Regular readers of Bad Money Advice will not be surprised to hear that I prefer numbers to words. (Allegations that I prefer computers to people, however, are greatly exaggerated.) I think this is a natural inclination. Any halfway thoughtful 
person favors evidence over feeling, and numbers have the appearance of being hard facts.
But not all published numbers are factual, even when widely repeated in respectable places. Which presents a difficulty for us lovers of digits. How can we separate the real from the realish? Not to worry, because today I am revealing for the first time my Law of Numerical Fiction which will help identify the imposters.
To be successful, that is, repeated widely as if it were true, a fake number must satisfy three criteria.
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Yesterday’s New York Times had an article about the simmering controversy over target funds headlined Target-Date Mutual Funds May Miss Their Mark. (Get it? It’s a pun.)
Target date funds have been around for a long time. They are a sub-species of asset allocation funds, mutual funds that, in effect, own other mutual funds in order to create a diversified one-stop-shop for the investor either too busy or too intimidated to pick his own. I’m not a big fan. I think you can do better making your own asset allocations, but that has little to do with the current round of hand wringing in Washington.
To understand what has caused the present consternation, you have to go back a few years.
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There is a very amusing site that bills itself as "entertainment shopping" called Swoopo. After a brief investigation, I have concluded that:
1. You would have to be a complete idiot to spend money on this site.
2. I am a complete idiot for not thinking of it first.
How Swoopo works is deceptively simple. They auction off desirable items such as notebook computers and big flat screen TVs. But the auctions have some very special rules. It costs $0.75 to place a bid. Bids can only top previous bids by a certain small amount, usually $0.15 but in some cases only $0.01. There is no fixed end time for the auction. It continues until nobody has bid for 20 seconds.
Get it?
This is an amusingly profitable deal for Swoopo. Although they wind up selling the merchandise for much less than it is worth, the bidding fees collected swamp the small loss involved. For example, yesterday morning the bidding on a Sony Playstation 3 worth (Swoopo tells us) $399.99 sold for $126.60. That’s a nominal loss of $273.39 from retail. But to get to $126.60 in $0.15 increments took 844 bids, representing $633 in revenue to Swoopo. Brilliant.
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Part of the deal when you participate in a carnival is that you link to it from your blog. My weekly Carnival of Personal Finance links have been getting less perfunctory lately, to the point where I thought I would try making a proper post of it. It’s an excuse to discuss a lot of personal finance advice from several blogs at once, which certainly fits into the theme of BMA. So here goes.
The carnival is hosted by Suburban Dollar this week with a delightfully kooky theme, the beyond vintage video game Mike Tyson’s Punch Out.
One of four editors picks this week was Happy Rock’s post 16 Year Old Skips The Last Two Years Of High School To Play Proffesional Baseball. The gist of the post is that this is a bad thing. It is about Bryce Harper, a 16 year-old from Nevada recently featured on the cover of Sports Illustrated, who dubbed him the "Chosen One". He plans to skip out on 11th and 12th grades in order to enter next year’s baseball draft. This is a maneuver that will probably net him a sum in the high seven figures.
How could this possibly be a bad idea? I know guys who would pay in the high seven figures to play professional baseball. And some of them would pay extra if they could’ve avoided the second half of high school. Granted, Bryce’s education will suffer. He might, for example, not learn how to spell "professional" or the difference between "to" and "too" or (gulp) "beat" and "beet".
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Last Thursday I ran a post that discussed the grim state of the credit card business. In it I discussed a New York Times article about consumers settling their credit card debt for less than what was owed. I even passed along some simple negotiating tips.
One thing I (and the Times) failed to mention is that if you settle your $3000 credit card debt for $2000, the $1000 that was written off by the credit card company is often considered taxable income. You will get a 1099 on it and come next April 15 you will either have to pay taxes on it or file a special form to explain why you don’t have to pay taxes on it. (This is discussed in detail in a great post at Don’t Mess With Taxes inspired by the same Times article.)
That it may be taxable doesn’t quite seem fair, does it? You’re broke, you manage to convince the card company to be "reasonable" and then Uncle Sam wants a cut. Actually, it’s not completely nuts. You really are up $1000. You got $3000 of stuff (and interest payments) for $2000. And the $1000 reduces the card company’s taxable income, so it seems mildly reasonable it might increase yours.
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person favors evidence over feeling, and numbers have the appearance of being hard facts.
Government, Media, Musings, Taxes, The Big Picture | Frank Curmudgeon | 
June 26, 2009 12:30 pm | 
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