Money

So I'm back in Victoria for Christmas vacation, and I'm watching the CBC again, and I come across the show "Dragon's Den." I absolutely fall in love with the show. The concept is, you have entrepreneurs going on Dragon's Den, pitching their ideas to five venture capitalists for funding. I'm encouraged by this show because when I took entrepreneurship in business school, the main source of funding they recommended was through government grants and agencies. I hope a show like this helps foster a culture of angel investors and venture capitalists in Canada.

It's pretty valuable to watch people pitch their ideas to a room full of very skeptical investors. On the flip side, if you've got money to invest, it's pretty valuable to develop a healthy sense of skepticism and ask the right questions when presented with an investment opportunity. These investors are even more brutal than Donald Trump, and it's strangely refreshing.

I really like how you get to see both sides of a business deal from the perspective of the business owner and the investor.

For the business owner:

• How much control of my company am I willing to give over to investors?
• Is the valuation of my company fair?
• What expertise do I lack?
• What expertise do I want from potential investors and partners?
• What's the exit plan for investors?

For the investor:

• What's the risk/reward of this investment?
• How much money does the business owner have on the line?
• Does the owner have good knowledge of the market and competitors?
• How long until I get a return on my investment?
• How much of my time do they need and what are my roles and responsibilities?
• Is the business model realistic or too good to be true?
• What are the strengths and weaknesses of this business?

Here's an example of a pitch where the entrepreneurs have a business plan, but clearly didn't do their homework on their idea, and don't understand the market that they're getting into. In this video, the owners are pitching a digital wall calendar.



This other clip is a great business pitch, but the entrepreneurs are too innocent and naive. It's a family business pitching Cosy Soles.The venture capitalists tell them if they weren't on the show, they would destroy them by taking advantage of them. Take away is, beware of investors bearing gifts and understand your financing options.


I'm finding this show very useful because I'm starting to be approached with investment opportunities, and this helps sharpen my business sense. I'm also in a position to pitch investment ideas as well (both personal and work), so learning how to present well is key to success.

Awesome show. There's plenty of clips of this show floating around on YouTube. I heard in the U.S., there's an equivalent show called Shark Tank, where two of the venture capitalists from the Canadian show appears on.

So for the last two Sundays, I've had the privilege of speaking to young adults at church about managing finances. Last week, I focused my talk on credit cards since a lot of people run into troubles with them. I highlighted that if you build up a good credit score, then you can gain access to credit cards which have amazing features. I was ranting and raving about the Visa card that I had, but unfortunately no one in the room could apply for it because it's exclusive to the Royal Bank of Canada. I realize that I was being an unsatisfactory tease for doing that. As a result, I did some research on American credit cards and I'm going to suggest a few cards that I came across. It's a convenient time for me to write this since I'm looking into ditching my awful American secured credit card, so I'm in the market for a new card anyways. A number of folks have been asking for suggestions on credit cards, so here goes.

The first card I'm seriously considering is the Citi Forward Visa.

Overview

Card	Citi Forward Visa
Interest Rate	12.99%-19.99%
Annual Fee	$0.00
Rewards	5 points per $1 spent on dining, books, movies and music; 1 point for other purchases.
Credit Score	Good
Balance Transfer	0% for 12 months

Here's all the disclaimers about all the fees and how much balance transfers will cost.

Points Value

The first thing I always look at is how much the points are worth in real dollars. I went to their rewards site, and found that you can trade in your points for flights, movies, dvds, gift certificates, cash back, etc. To measure real dollars, I looked at the cash back reward. They say 8,000 points gives you $50 cash.

So lets do the math, $50 / 8000 points = $0.00625/point.

If I spend $1 on dining, books, movies, or music, that gives me 5 points. $0.00625 X 5 = 0.03125. That's equivalent to 3.125% cash back. That's not bad at all.

However, for all other expenses, $0.00625 X 1 = 0.00625. That's equivalent to 0.625% cash back which is lower than the average reward.

The biggest expense I have is actually eating out, and movies, so if I spend all my entertainment dollars on this card, then it's worth it. For all my other expenses, I would use my other card because I get the equivalent of 1% cash back on that card.

Assume I spend $400/month dining, and $100/month on movies/books, then that's $500/month X 5 points X 12 months/year X $0.00625/point = $187.50/year cash back.

Bonus Points

The Citi Forward Visa offers a couple of bonus point offers:

• 6,000 Points after you make $250 in purchases within the first 3 months
• 2,500 Points when you sign up for Paperless Statements within 3 months of account opening
• 100 Points each billing period when you pay on time and stay under your credit line

Lets assume that you can meet all of these criteria, lets do some math.
6,000 points + 2,500 points + 12 months X 100 points = 9700 points X $0.00625/point = $60.62. This means in your first year, you get that much cash for free if you fulfill their bonus points offer.

I really like that this card rewards you for paying your credit card bill on time every month.

Rewarding Fiscal Responsibility

There's two rewards that this card offers which rewards fiscal responsibility, which makes me feel this is a great card for young adults. The first was already covered above, you get 100 points for every month you pay your bill on time, and stay under your credit limit.

For every 3 month period that you pay your bill on time, and stay under your credit limit, Citi will lower your credit card's interest rate by 0.25% (maximum 8 times, or -2% total). If you don't carry a balance on the credit card, then this isn't really a benefit. However, for those who do carry a balance, this could be a nice way to gradually save some money since debt gets a little less expensive.

Card Benefits

Here are some additional benefits with the card:

• $0 liability on unauthorized charges (ie fraud)
• Cellular Telephone Protection -
  If you pay your monthly cell phone bills with your Citi Forward Card and your cell phone is damaged or stolen, you have supplemental insurance coverage that reimburses you for a replacement phone
• Extended Warranty -
  The terms of the original manufacturers' U.S. warranties (of one year or less) may be extended up to one additional year on most items purchased on your card
• Auto Rental Insurance -
  You're automatically covered when you reserve and rent a covered vehicle with your Citi card and decline the car rental company's collision loss/damage waiver insurance.
• Retail Purchase Protection -
  Most items purchased with your card are eligible for protection against accidental damage or theft up to 90 days from the date of purchase
• Travel & Emergency Assistance -
  You're protected when you’re traveling in the U.S. and abroad. Travel & Emergency Assistance services include medical and legal referrals, lost luggage assistance, emergency transportation, translation services and more

Conclusion

I think if your biggest expenses every month is dining, books, movies and music, then this card is right for you since it offers a generous 3.125% cash back (equivalent). I've seen other cards that offer 5% cash back, but it's isolated to a narrow class of expenses, such as only for gas. You know your spending habits, so you'll have to calculate how much money you might make off this card, and if this is the best for you.

I really like how this card also has features that reward good fiscal responsibility, it has no annual fees, and has a whole whack of extra benefits. The benefits I use most would be the cell phone insurance, the extended warranty, and the rental car collision insurance.

(*) Next week I'm going to go over a credit card that caters to investment-minded people.

Disclaimer

Credit cards are a two-edged weapon. It can bring amazing benefits, and it can bring amazing destruction. Credit cards are not for everyone, and I only recommend this card if you're financially responsible. All these benefits the card brings are instantly negated if you're paying 19.99% interest.

This does not constitute financial advice. Please consult a financial advisor for professional advice.

Full disclosure: I do not own shares of Citi or Visa at the time of writing this article.

Well, this last week has been an emotional roller coaster at work due to the Yahoo Microsoft deal. I have to say, the night before the deal was announced, I was reading the rumours from various tech websites, and I didn't like what I was seeing. There was obviously some anxiety over how much longer I would be able to stay in Silicon Valley, and whether my job would still be here. The idea of becoming a Microsoft employee wasn't very palatable either.

Day break came, and the deal was announced super early in the morning (4:30am ish?). My immediate reaction was, oh my goodness, the stock price is sinking like a rock. I should have seen it coming though, speculators were piling into the stock, driving the price up to $17/share which wasn't sustainable. When the deal finally came, these people were piling out of the stock. It seems like investors in general didn't like the deal because Yahoo didn't get cash upfront for the deal. I have to admit that the deal is fairly complicated. The next two days, I spend several hours sitting through meetings that explained the deal, and its implications. I understand what the deal entails now, but the merits of the deal were definitely not apparent at first glance.

In either case, I was glad to hear that my job wasn't going to be transferred to Microsoft. I will continue be fighting on the side of Yahoo, and my job should be safe. My team should be unaffected by the deal, so I thank God for that.

Anyway, I'm still digesting this deal, and pondering what the future holds, and what change shall come.

So, this is the first year that I've done a US tax return by myself. I did mine online this year with TurboTax. Overall, it worked but I do have some gripes over it.

User Interface

It was hard to navigate to specific parts of my tax return. They start you off with five tabs, Home, Personal Info, Federal Taxes, State Taxes, etc. Under each tab, there's sub-tabs, but the sub-tabs are far too generic. For example, under Federal Taxes, you get Wages/Income, Deductions & Credits, Others. If I wanted to modify my donations, I would have to go through Deductions & Credits, and scroll through a bunch of questions that I already answered. There's no way to jump directly to donations, and edit that number.

Price Hike

It seems that TurboTax charges a certain rate for people who file before March 28th, and they charge a higher rate for after March 28th. I had my taxes mostly done, but not submitted yet, but when I found out that they were increasing prices, I rushed to get them done before midnight. It feels like price gouging when you jack up prices a few weeks before taxes are due.

Editions

TurboTax has several different editions, Basic, Deluxe, and Premier. Each one costs more than the last. I initially didn't know which edition I needed, so I filled out their questionnaire. Based on their questionnaire results, they recommended that I use the Premier version because I had stocks and mutual funds. After filling out all the forms, I realized I didn't need the Premier version because none of my stock transactions this year triggered a tax event. I could have done my taxes with the Basic version which would have cost a lot less. So, I tried to downgrade my TurboTax to Basic, but there's no way to do it. The only solution is to delete all your data, and start again. That's pretty bad.

Payment

At the end of the whole process, you have to pay in order to get your tax return. I was going to pay by credit card but I ran into problems. They needed me to fill in the address that I use for the credit card, but that address is tied to an international address. Unfortunately, there's no way to enter an international address into the system because it will not validate.

My second gripe with payment was, you can tell them to take the payment out of your tax return. The problem with this is, they charge a $20 fee for this service. This service doesn't seem to be worth $20 in my opinion

Random Thoughts

On a completely separate note, there's something kind of scary about TurboTax. It seems like every employer has an EIN (employer identification number). If you punch that in, TurboTax can query a database, and fill in all your income information. The paranoid in me thinks it's not cool that third parties have a way of querying some database for my employment income information.

In either case, I'm debating whether I'm going to use TurboTax next year. Intuit (the makers of TurboTax) seems kind of evil at this point. In addition, I really prefer the online tax filing systems like UFile which I used for my Canadian taxes. Also, Canadian taxes are so much easier to deal with, I miss doing them. /tear

With each passing day of this recession, I find myself increasingly annoyed by these bankers and money men of Wall Street who basically ruined the economy for the rest of us. The latest outrage of course is A.I.G. trying to pay out $165 million in bonuses to its executives.


It's just infuriating that a company who recklessly bet the house on housing mortgages and failed could even consider rewarding its executives with bonuses.

I think it's also quite remarkable how the mistakes of this sector has such massive ramifications on all of us. I mean, a lot of us did nothing to deserve this, yet somehow, I find my salary being frozen because businesses are in cost-cutting mode. I see round after round of layoffs from companies all around me. I have friends struggling to get enough work in order to pay the bills. A quick look at my retirement and investment accounts will reveal something synonymous to a large impact crater. I looked at my savings account, and interest rates have come all the way down to 1% which makes holding cash a pretty poor return on investment, even though it's one of the few safe havens left (it's practically a disincentive to save). All of this is happening to everyday people, and yet we're rewarding those who engineered this financial disaster.

And so, I salute Wall Street for creating such a glorious housing bubble, and making off with a ton of cash, and then having the balls to pat themselves on the back with bonuses after they burned down that house. Kudos.

/end rant.

This weekend, I watched PBS Frontline's - "Inside The Financial Meltdown." (Link takes you to the full video).

Here's an excerpt from the introduction:


I really enjoyed watching this documentary because they presented this complex problem in a very easy to understand manner. The documentary provides some incredible insight into former treasury secretary Paulson. Secretary Paulson is this wall street guy who used to work at Goldman Sachs. There's this incredible moment where he seems to put his personal agenda for vengeance ahead of the public good. He seemed intent on letting one of his former competitors in Wall Street fail, and he makes an example out of his competitor. It seems to be partially based on personal animosity towards this former adversary. This act sends shockwaves across the stock market.

I think the other remarkable thing is just how quickly these financial titan corporations fell in a matter of days. Billions of dollars of market capitalization literally evaporated over night.

The Dow Jones Industrial hovering over 13,000 seems like such a distant dream these days. We're barely holding onto Dow 7,000 right now.

I've been hearing a lot of rhetoric in the news about how bad the current financial crisis is. A common phrase being thrown around is that this is a once in a century event. The New York Times has a very informative chart which illustrates how bad the stock markets are going, and how they compare to other bear markets.

I remember a couple months back, I was pondering if I was being bearish and pessimistic enough. Basically I wasn't. The scary thing is, it appears I'm still not bearish enough when you look at the chart. We've lost 50% of the stock market so far; however, during The Great Depression, the stock market lost 80% of its value.

Of course, there is a silver lining in all of this. A market crash is actually a boon if you're investing for retirement, ie you need your money in 40+ years. In the long-run, this is the ultimate play on "buy low, sell high" if your time horizons are long enough. That is why, I'm still doing some buying for my retirement fund.