Frugal Friday – Mother’s Day Edition

It took longer than I thought it would to distill the best tips and frugal philosophy from the past month, so Frugal Friday is appearing late. I am sure you will agree it was worth the wait.

Leading off, there was another high-profile mention of one of the best money saving tips ever seen here, switching to printer fonts that use less ink. Alas, this one, at WiseBread, failed to bring up my follow-up idea, using shorter words and words that contain less ink-intensive letters.

WiseBread also brought us 12 Surprising Ways to Reuse Aluminum Foil. It is not a bad list, but I am not sure the word surprising can be applied to washing and reusing foil for its intended purpose. It does share the tidbit that “10th wedding anniversaries are traditionally celebrated by exchanging gifts made of aluminum.” I guess there is no romance like frugal romance. But they missed completely a 13th use, as headgear.

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The Living Too Long Problem

I think the folks at WalletPop must be running some kind of obvious headline contest. Yesterday they carried Airlines Rake in Billions from Extra Fees and Majority of Social Network Users Share Too Much. And today we get Study: Longer Life Can Bring Pension Money Woes.

I’m willing to forgive WalletPop some for that last one. They are a bunch of kids who probably have not thought much about retirement. They do not yet realize that one of the biggest challenges in retirement planning, maybe even the single biggest one, is the somewhat counter-intuitive fear of living too long.

If you are retiring on an old-school pension or annuity, which will pay you a certain amount every month as long as you are around to cash the checks, then living a long time is not much of a fiscal danger. Social Security works the same way.

But if you reach that golden moment of retirement with a pile of money that needs to last as long as you do, longevity risk is a tough problem. Interestingly, it has a fairly tidy solution, but nobody likes it.

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The Department of Home Security

There was a (for me) thought provoking article in The New York Times the other day on Weighing the Value of Home Security System.

Our house had an alarm when we moved into it 11 years ago. It was not  particularly useful. With children too young for school, there was somebody in the house almost 24/7 so the alarm almost never got turned on. After a while it broke, I never bothered to get it fixed, and eventually I just cancelled the contract. All that is left now are some unobtrusive but ugly motion detectors in the corners of some rooms.

Home alarms are more about psychology than economics. That much is clear from the overwrought TV commercials the alarm companies run. They do not mention the discount you will get on your insurance or the average reduction in property loss. Instead we get unlikely dramas with burglars in ski masks and foiled home invasions.

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I am Worried About Goldman Sachs

I cannot remember if I have disclosed this before, but I own some Goldman Sachs stock. It is not a particularly large position, less than 1% of my net worth. But it worries me. I came close to selling yesterday and might just let it go today.

It is not that I don’t think Goldman is a great company. And it is certainly not that I think the stock is overpriced. With a trailing PE of less than 7 and no obvious threat to near term profits, it is, or ought to be, compellingly cheap.

The problem is that there is a chance, maybe not a big one, but a significant one, that the stock will go to zero. Not because of a problem in Goldman’s business, nor because the firm did anything it should not have, but because the federal government will decide to destroy it. Basically, I am worried that Goldman will get lynched.

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House Prices Now Boring

Once, in a now faintly remembered time, we were obsessed with house prices. Even as recently as a year ago, such obscure arcana as the Case-Shiller Home Price Index was closely followed. Looking back it is hard to understand why. It was almost as if we thought that houses were a significant slice of our national wealth, that a change in their value might actually effect consumer sentiment and spending, and that a sharp drop in house prices, of all things, had set off the Great Recession. As if.

Of course, now we know that the Great Recession was started by a mid-level employee in the London office of Goldman Sachs.

Yesterday S&P released the monthly Case-Shiller numbers for February. It did not get a lot of coverage. True, that may be partially attributed to sharing a business news cycle with surprisingly strong consumer sentiment numbers, a turn for the worse in the Greek Crisis, and the ritual sacrifice of Goldman execs to appease the mid-term election gods. But it is hard to escape the conclusion that we have simply lost interest in house prices.

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