Carnival of Personal Finance #211

I had it all figured out. Last week’s review/roundup of the Carnival of Personal Finance went well, so I thought I’d do it again this week. I planned to spend yesterday leisurely reading through the posts and writing it up in time to get it posted nice and early today.

Not so much. The carnival only appeared this morning, leaving me just a few hours to run through it. Yes, I could have come up with another post idea yesterday, but, you see, I had a plan.

This week’s carnival is hosted by Green Panda Treehouse. Is that blog name a cultural reference that everybody who is younger than I am gets? There is a picture of a green panda on the banner, which helps me. I thought it was the tree house that was green.

There are five editor’s picks, two of which are on finance related marital problems and two of which discuss how expensive it is to own a house. Something on your mind Green Panda?

Savings Toolbox shared a good post on why automating payments is not always a bright idea. Turns out that actually reading your bills before paying them is often advisable.

Financial Methods had a post asking New Account Bonus Deals-Worth the Trouble? The answer is possibly not, but the post did contain the tidbit that "Overdraft fees account for approximately 30% of profits for most banks." Sounds like numerical fiction to me, but I don’t have the time/energy to follow-up right now.

Anna Bleker at Taking Charge had a great post on a topic I didn’t realize I was fascinated by. Why do credit cards still have embossed numbers? Turns out it is only partly what was once described to me as the English Reason. ("That’s the way we’ve always done it.")

Penelope Pince at Pecuniarities has a lunatic dog with what sounds like a very inconvenient obsession with the TV remote. She is much more successful at using this as an analogy about how humans deal with money than you might expect.

There was a short and educational post What Are Annuities? at DepositAccounts.com. Spoiler alert: they are not deposit accounts.

Darwin’s Finance has a post on Structured Notes. The post explains that these are financial cocktails made out of other commonly available financial instruments that you could buy yourself, e.g. zero coupon bonds, options, etc., but are really the debt of (possibly shaky) financial institutions, so you also have to worry about the credit risk of the issuer. And then it tells you to buy the notes anyway. Survival of the fittest?

And finally, Kyle at Amateur Asset Allocator compared owning REITs to directly owning rental property. It’s a good topic I will be plagiarizing in the near future. Kyle hits on the right issues, but winds up wussing out and concluding that the choice depends on the investor’s needs and wants. No. REITs are a better investment. Owning rental property is, at best, for a few, a better part time job.

[Photo: Michael Maggs]

Carnivals, PF Blogs | Frank Curmudgeon | June 30, 2009 12:01 pm

216 Comments

By ObliviousInvestor, June 30, 2009 @ 12:42 pm

From somebody in Gen Y: I’ve never understood the Green Panda name either, if it is in fact a reference.
By Brandon, June 30, 2009 @ 12:58 pm

I think I have had to run my credit card old school maybe 3 times in the last 7 years.
By Anna Bleker, June 30, 2009 @ 5:30 pm

Thanks for the mention! Yeah, I didn’t realize that the embossed numbers were more than the English Reason until I started researching.

PS: ObliviousInvestor, I’m in the same boat as you. What’s the deal with the name?
By Neil, June 30, 2009 @ 6:08 pm

I suspect that the “overdraft fees are 30% of profits” is more a tortured logic thing than a fictional number. While I’m also too lazy to look it up to confirm, I’m going to go out on a limb and say that the reasoning is something along the lines of:
- Overdraft fees are 3% of bank revenue.
- Bank operates with 10% profit margin.
- Ergo, if bank didn’t charge overdraft fees, their profits would drop by 30%. Put another way, overdraft fees are 30% of bank profit.
By Neil, June 30, 2009 @ 6:11 pm

I should note, though, that the one and only overdraft fee I’ve ever been charged was the result of switching bank accounts. So the author of that article is right, and it is a hazardous option to go with. Still, I called and shouted at the auto-withdrawal vendor for taking their money from the wrong account (and on the wrong day) and eventually got the fee refunded in the form of a credit on my electric bill.
By Jim, June 30, 2009 @ 6:11 pm

THe FDIC reports data on overdraft fees.
http://www.fdic.gov/bank/analytical/overdraft/
According to the FDIc report, in 2006 banks took in $1.97 billion in overdraft fees or 6% of their revenue.
By Kyle, June 30, 2009 @ 9:18 pm

The reason I don’t claim REITs are a better investment is because the term “better” is so subjective. The residential real estate market is still such an incredibly inefficient market that an experienced investor can make a killing with relatively little risk. Then again, it’s still a lot of work so maybe it’s more akin to a job than an investment.
By Frank Curmudgeon, June 30, 2009 @ 10:40 pm

Neil: Given the level of bank profits lately, I’m surprised overdrafts aren’t 10,000% of them. Obviously, % of revenues would make more sense.

Jim: You are the god of links. The 6% refers to the proportion of net operating revenues, which I think is pretty far down the income statement, due to all overdraft related revenue.

Kyle: You’re as entitled to be subjective as anybody else. “Can make a killing with relatively little risk” is a phrase that worries me.
By Jim, July 1, 2009 @ 2:15 pm

Maybe the key about the overdraft thing is that they said “30% of profits”. That sounds like its a lot, BUT how profitable have most banks been lately? $2B could be 30% of the profits for the entire banking industry if you average in all the banks that bled billions and still are as they have bad debts defaulted on.
By kmfdm, July 2, 2009 @ 8:16 am

good lord, how can you force yourself to read all that tripe each week?
By Laura, July 2, 2009 @ 11:02 pm

LOL! The blog started out as a personal blog, then focused on finance. There’s no pop cultural reference.

We’re looking at townhouses to possibly own, so TML’s post on home ownership costs caught my eye.
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