Mortgage Information

This photo was on the cover of the free WaPo rag this morning. And lest you nonlocals become concerned about declining standards at the Post, I’ll explain that the Express prints all the wire reports that are fit to snark about and no more. Because I’m working with camera phone technology that’s at least three years old, here’s the full caption…On the ball: Workers perform a test of the New Year’s Eve ball on Tuesday in Times Square. Up to 1 million people are expected in New York City Wednesday to help usher out a year marred by a recession fueled by a mortgage crisis and Wall Street’s meltdown. In hopes of better fortunes, 1,000 balloons reading “Joy,” “Hope” and “2009″ will be released five minutes before the ball drops.Which is sure to guarantee a joyful and hopeful 2009 for everyone except the endangered species who ingest these glad tidings and die as a result of them. Or the folks downwind from NYC who wake up to find their yard full of airborne litter from their neighbors.I’m planning to join NYC in their spreading of good cheer this new year as soon as I can find a print shop that can fit “schadenfreude” onto a balloon.And really, why do these ball droppers believe that 2009 will be any different than 2008? Or even 1908? After all, there are still over 600 plutocrats who are willing to shell out $14,000 to sit in a room and watch their daughters present themselves to the world for marriage the same way that farmers line up along the rail at the county fair to watch their livestock auctioned off for slaughter. See? Everything’s fine with the economy!Although, I suppose that I shouldn’t be surprised that so many people turned out…The director of the ball, Margaret Hedberg, brushed off the $14,000 cost of a table — “Watches cost more.”And everyone’s sporting that kind of bling. Hell, in 3B’s last BK kids meal, he got a plastic Disney princess and a Rolex, although honestly, I wasn’t that impressed. I’m waiting for the meal that comes with a DBS.But amid all this good news from those whose balls drop in public once a year, endangered species, and robber barons, there is a spot of bad news for the five people left on the planet who somehow believe that Microsoft makes worthwhile good tolerable working products. Apparently, at 2 a.m. this morning, both all Zune 30s died (from David Connell).Actually, come to think of it, that brings me some hope and joy for 2009. Subscribe to the Bradstein feed–Vorsprung durch Technik!

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THE FUNERAL:beautiful. A. played guitar and sang during the service with his cousin and uncle, and the funeral procession took the long way through her small Indiana town, with people standing at the sidewalk outside of their homes in respect as we passed. Side streets were blocked off with banners, and the flag was at half mast. People were kind, others behaved poorly, it was crowded, it was joyful, it was mournful, it was family. And it was good to be in Mary’s house, though we’d never been in it without her there.THE SIDE STORY:We slept at Mary’s house on an air mattress in the back room in the freezing cold, under quilts we scavenged from the upstairs closet that may not have been unfolded since 1974. And no surprise, slept terribly and battled stabbing sinus pains and cement-quality congestion during the visitation and funeral the next morning. So imagine my relief when I found– and swallowed– a friendly Tylenol Allergy Sinus I discovered in the bottom of my purse while standing on the front porch of the funeral home. And imagine my horror when I turned the package over and read “nightime.” The rest of the day I was mildly stoned and not too upset about it.OUR HOUSE:Is a shameful mess, suitcase still loosely packed in the living room (where I’ve been putting on deodorant by the front door for a week), dishes in the sink, clothes everywhere. We’re replacing the kitchen faucet tomorrow if we can muster the energy– the faucet slowly disconnects from the sink every couple of days, the hot water handle is broken off and the sprayer is stuck at “on.” Also, the toilet is running, the back door frame is getting weirder, and I can’t even begin to list the other 80-year old elements of this house that could use some love, and yet still get none, as we have spent 8 of the last 12 weekends with one of us on the road to somewhere.But damn. It is so good to be here. This morning I started and abandoned a grocery list, ended up dumping dried beans from one jar to another in the parlor with Bird. There are still beans all over the floor, and that was over 12 hours ago. And guess what? There they will stay, along with the laundry and the pet hair tumbleweeds, junk mail catalogs and piles of things I intend to read, renegade socks and shoes, all of it. To quote a friend, “I prefer to waller in my squalor.” At least for this weekend, while I celebrate what looks like the (at least temporary) end of our two-state commute.MY FRIEND:is having surgery on Tuesday. We came home to find him– my 11 year old Bear Dog– with a very swollen ear, like some kind of poofy filled pastry attached to one side of his head. Turns out he has a hematoma– which would be a bruise on any other part of his body but on his little old ear there is no tissue to soak up the blood, causing this big pocket. The vet also pointed out a dangerously infected/ rotting tooth that has to go, so we will be spending our entire Christmas budget times two next week taking care of Sir Rottentooth Puffyears and his stinky old body. That sounds resentful, but I mean it with affection. He is both stinky and old, those are facts. Plus, he is family.MY BIRD:has had the two worst tantrums of her short life — and I do not exaggerate, I say WORST and I mean WORST– this past week, a result of 4 days of scanty parenting, absent bedtimes and a steady diet of crackers and bullshit during our trip to Indiana. I think she is back on track, but DUDE. I have seen the dark side, and it is terrifying.THE GOOD NEWS:Yes, we did! We came home from Indiana Tuesday afternoon and I went straight to work, then home to the demon-posessed version of my child, then onto the couch with a bottle of nyquil and only the strength to stay up long enough to see Ohio go blue on the map. And then, several hours later in the deep, deep dark of my cold medicine slumber, I received a “YES!” text from my friend Jen, and went back to sleep relieved and hopeful. The next day, my crushing head cold symptoms showed marked improvement. So yeah, things are lookin’ up all over the place.

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While screwing around on Facebook yesterday, I came across a group called I AM NOT ENGAGED, PREGNANT, OR BUYING A CONDO.
Oh hahahaha! I thought. That’s so witty! I must join immediately!
Except: I’m married, have a kid, and own a condo.
Now, if I quibble (what a LOVELY verb!) over semantics, I’m still eligible for membership, right? Technically, I’m not engaged, pregnant, nor buying a condo. Those phrases all indicate being on the verge of such thresholds, thresholds I’ve already and quite happily walked across. So why, praytell, do I want to join the damn thing?
It may have something to do with the fact that, last night in class, I referred to The Smiths, and no one knew what I was talking about. Or a few weeks ago, I said, “Nobody puts Baby in a corner,” and got a blank look in return. And this morning, on the train, I read this really disturbing article in the Atlantic about how people don’t read books anymore because of the quick-fix that is the internet, and it’s become difficult to digest more involved narratives because we’re so trained in google soundbites, status updates, and Twitter Tweets, and I know I’ve been Twittering lately instead of blogging because I just don’t have the time to sit down and write something longer, or maybe it’s that I don’t have the patience, and also, I have gray hair. I do. And a mortgage, mortgage with a capitol MORGE, I mean, “escrow” is an oft-used word in my current vocabulary. The world is changing, people; I’m changing—I used to be the girl who could join an I’M NOT ENGAGED, PREGNANT OR BUYING A CONDO FACEBOOK GROUP and now, now, now I’m an adult, one who is, like, shocked when someone doesn’t know The Smiths, one who is watching her 401K capsize, one who begins sentences with BACK IN MY DAY, who reads books, who will buy the good wine over the cheap wine ‘cause I’m not drinking to get drunk, I’m drinking ‘cause it tastes good, and I’m relaxing, it’s the end of the day in my home that I own with my husband that I married and our kid is asleep in the next room and still, still, still I check my Facebook account. Regularly. Because—and I’m not afraid to admit this—I LIKE STALKING.
(quick sidenote: We have two fan-f’ing-tastic interns for 2nd Story, and they went to this fancy professional-y audience development conference for us [Amanda and I couldn’t go]. Halfway through, I started getting texts from both of them about how the whole conference was old white men talking about these new-fangled computery thingiemabobs, have you heard of them? Facebook? Myspace? Twitter? And my interns [so awesome, these girls. Give them jobs. Pay them excessively] were like, D’uh, Old White Men! and then came back to the office and wrote a very detailed report which said, essentially, D’uh, Old White Men! except in very formal language. My point: Facebook as an effective networking/audience development tool cannot be argued, and while I’m enjoying 2nd Story’s surge in attendance since we started Facebooking and eBlasting and Twittering our shows, I also regularly enjoy the excuse of Facebook as a networking tool when what I really want to do is poke around in people’s lives, find out all sorts of juicy gossip and read witty status updates [many of which say things like SO AND SO IS UNCOMFORTABLE WITH HIS/HER ADDICTION TO FACEBOOK or SO AND SO IS TRYING TO FIGURE OUT FACEBOOK or SO AND SO DOESN'T CHECK THEIR FACEBOOK OFTEN (lies!) because to draw attention to your discomfort with Facebook allows you to hold on to your last shred of street cred. Except, Facebook is the new street cred. Like how thirty is the new twenty and beige is the new black. According to that Vogue I read in the doctor's office. 'Cause, of course, I don't subscribe to Vogue. Only Harper's, Atlantic Monthly and The New Yorker (and Cookie, my new favorite parenting magazine, which I'm stating here in parenthesis because it doesn't go with the sarcasm I'm trying to create, that whole "I'm so totally smart, I flick my nose at thee, Facebook,” flick! flick!)] [Aren’t I on top of my parenthetical-within-the-parenthetical! Usually I have to go back to the top to remember if I was in them or out of them] [good morning! My kid woke up at five! I've had so much coffee!] so whatever, I have a Facebook account).
Maybe, what I’m trying to say here is: I’m getting old.
And maybe, what I’m trying to say is, FINALLY.
But who knows, ‘cause I really don’t have time to think about all that what with everything that’s been going on, like, my kid can STAND ALL BY HIMSELF FOR SIX WHOLE SECONDS. And my students just turned in their rewrites, they’ve been working so hard and I’m really proud. And 2nd Story is throwing a ginormous New Years Eve party! You should come! And I’m working on this book, and I’m having FUN: no deadline, no pressure, just that slow, delicious process of figuring out the characters and the story, and I’ve sort of forgotten what that feels like. And other stuff, not that there needs to be more, ’cause the above is plenty, but there’s always more, stuff that jumps out of the woodwork, it’s life, it moves, run run run so you don’t get left behind, and I’ve been so busy keeping up with everything that I haven’t sat still to really consider this whole new reality I’ve recently entered, one that wouldn’t be welcome in an I’M NOT ENGAGED, PREGNANT OR BUYING A CONDO Facebook group, not because I’m married, have a kid and own a condo, but rather because I’m lucky enough to have found things that really matter to me, and I don’t have the time or inclination to be all witty and ironic and concerned with societal norms and unrecognized social conditioning and what, what, what does it all mean?
The girl I used to be spent a LOT of time worrying about that stuff.
The girl I am, man, she’s too busy. She just poured herself a really fancy glass of wine and curled up on the couch with Anna Karenina.

When I started blogging, I made several rules for myself. The first was that since the purpose of blogging is to communicate, and since even banker eyes tend to glaze over when I bring up a bunch of calculations, I would not ever do the math here.But I have been considering how to address Tom Carter’s belief that raising gas taxes would cause energy conservation (it’s a total fallacy), and it cannot be done without some numbers, since he doesn’t pay attention to the words.So I decided to introduce this deviation from rule 1 with a brief and simple analysis of solar power payouts. This analysis was done from a quote for solar-generated average annual usage replacement for a house in the Middle Atlantic region. Here are some numbers:The current monthly bill averages under $60 a month annually. A quote I got wanted $16,000 for the panels and equipment to replace the average usage and tie to the grid. I figured a low-ball installation of $500.The result, according to the figures of the organization selling the equipment, would be to reduce the annual utility bill to $0.00. In other words, I’d spend $16,500 to save $780 annually, so it would take about the life of the equipment to break even.But actually, I’d be costing myself money. The next “Alternative” block figures the return of taking that $16,500, investing it, and using the proceeds to pay the utility bill. At 5% return, I’d be doing better on my utility bill than with the solar power. At 3% return (3.22% is the last reported yield on 20-year Treasury bills), I’d be paying less than $25 a month for power. Plus, at the end of the 20 years, I’d still have my $16,500.Since the solar panels won’t last forever (20-25 years is the expected life), the third block looks at what would happen if I took $16,500 and used it as a 254 month (21.15 years) annuity with a residual value of about $500. This is most comparable to the alternative of investing in the solar panels. Needless to say, I would do far, far better at reducing my utility bill this way. (I have somewhat skewed this analysis in favor of the solar panels. The real cost of installation would probably be more along the lines of $1,500, because some trees would need to be cut down, and the municipality would want permits. And then the insurance company would want an additional premium to insure the thingie. Cutting down the trees would raising the summer heat levels considerably too.)This is the basics of most financial analysis. You compare any way of investing money not just on expected returns, but against other ways of investing that money. There are some other aspects that might not be immediately obvious.First, an investing alternative that is more flexible has an unquantifiable benefit, because it maximizes future economic flexibility and saves money that way. The solar option is basically a fixed option. Other investments are more flexible (for example, Treasuries will continue to be marketable) and thus may produce substantial future benefits.Second, of course this estimate of solar replacement works only if a very small percentage of total utility power supplied is replaced. As with wind power, solar power is periodic. Without the tie-in to the grid, the return would be much less, because power would have to be stored in batteries (very expensive, and causes loss of net power). Therefore, essentially the storage cost is avoided here by shifting the compensation to the utility company.If, as a society, we tried to replace a substantial portion of utility generated electricity by site-generated solar power, the cost of utility-generated electricity would go up significantly. This is because utilities would have to pay someone to develop alternate generation capacity, and since the alternate generation capacity would not be running at full capacity, the capital costs would be higher per unit of power used on grid.Solar power is really quite expensive. Wind power is cheaper, but even more fluctuating. It is easier to compensate for solar power flux than wind power flux, which is why some of the wind farms in Texas are paying ERCOT to take their power currently. The wind farms make their money through government subsidies. You can imagine what will happen when the government subsidies are cut.Third, it is obvious that a wholesale investment in solar power won’t pay off for most regions. No matter who does it, the net cost of solar power is not just the cost of the solar generating equipment, but the cost of developing and using (at less than maximum capacity) power sources to be used to balance the solar generation.Thus, it would be hard to generate any net jobs with such a program. No matter how you slice it, dice it, and shift costs around, solar power is substantially more expensive per unit of power produced, and thus it will, on net, cost society money. This is a recipe for getting poorer rather than attaining economic self-sufficiency.Fourth, you cannot offset oil imports with solar power used for home supply, because current electricity generation does not use substantial amounts of crude oil. In theory, electric cars might reduce oil usage, but first you will have to make economically viable electric cars, and right now they are not all that competitive. The cost of a Prius is about 80% more than the cost of a Hyundai Accent, and in some cases, the driver would use less gas in the Hyundai Accent with manual shift.

Before the election I wrote about this - Obama’s economic advisor said that the Obama adminstration would regulate CO2 as a HAP (under section 112). And since the election, Obama has promised again to do it:He repeated his campaign promise to create a system that limits carbon dioxide emissions and forces companies to pay for the right to emit the gas. Using the money collected from that system, Obama plans to invest $15 billion each year in alternative energy. That investment - in solar, wind and nuclear power, as well as advanced coal technology - will create jobs at a time of economic turmoil, he said.Corn farms over 500 acres would also be impacted. Larger churches, stores, apartment buildings - millions upon millions of new emitters that would have to apply for permits and pay fees. The fees pay for EPA processing the permits.So there’s no need to have fits about the EPA (The Supreme Court mandated that it either regulate CO2 or come up with a reasonable explanation as to what it wasn’t doing so):Farmers so far are turning their noses up at the notion, which is one of several put forward by the Environmental Protection Agency after the U.S. Supreme Court ruled in 2007 that greenhouse gases emitted by belching and flatulence amounts to air pollution….It would require farms or ranches with more than 25 dairy cows, 50 beef cattle or 200 hogs to pay an annual fee of about $175 for each dairy cow, $87.50 per head of beef cattle and $20 for each hog.Think how much food would cost!!! If CO2 is regulated as a HAP (section 112) under existing law, emitters of 25 tons or more will have to go through a permitting process, etc. There are other possibilities, but all of them would impose considerable regulatory burdens.That 5 million “green” jobs Obama’s promising? A good number of them could be at the EPA.An awful lot of people weren’t paying attention in this election.Naturally, PETA is in favor of this:”It makes perfect sense if you are looking for ways to cut down on meat consumption and recoup environmental losses,” said Bruce Friedrich, a spokesman in Washington for People for the Ethical Treatment of Animals.”We certainly support making factory farms pay their fair share,” he said.It would be great for Canadian and Mexican farmers!!Of course, every right-minded WaPo reader knows that we are in an environmental crisis, and that something has to be done before millions die. Here’s the sea-level variance from the Topex-Jason data (satellite altimetry):Yep. Looks like the Death Star to me. With ocean levels rising like that, we’d all better make for the nearest mountain. (University of Colorado has a very nice website for the satellite sea-surface data. They just updated for most of 2008.) If you look at the higher resolution graphs, you can see that over the last couple of years the trend has been declining.For what’s it worth, sea levels are good lagging indicator of what the climate is doing.Anyway, if Obama follows through, we ARE going to have a depression in this country. This economy is too weak to withstand this type of gaming. It will be an interesting spring.I strongly recommend reading the SBA’s response to EPA’s ANPR(Advanced Notice of Proposed Rule, which basically pointed out a lot of the problems and asked for private support to avoid regulating CO2). For further background, I also recommend this excellent review. Since Obama’s policy was originally created (in July of 2008), a court invalidated regional cap and trade compliance. Read the whole thing, but here’s the most relevant section:CAIR was a carefully constructed cap-and-trade scheme adopted after years of negotiation among the federal government, industry, states, and environmental advocacy organizations. Issued in March of 2005, CAIR permanently capped emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx) in the eastern United States and would have managed emissions of these pollutants through the use of a regional cap-and-trade program. The Agency estimated that this flexible and market-based approach would reduce SO2 emissions in these states by more than 70 percent and NOx emissions by more than 60 percent from 2003 levels, without “command and control” regulation.But on July 11, 2008, the same day the EPA Administrator signed and issued the ANPR, the D.C. Circuit Court of Appeals ruled the entire CAIR program unlawful. In North Carolinav. EPA, a unanimous three-judge panel ruled that any trading scheme that allowed some facilities to maintain — indeed, even increase — emissions was inconsistent with the Act, even if it resulted in a regional emissions reduction of air pollutants.[7] Why? Because the CAIR “does not connect states’ emissions reductions to any measure of their own significant contributions” and does not ensure that each state achieves the appropriate clean air standard, but the statute requires just that. That is, the Act does not permit a scenario where one state’s air pollution levels could deteriorate, even when the overall air quality of a region markedly improves. Describing CAIR as “a single, regional program . . . [where] all its components must stand or fall together,” the court vacated the entire rule and said EPA must “redo its analysis from the ground up.” So now the Obama administration either gets action from Congress (new law exempting CO2 from the Clean Air Act, and promulgating another law), or it exerts executive authority to regulate CO2 under the Clear Air Act, or it continues the Bush administration policy of saying “You must be kidding me, right?” to the Supreme Court.As it stands, Obama’s administration doesn’t have authority to set up a cap and trade system. It needs Congress to pass legislation to do so, but any meaningful legislation would indeed have to impact farms, hospitals, apartment buildings, churches, municipal halls, etc. I don’t think Congress will act, because right now the individual members don’t have to take responsibility for any of this.I disagree with the conclusion of the Wiley Rein analysis. It’s very logical, but in fact the Supreme Court case which forced the EPA to this step was brought by parties wanting the EPA to regulate motor vehicle emissions, rather than power plants, heavy industry and refineries. In essence, this still leaves the EPA with no response to the Supreme Court’s mandate, which was pretty clear. The text of the decision is here, and I quote from the syllabus:4. EPA’s alternative basis for its decision—that even if it has statutory authority to regulate greenhouse gases, it would be unwise to do so at this time—rests on reasoning divorced from the statutory text. While the statute conditions EPA action on its formation of a “judgment,” that judgment must relate to whether an air pollutant“cause[s], or contribute[s] to, air pollution which may reasonably be anticipated to endanger public health or welfare.” §7601(a)(1). Under the Act’s clear terms, EPA can avoid promulgating regulations only if it determines that greenhouse gases do not contribute to climate change or if it provides some reasonable explanation as to why it cannot or will not exercise its discretion to determine whether they do….The statutory question is whether sufficient information exists for it to make an endangerment finding. Instead, EPA rejected the rule-making petition based on impermissible considerations. Its action was therefore “arbitrary, capricious, or otherwise not in accordance with law,” §7607(d)(9). On remand, EPA must ground its reasons for action or inaction in the statute. Pp. 30–32.Here I quote from the text itself:If EPA makes a finding of endangerment, the Clean Air Act requires the agency to regulate emissions of the deleterious pollutant from new motor vehicles. Ibid. (statingthat “[EPA] shall by regulation prescribe . . . standards applicable to the emission of any air pollutant from any class of new motor vehicles”). EPA no doubt has significant latitude as to the manner, timing, content, and coordination of its regulations with those of other agencies. But once EPA has responded to a petition for rulemaking,its reasons for action or inaction must conform to the authorizing statute. Under the clear terms of the Clean Air Act, EPA can avoid taking further action only if it determines that greenhouse gases do not contribute to climate change or if it provides some reasonable explanation as to why it cannot or will not exercise its discretion to determine whether they do.A reasonably usable edition of the Clear Air Act is accessible at Cornell University’s Law School. Even though the EPA is expected to do economic analysis of regulation under CAA, such economic analysis is explicitly precluded from affecting the regulation. Since the EPA already argued in this case that CO2 global emssions would rise no matter what it did (and they are rising faster then ever. China is now the world’s greatest CO2 emitter), it can’t use the ineffectiveness argument.

My CFP Tax class is almost over (final exam Dec 16), and I definitely learned more than I thought there was to learn (wait, that’s been the case with all the CFP classes so far).Since I was an Accounting major in college, alot of this was just a refresh. But there were some areas I had forgotten.Here are the high level takeaways almost anyone can take advantage of, or, at the very least, should know about (note: in case it’s not obvious, these are generalizations.):1) There pretty much is no such thing as a Tax Shelter anymore. These were effectively done away with with the 1985 Tax Code. But dang, you used to be able to do some pretty sweet stuff to reduce your AGI (AGI = your adjusted gross income).2) If you are trying to do something to ‘evade’ taxes, bad idea. You can do things to ‘avoid’, or to be more specific, ‘defer’ taxes, (e.g. maximize your 401(k), have rental property), but for the most part, the higher your net worth and/or AGI (e.g. 33% + tax bracket), tax deferral as a tax strategy isn’t as likely to be beneficial to you. This doesn’t mean it won’t be beneficial to you, just that it’s moreso for higher income taxpayers.3) Borrowing money primarily to get the tax write off? Bad idea. Bad math. You are still having to pay on the interest, carry the debt, and effectively paying money to have the opportunity to take a tax deduction (e.g. taking on a mortgage just to get the property tax and interest deductions).4) You need to be paying at least 90% of your current tax year’s federal taxes in order to avoid a 10% penalty on what you owe (as a result of underpaying). In other words, don’t get too aggressive with the tax allowances on your W-4, because if you aren’t having your employer deduct at least 90% of what you owe for that year, you will get dinged for it.5) You can deduct up to 50% of your AGI in the form of charitable contributions; so essentially for most of us who will never do anything remotely close to that %, the more you contribute, the better. This is amplified if you are in a higher tax bracket, since it’s a deduction from AGI.6) The definition of dependents, and thus taking dependency exemptions, has recently changed (Working Families Tax Relief Act 2004). There is now, in addition to a qualifying child, a qualifying relative option to take advantage of the exemption (e.g. a parent, an aunt, a mother-in-law).Overall, for married individual income taxpayers who itemize deductions and make less than combined ~ $159,950 AGI for 2008, there’s lots of little things you can do to offset your tax hit that are also good for you.The easiest way to find out what you can take advantage of, if you itemize your deductions, is to look at the 1040 and get a better understanding of what each of the deduction opportunities are.If you ever find yourself in the fortunate situation of having so much net worth and/or AGI that you have to start finding ways to give it to heirs, there are things that can be done in the form of trusts, but that’s a topic for another day, and one that, sigh, many of us aren’t ready to take advantage of….yet.

A few moments ago I commented on the Radioactive Trading blog to a post addressing the relationship between a long call and a married put. I am re-posting my commentary below, just to keep the record clean.Before I do that, I want to re-visit the reasons why TheOptionClub.com came into being. I, and a small group of other people, were studying the subject of options and trying to discover how best to trade them. One problem we encountered was that there were a lot of folks out there selling what they said was the best way to trade. Some of the information was really great. So of it was nonsense.My friends and I formed a group for the purpose of separating the hype from reality, fact from fiction, and simply drill down to the truth about options and trading. That’s what TheOptionClub.com is about…learning about how options really work and how they can be used for legitimate trading and investment purposes.So, my commentary about married puts, call options, and the Radioactive Trading Blueprint are offered in exactly that spirit. I encourage you to learn as much as you can about trading, investing, how options work, and how you can benefit from their use.Kurt,It is interesting that this debate about whether a married put and a call option are synthetic equivalents persists. For what it’s worth, it’s not just Chris Smith that says so…”This position [the married put] is also called a synthetic long call, because the profit graph is the same shape as a long call’s.” McMillan, Options As A Strategic Investment, (4th Ed., 2002, New York Institute of Finance), p. 271.”Many conservative investors purchase stock and then add a protective put to their position to hedge their risk. What they fail to realize is that this position has the same exact risk/reward profile as a long call but at a significantly higher cost.” Jabbour and Budwick, The Option Trader Handbook, (2004 Wiley & Sons), p. 45.I could quote more, but is it even necessary? The point is that it’s not Chris Smith who is saying that the positions are equivalent. It’s Myron Scholes. It’s Fischer Black. …to argue otherwise means that you have found the Black-Scholes option pricing formula defective.Come on…The point to understand about the risk free rate of return is that a call option allows you to adopt an identical risk/reward position as a married put, but with significantly less capital. The market, and the Black-Scholes formula, recognize this and price the positions accordingly.Is a call option better than a married put?No. It provides a risk/reward ratio equivalent to owning a married put.A call option is more efficient, however. Less capital is required for the trade. You have one commission to get in and one to get out, compared with the married put’s two. It’s also easier to set up a “stop” for automatic execution.You argue that married puts are better for those who cannot, or will not, apply risk management. I guess we could go with that, but if someone is that lacking in discipline I doubt that they would do the homework necessary to trade any option position.My guess is that your successful students are diligent and dedicated. If they were not, they would not be successful. At least not in the long term.Your position adjustments are not simple. They are quite sophisticated, in fact. Those adjustments move your students into some pretty complex multi-legged positions, which is another reason not to create confusion about what position they’re actually holding. It’s demanding work and requires discipline. If they can handle that, I’m thinking they can handle position sizing.By the way, the counter argument to the “automatic position sizing” is that the lower capital requirement of the call option provides the investor / trader the choice of whether to accept a risk free rate of return or seek higher returns. Could that lead to over leveraging? Absolutely. But as you and I have discussed there are also good investment opportunities out there that return better than the risk free rate.The call’s low capital requirements also make your core strategies tradeable in a small account. Why not provide the alternative?So, what about the guy who buys company stock in his retirement account? Does it make sense for him to trade a married put? Quite possibly… It would also make sense for him to sell a portion of the position as soon as he is able to diversify his holdings.It just seems to me that the married put is being portrayed as more than it really is. It is a legitimate option strategy with real purpose in today’s market. It is not always the best tool for any given job, however.As I said in my review, I agree that The Blueprint has quite a bit to offer. It’s greatest contribution, in my opinion, is the tireless focus upon risk management and trade planning.Where I think it does a disservice is in its mislabeling of option positions and the portrayal of the married put as the ultimate option strategy. This only leads to later confusion as Radioactive Trading students begin expanding their knowledge. Your indication that this will be resolved in future editions is a positive step towards making The Blueprint more valuable.I would encourage those same folks who were “burned by the snake oil gurus,” as you say, to learn the true facts about options and how to use them responsibly. This may very well mean taking advantage of the benefits that The Blueprint offers, but it would also include expanding their knowledge and understanding so as to fully appreciate how options work.Christopher SmithTheOptionClub.comIf you’re interested to read my review, it remains available on our website.Review of Kurt Frankenberg’s Radioactive Trading BlueprintI do think that Kurt Frankenberg has done a very nice job of putting together a trading plan for married puts. The reality is that sometimes a married put will make a lot of good sense, but that often you will have better choices available to you. Sometimes that choice will be the purpose of a long call option.The best lesson Kurt offers is on risk management. We could discuss trade planning as there are many adjustments choices offeredReceive a complimentary stock options mini-course and our stock options education report at http://support.theoptionclub.com

As you may have noticed on Twitter early yesterday morning, I posted a tweet saying I was heading to downtown St. Paul to an all-day event sponsored by my friends at Visi.com (the best darn ISP and managed services firm in Minnesota). It was called Vision2008, and I was looking forward to tweeting live from the event.
There aren’t many things that can make me get up so early, after getting home at 10:00 the night before from yet another hot event (Minnedemo) — but the early keynoter at this one was enough to do it. That was Robert Stephens, the founder of Geek Squad and now a Best Buy VP. (As he always says, his firm “acquired Best Buy” in 2002.)
I’ve heard Robert speak at least three times before, and have blogged about it, but I find I just can’t miss another opportunity to hear him spin his stories, which get better each time.p The man is good — entertaining, insightful, and just plain funny.p The audience never goes away unsatisfied.So, I fight traffic early to get there by 8:15, grab a seat in the eighth row or so in the very nice theater room, and open the MacBook expecting to find a wifi network for the attendees — whoops, my friends at Visi don’t seem to realize that people want to live-blog or tweet at events these days.p No wi-fi — zip!p No problem, I think, I’ll just plug in my trusty AT&T broadband card. But, crap, no signal in this hugely fortified data center fortress.p At this point, I have no choice but to go to my failsafe backup, which is luckily on board… you got it: pen and paper!So, instead of tweeting this thing in real-time in one-at-a-time sound-bites, I tweeted later that I’d blog it. And that’s what I’ll do now: give you the continuous play-by-play, right here in one long blog post, as Robert delivered it.p Just realize that he tends to jump around, often throwing in a random thought here and there. So, I can’t say this will always track and make sense in a logical sequence — but then, it wouldn’t have if I’d have tweeted it, either… :-)p
Here we go (tweet style), including a few blurbs from the intro, to set things up:in April 1994, after about four years at the U of MN, Robert started Geek Squad with $200… jump forward to 2002, he “acquired” Best Buy, and now has 17,000 “agents” and recently expanded Geek Squad into Shanghai and Europe… Robert started talking about how he was dealing with Best Buy for years before the company knew it… hiring people who’d worked there, buying lots of stuff in their stores in the process of making house calls… “Minnesota is like the Russia of America,” says Robert.. “Russia has long led the world in literature and physics. Why?p Because there’s not much else to do during those long winters.” (huge laughs) …he likes Minnesota as a center of innovation for the same reason… “It makes us tougher competitors”he talked about how Geek Squad is all about “world domination”… “but every company wants to dominate the world, really”… then he goes off on a tangent about Apple, “which has taught us that design is as much as what you don’t do, as what you do” (less buttons, for example)”the best thing that ever happened to me,” said Stephens, “was starting my company with no money”… he then shows a slide that’s a photo of a package of Ramen Noodles, which he said is “the universal food of college students” (big laughs again)how poor was he in college?p he recalls that, in September 1990, after nine months at the U, he experienced “the low point in my life: I bounced a check for 41 cents for a microwave burrito”so, then he raises the question about the economy we’re in now… he’s not worried: “You never get the taste of Ramen Noodles out of you”his first computer was a Commodore 64… his friends used to get beat up by the football players, but he was always treated well by them, because he’d let them play games on the machine (his first experience realizing that being a geek wasn’t such a bad deal)he started college by going to art school (in Chicago, on a scholarship), but quickly realized he didn’t want to be a starving artist… soon, he was on his way to Minnesota to go to the U — a friend had moved here and encouraged him to come… “to get away from the family and concentrate on studies”he enrolled in the computer science program, and soon had a job in one of the labs… where he first saw an Internet browser (the original one, developed at the U, called “Gopher”), and said he was “totally blown away”… and soon came Mosaic, developed by then-college student Marc Andreessen and his team at the U of Illinois… he said he quickly started to realize “what it must have felt like in the times of Gutenberg”which was a perfect segue into his definition of a geek… “Geeks today are nothing more than modern-day monks”… “they first existed in the wild in university labs”… basically, he said of his days at the U, “geeks would do anything to have a broadband connection”… to keep his low-paying job at the U, and that broadband connection, he realized he also had to do something else to make money — “so I decided to fix things”he soon had come to the realization that “everybody wanted to sell stuff, but nobody wanted to make house calls”… so, he sensed an opening… and that led to him to launch Geek Squad in his still-struggling college days in 1994, with the aforementioned huge sum of $200… he said he rode his bike to the Secretary of State’s office to file the papersRobert said he loves geeks… but not to let any of us in the audience feel short-changed, he said “everyone’s a geek at something — the thing that they focus on”… he later alluded to his three college roommates, who are now bigtime execs at Oracle and two other big IT firms I didn’t catch which was a segue into another observation of Robert’s: “the paradox in business of small vs. large”… “small companies are nimble, and highly integrated, but lack leverage, like Best Buy has”… whereas “large companies’ employees go home at night having more access to collaborative possibilities in their Facebook accounts than they do at work”which launched Stephens into a discussion of logo design… and here, friends, is the part that starts to pay off the title of this post:Enter ‘Branding 101 for Geeks’[So, let me now leave the "tweeting my notes" style for a minute to insert some observation and opinion. This is one of the most fascinating things I find about Robert -- that he started college as an art student and then switched to computer science. This is an extremely uncommon set of circumstances!p But it helps explain what an amazing combination of right brain/left brain talent this guy really is. This background was obviously a powerful mix -- and I have no hesitation whatsoever in describing Robert as a "branding genius." Now, back to my tweet/notes style -- and listen up, would-be geek entrepreneurs, for some lessons from the master...]in trying to decide on a logo for Geek Squad, he said he looked for inspiration at classic logos from the past, going back to the 1930s and even earlier… he put up a slide showing the logos of Tide, Texaco, and STP… he noted that designers of that day didn’t have anywhere near the design tools we have today: “the absence of technologies forced people to create really good logos” you may wonder which was the one that most inspired the logo he eventually created for Geek Squad?p this may surprise you… it was STP’s!p the oval shape and the simplicity of the lettering can indeed be seen in his logohe said this design fit his needs… “I have a low-tech audience — I don’t want to be in Wired magazine!p I’d rather be in Good Housekeeping”then he snuck in a funny marketing tactic he used early-on… “I couldn’t afford brochures, so I asked a cruise company if they could send me 100 brochures to hand out — they said sure — so, I mailed them with my business card attached to IT and network admins at local companies and said, ‘you need a vacation’!”p :-)then right back to branding: “the more unglamorous your business, the more opportunity you have for a great brand,” he said… this, to me, resonated huge throughout the room, full of execs, IT managers,p and entrepreneurs from mostly B2B companies, including many undifferentiated and unglamorous software and services companies… “think about your brand — do something to create your own language”by focusing so much on branding, Robert could bring up one of his favorite points: his distaste for advertising (which I’d heard before): “advertising is a tax you pay for being unremarkable”… and here’s a translation for those who might not get this point: if you have the right brand and the right message, then buzz, publicity, and word-of-mouth will follow — and that costs a fraction of advertising! [Robert is a master of this practice, and thus a huge inspiration to entrepreneurs -- not to speak of startup marketing consultants like me -- this is music to my ears, people! I'm preaching this gospel all the time... but it's especially successful when the entrepreneur, the leader, understands and believes]he continues: “there are no rules for the title of your movie — your name, your brand”… and, remember, you must hire people, so this (your brand) is how you inspire them… in this respect, he says, “everything you do is really ‘advertising’ “Robert takes a couple of tangents here… he talks about two very notable geeks, Bill Gates and Warren Buffet (yes, he classifies the latter as a geek, too), and finds their friendship interesting… “Buffet is now outsourcing his giving to Gates — only a geek would do that!”then back to Best Buy… “this company forgets they were a startup in 1966″… and this is something I know he’s continually trying to re-instill at his employer… “companies can lose their imagination”… he’s doing a lot to make sure that doesn’t happen at Best Buyp [some more opinion here: Robert is like a little kid, a kid who never loses his imagination, his fascination with new things, with what could be... how many big, huge companies do you know that have a guy like that in such a position of influence? one who has the CEO's ear?p and I must say that I can see it coming out in so many ways at that company...]Stephens then launched into a discussion and slides about branding as relates company-vehicle design… he said, “You’ve got to look like a billion-dollar company if you want to be one”… and proceeded to show us a whole series of images on the evolution of the Geek Squad vehicle (now a black-and-white Beetle in the U.S., and some other funky small British car in the UK)which led him to another key point: “Do not look for ideas in your own industry — it’s like swimming in your own bath water”… then a reminder of a great Picasso quote: “Good artists copy, great artists steal”… look for ideas outside your own industry that you can use, he saidStephens told us he’s always thinking and dreaming… “Geek Squad is a movie playing out in my head, and it never ends”back to branding the vehicle:p what was his inspiration there? (are you ready?)p the Batmobile! he says he still strives towards that… it’s the ultimate in his mindbut what about the rest of the brand, the other brand assets, if you will? … “I stole our fashion sense from the government!” …meaning in part the black-and-white police car (which brought a story: he said people have asked him in Britain about his vehicle colors, because cop cars aren’t black and white there… Stephens comeback?p “Well, not yet”)on the subject of vehicles, Robert was hardly done: he showed a slide of some really, really badly designed company vans and vehicles — totally crowded with all kinds of graphics and copy… “Who can possibly read all that crap?” … the point, he said, is “don’t look like you’re advertising” … and he cited FedEx vehicles as very powerful icons….as well as UPS and their saying, “What can brown do for you?” he said that they’ve virtually trademarked a color — you can’t, really, but you can a tagline…and they essentially own “brown” in the consumer’s mindin regard to bad vehicle design, and perhaps in other ways as well, he said “You have to restrain yourself from promoting yourself”what about the Geek Squad “uniform”?p this is very, very serious stuff to Robert, and he never shows up anywhere, where I’ve ever seen him, wearing anything but… when he first started planning it, he decided, “I did not want to bring another polo shirt into the world”so, how did he come up with his uniform concept?p “Steal ideas from another industry!” he boldly stated… he then put up a slide of Mission Control: “I borrowed the culture of NASA!” …everyone in white shirts and black ties… to show you how important the uniform is at Geek Squad, Robert said some agents have actually taken to having their uniforms on when they get their drivers license photos taken! (on their own, without ever being asked to)… he reminded us again: “The most important ‘advertising’ you will ever do is to your own employees”moving back to the larger picture — Best Buy — Stephens had this to say, as he moved toward the conclusion of his talk… he definitely seems to be focused on trying to help them get back their startup mojo (my words, not his)… “They really do want to be good”… and I’m convinced he’s helping elevate their brand with his own in many respects, not to speak of the positive effects of his company’s culture and brand philosophy he talked about the subject of “serious gaming” (look it up, it has a Wikipedia page)… and says “one day I’d like to have a Geek Squad game”what are the things he hires for? “Curiosity, ethics, and drive — these are the things you can’t train for”where’s Geek Squad going?p “We follow the screen, follow the network”… these are the things consumers are focused on, and I sense this is the internal lingo, the mantra, right now at Best Buy — to keep everyone on task”Android and mobile apps” in general have him all juiced up… “These are exciting times — it feels like 1990 all over again”wrapping up, he challenged the audience:p “Your goal is this: to inspire your talent”… and, lest people think his mantra doesn’t apply to them: “No matter what, ALL of you are in the services business”and, going for a final laugh, he says, “Really, what is a company but a for-profit cult?”as a final footnote, he said he wants us all to know that we can always email him, “If there are ever any disturbances in the force” … rstephens (at) geeksquad (dot) com[Whew, this was one of the longest, and most enjoyable, blog posts I think I've ever done... :-)p What say you?p What's your take on Robert's story?p If you're an entrepreneur, or thinking about making the jump, how does Robert's message speak to you? ]p

When negotiating the terms of a redevelopment agreement with a redevelopment entity it is crucial to pay close attention to the wording of the redevelopment entity’s remedies upon default, especially if the redevelopment project is going to involve mortgage financing. Indeed, in such instance, a redeveloper should try to avoid including a provision in the redevelopment agreement that subjects its interest in whatever property it might acquire within the redevelopment project area to forfeiture upon default. However, if the redevelopment entity insists upon having such a remedy, then it should be made subject to the redeveloper’s right of redemption under any mortgage. Otherwise, a redeveloper runs the risk of losing title to property previously conveyed to it by the redevelopment entity upon default under the redevelopment agreement (whether or not the redeveloper is in default under the mortgage at the time the redevelopment entity seeks reversion of title). This situation was recently addressed by the Appellate Division of the New Jersey Superior Court in Mercer County Improvement Authority v. Trenton Studios, Inc. in an unpublished case decided on August 21, 2008.

In Trenton Studios , a redevelopment entity initiated foreclosure proceedings and sought reversion of title, among other relief, after the redeveloper had defaulted under a mortgage held by the redevelopment entity and the redevelopment agreement. The redeveloper claimed, among other things, that enforcement of the redevelopment agreement’s forfeiture remedy impermissibly interfered with the redeveloper’s equitable right of redemption. In evaluating this issue, the Appellate Division agreed with the redeveloper’s position “that a remedy which flows from the [m]ortgage due to a default under the [m]ortgage cannot clog the equity of redemption.” However, the Court rejected the redeveloper’s assertion that the redevelopment entity was limited the those remedies, such as foreclosure, that flow from the mortgage. In this regard, the Court observed that since the redevelopment agreement “does not incorporate the default events” contained in the mortgage and has “separate and independent conditions, obligations and events of default[,]” it is a “distinct instrument[]” that is neither subject to nor intertwined with the mortgage. “Therefore, while reconveyance of title and possession is not a viable remedy under the [m]ortgage because it would clog the equity of redemption, it does not prevent plaintiff from seeking that remedy under the terms of the [r]edevelopment [a]greement.”

Deficiency actions to recover balances owed after a consumer foreclosure action are not favored in New Jersey Courts. Although, such actions are permitted under New Jersey law, it is in very limited circumstances and may be difficult to obtain. Under New Jersey law, a judgment for deficiency may not be brought in the same action to foreclosure the residential mortgage (a separate action must be brought); this preclusion also includes claims on any personal guarantees. Foreclosure deficiency actions can be brought only once the mortgage is foreclosed; must be brought within three (3) months from the date of the sale and can not be brought against any party who was not a party to the foreclosure action. The deficiency balance sought must be the difference between the foreclosure judgment amount and the fair market value of the property at the time of the sale.
The public policy behind the legislation was to protect the homeowners from losing their homes and then to have a judgment against them for a deficiency which could be as much as the full amount of the mortgage plus additional costs and attorney’s fees.
The protection afforded by New Jersey’s deficiency statutes does not extend to business or commercial loans, one to four family residential dwellings owner occupied at the time the deficiency action is commenced where the mortgage is not the primary security for the debt or where there is a second mortgage lender and the mortgage is subject to a prior lien(s) not held by the same lender. It is a common misconception that these statutes protect all residential homeowners. For example the protection would not apply to a second mortgage held by a different lender than the one who holds the first mortgage, provided the first mortgage has already completed its sale; a single family dwelling where the owner or family does not occupy the property or a single family dwelling which secures a commercial loan.
Although, the amount of the foreclosure judgment is binding on all parties to the foreclosure action, the defendant in the deficiency action may still dispute the amount of the debt in the deficiency action. The main thrust of the statute’s protection is found in the ability of the mortgagors to dispute the amount of the fair market value of the property at the time of the foreclosure sale.
A deficiency action can not be brought if a deed in lieu of foreclosure is accepted. It must be remembered that an action to recover a deficiency balance will open the foreclosure and sale of the subject property and extend the homeowners right or his assignee to redeem the property for six months, by paying the full amount determined in the foreclosure action.