fighting to prevent another entrepreneur or small business woman from being deprived of their property rights despite having done all the rights things. This is a struggle that can be likened to the battle between David and Goliath. Yet, we all remember that, in the end, David triumphed over Goliath.

Are Women Risk Averse?

Men are risk takers and women are more risk averse. You have heard this fact without much debate for many years, but turns out it might not be true in regards to investing. Still, many current statistics seem to point out that women do not take the same risks as men. For instance, according to the Federal Reserve’s Survey of Consumer Finance, women do hold less risky stock positions in comparison to men.

This fact is easily linked to psychological studies that find men and women do have neurological differences when it comes to risk analysis. Women tend to visualize things with enhanced clarity, including worst-case scenarios, meaning they might be less avid about making a risky decision with a potentially negative outcome.

What other factors could make women less likely to jump into risky investments? According to the latest research on the matter, women are willing to take just as many financial risks as men, the reason they don’t may have more to do with inequality than biological differences.

Are Men Really That Risky?

It is a long held belief in our culture that women are not as financially risky as men, although some are starting to argue this isn’t true. According to a Prudential Financial survey, women view themselves as savers opposed to investors. Interestingly though, this same survey revealed a large majority of men also favored savings over investments. This shows women are not the only ones hesitant about taking big risks for potentially big rewards.

Julie Nelson, the chair of economics at the University of Massachusetts, Boston, has done extensive research on the matter; analyzing over 20 different scholarly papers that all “prove” women are less likely to take financial risks. Going over the data presented in each study, Nelson doesn’t think these studies show what they say. Instead she thinks the researchers up play small differences and downplay many overlaps between men and women and how they handle money.

The Underlying Problem That Keeps Women From Investing

If women are just as willing to take financial risks as men, why do women have less money in their bank accounts and 401(k)s? This puzzle might be easy to piece together, just take a look at salaries for men and women. Even in our age of gender equality, men still make more money for the same job, even with comparable qualifications and experience. In the financial services industry, women bring in about 44-62 cents for every $1 a man earns. In other industries the gaping discrepancies still exist as well.

Interestingly, women that do earn a high salary are more likely to put their money into risky investments. The same goes for high earning males, who are also more likely to invest than their working or middle class male peers. The problem is that fewer women earn a generous income than men, even within the same fields of work. Men that are more willing to invest money tend to do so because they feel confident in their ability to make back losses with their regular salary. In other words, women might take fewer risks because they have less money to risk in the first place.

Socioeconomic Class or Gender: What Really Influences Investments?

The Consumer Federation of America asked people with annual salaries between $30,000 and $100,000 what they would do if they were suddenly $1 million dollars wealthier. Would they use the majority of it to purchase stocks and bonds, or would they keep most of it tucked away safely in a savings account? 1 out of 5 middle-class individuals agreed they would invest a large portion of the money. When this same survey consulted people making over $100,000 annually, more than half said they would invest most of the money.

Clearly, the wealthier you are, the more room for risk you have in your portfolio. If you are unsure when, if ever, you will have access to this much money again, you are more likely to hold onto it somewhere safe, like a savings account.

If you keep your money tucked away in low-return savings accounts, you are not going to make much of a return. Taking a few risks can earn you incredible and even life-changing rewards. To feel about about investing in the volatile markets, consider a well-balanced portfolio that manages your personal expectations and goals.

 

Bitcoin Regulation is Inevitable

The cryptocurrency, Bitcoin, is becoming more mainstream. Yesterday, online hotel booking company Expedia announced that it was teaming up with San Francisco-based start-up, Coinbase, to enable customers to book hotels using bitcoins. Digital currencies like bitcoin are quickly becoming an alternative to  traditional currencies because of the process for creating, exchanging, and storing bitcoins with the use of the bitcoin protocol and third-party miners. Bitcoin enthusiasts, economists and politicians have mused over whether bitcoin can actually be considered “money” or “currency”. These initial discussions are just thought exercises, but regulatory action is likely to follow.
 
All Eyes on Bitcoin
 
Federal Government agencies including the SEC and the IRS as well as financial regulatory organizations like FINRA have taken a look at bitcoin. The SEC has issued alerts regarding bitcoin-related Ponzi schemes. FINRA also released an Investor Alert that labels Bitcoin as a “More Than a Bit Risky”. The SEC and FINRA’s perspective on the digital currency is mostly cautious and negative. The IRS provided guidance on the tax implications of bitcoin – it would be treated like property. A complicating factor is that bitcoin transactions would be taxed based on the difference on the USD dollar value of each side of the transaction. So, if someone purchased 1 Bitcoin for $633.1 USD today and then aid 1 Bitcoin for, let’s say $1000 USD, for a product or service in the future they would owe the difference ($1000 – $633.1) in taxes.
 
There is a silver lining. Chicago Fed senior economist, Francois R. Velde, wrote a great primer on Bitcoin. Unlike some economists, Velde considers bitcoin to be a fiduciary currency. He goes into some detail about the genius of bitcoin, mining, and blockchains. However, Velde concludes that it is “unlikely that [bitcoin] will remain free of government intervention”.  Therein lies the rub. The regulators are coming.
 
Getting Ahead of the Regulatory Wave
 
What can be done to get ahead of the regulatory wave? This is a case where perception is reality. Bit coin stories about  failed exchanges, online drug-trafficking sites, and Ponzi schemes cast a very negative light on the digital currency. Moreover, in the rare event that we are headed into a bitcoin bubble, dumb money tends to follow smart money. People are predictably irrational. I have previously advocated that bitcoin exchanges come together to develop minimum standards for security, operations, hedging, and capital requirements. Developing a regulatory organization for exchanges (like FINRA) could reduce the potential for regulatory backlash from US states and the Federal Government. This self-regulating entity could also tackle other issues like consumer education, evaluating proposed legislation, and studying best-practices for hedging and tax-planning. These actions could improve the perception of the US bitcoin exchanges and prevent or lessen regulatory overreach. Government intervention in digital currencies is not possible, it’s inevitable.