Carnival of Personal Finance

This week’s Carnival of Personal Finance is up at Funny about Money.  My post on the Efficient Market Theory Hoax is there along with a lot of other interesting stuff and some pictures of lovely places I will probably never visit.

The Death of LifeLock

You have seen the ads for a company called LifeLock.  They’re the ones with the CEO’s Social Security number.  It must be a very effective campaign. The company currently has 1.5 million subscribers at $10 a month each.

And what do you get for your $120 a year?  Well, a few things, but the major one is that LifeLock will place a "fraud alert" on your credit reports. These warn potential grantors of credit that something is fishy and tell them to contact you directly to confirm that it was really you that asked for the loan.  Fraud alerts expire after 90 days, so LifeLock dutifully renews them for you four times a year.

That’s a nice little business they’ve got. $180 Million in recurring annual revenue for not a lot of work.  But before you slap your forehead and ask why you didn’t think of it first, you should know that it looks like the party’s over.

LifeLock’s use of fraud alerts is pretty clearly abusive.  They were created by federal law as a way for consumers to place a red flag on their credit reports if they were currently involved in fraud, not as a precautionary step to be taken by millions.  (The LifeLock website says that to use the service you must "confirm that you have a good faith suspicion that you have been or are about to become a victim of identity theft."  Wink wink.)

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This Time it’s Not Different

Friday calls for lighter fare, so today I thought I would present evidence that this financial crisis we are now living through is not particularly unique. Realizing that some may find the idea that we are doomed to go through this every few decades less than cheering, I will present it in the form of a quiz.  As I’ve said before, everybody likes a quiz.

Question 1: The Buildup

In what year did BusinessWeek editorialize as follows about the stock market?

For five years at least American business has been in the grips of an apocalyptic, holy rolling exaltation over the unparalleled prosperity of the "new era" upon which we, or it, or somebody has entered.

Stock prices are generally out of line with safe earnings expectations, and the market is now almost wholly "psychological."

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On Brett Arends on House Prices

I know I shouldn’t be doing this.  I talked about home prices yesterday, and I’ve singled out the Wall Street Journal’s Brett Arends way too many times already.  (This will be his sixth mention in this blog. See also one, two, three, four, and five.) I don’t want to give the impression he is exceptionally bad. He’s merely typically bad, but writes often and on topics I like to talk about.

But Arends ran this column yesterday sharing his thoughts on house prices and, well, fish gotta swim and birds gotta fly.

He starts out by mentioning the previous day’s release of the Case-Shiller home price indexes for March.  This update, which was, let’s face it, more or less as expected, was “startling” to Arends because of  “What the latest data show about the long-term of the real estate market.”

Apparently, this last set of numbers was the missing piece needed to allow Arends to make the observation that since the late 1980s and early 1990s, house prices have only beaten inflation by one or two percentage points a year.

Well, golly.

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March House Price Update

Yesterday was the last Tuesday of the month, so it’s time for our monthly update from the good folks at S&P who bring us the only home price index worth watching, the Standard & Poor’s/Case Shiller Index.  This time ‘round the media coverage of the event was light, which I suppose I could spin as a good sign.  Perhaps things are looking up and we are just not that worried about home prices any more.

But readers of this blog know I am a glass-half-empty kinda guy.  My view is that the media doesn’t consider the release of some data on house prices to be all that interesting, however important it might be.  Also, the release coincided with the release of some surprisingly strong consumer confidence numbers and a few other stories of the trivial type that the media likes to report on, like a Supreme Court nominee and some North Korean missile tests.

House prices are down.  That’s not exactly news. The Case Shiller 20 City Composite was down 2.2% in March from February, 18.7% from the previous March, and 32.2% from the July 2006 peak.

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