The U.S. Office of Thrift Supervision has developed new rules to put a stop to some nasty practices of credit card issuers. The fact sheet they put out describes the major changes. This is good news not only for consumers but also for the credit card issuers who were already following these rules because their competition will be forced to play on a more level playing field. Most of the new rules are self-explanatory. Interest rate increases must take place at defined times with adequate notice for card holders. Consumers must be given at least 21 days to make a payment. A fairly substantial change is the rule ending double-cycle billing where the average balance over two months is used to calculate interest. This practice causes interest to continue for another month after you pay your bill in full. Now interest will be based on just the current month. The last new rule places restrictions on predatory high-fee subprime cards. These are high-fee, low-limit credit cards gi...

There are many times when you have to choose whether to “do it yourself” (DIY) or hire someone to do a job. This choice comes up with house repairs, investing, landscaping, to name a few instances. We tend to think of the choice as binary: either DIY or hire someone. However, there is a middle ground. Let me use an example to illustrate my middle ground approach. I have a large natural gas pool heater that became flaky after about two years. I have no training with these heaters and had little choice but to call a repair person. It turns out that fixing natural gas heaters is specialized work and calling in the repair person wasn’t cheap. I always had to pay for some minimum time plus the cost of some expensive part that had to be replaced. The repair person would get the heater working, but the flakiness never went away. During the fourth service call in two years I did my usual thing of watching the repair guy and asking questions. This guy happened to mention that the contro...

Alice Schroeder’s fascinating biography The Snowball: Warren Buffet and the Business of Life makes it clear that Buffett engages in market timing in the sense that he varies his allocation to stocks over time. If he does it, why shouldn’t we? Of course, Buffett’s market timing is different from the investor who makes short-term bets on whether stocks will go up or down. Buffett looks for attractively-priced stocks, and during some time periods he finds them and sometimes he doesn’t. This is still a form of market timing, though. It’s easy to show that market timers as a whole must make less money than buy-and-hold investors, on average. It’s simple mathematics that the extra trading costs along with investing in inferior asset classes like cash and bonds must hurt the average market timer’s returns. This doesn’t mean that all of them lose to the market averages, though. Buffett is a remarkable example of someone who has beaten the odds so convincingly that he must have talent th...

My family uses Rogers Cable for TV and internet, but we still use Bell for our telephone. Both companies work hard to get us to bundle all three services together. I’ve discussed the offers from Bell here and here , and now it’s Rogers’ turn. The mailing we received from Rogers isn’t just a generic mailing; it is addressed to us and contains specific details of which services we already pay for. Apparently, we can bundle Rogers telephone service in with everything else for $149/month, “all monthly service fees included.” This is only $5.27/month more than we pay right now which makes it seem like a great deal. There must be a catch, right? After reading further it turns out that there is more than one catch. I’m guessing that the $149 figure doesn’t include sales taxes. This makes the added cost of phone service close to $20/month. The list of services we currently have seems to be missing a service that costs close to $20, and so we’re up to about $40/month extra for the...

With the BCE takeover officially dead, BCE has announced that they will resume their dividend and start buying back shares. Just about everyone knows what a dividend is, but many investors may not understand what it means to buy back shares. After all, what sense does it make for a company to buy itself? For the uninitiated, it may be disturbing to learn that the number of shares in a company does not remain constant. Many companies issue new shares over time, and this dilutes each shareholder’s ownership in the company. There are many reasons why a company would issue new shares and they all have to do with paying for something. Stock options, when exercised, usually cause the company to issue new shares. A company might choose to raise money by making a secondary offering of new shares to the public. Corporate takeovers of other companies are often financed by issuing new shares. All of these things dilute the ownership of existing shareholders. Is this a bad thing? Wel...

It may seem obvious when you think about it, but the stock market and the economy aren’t exactly the same thing. Some commentators seem to confuse the two. There is no doubt that they are related to each other, but they don’t always move in the same direction. The stock market reflects the going price for businesses that are at least partially owned by the public. The economy includes these businesses plus privately-owned businesses, bond markets, currency markets, governments, jobs, etc. Stock prices are a consensus view of the expected future profitability of public businesses. This makes the stock market forward-looking. Sometimes the crystal ball is cloudy and stock market participants get it wrong, but stock price movements tend to precede changes in the economy. We have seen this lately in media stories. As stock prices dropped, we heard story after story of gloom and doom about the stock market. This has largely given way now to gloom and doom about the economy. Ap...

My wife and I have always maintained separate bank accounts. It never really occurred to us to do all of our banking with joint accounts. I’ve often wondered what it says about a couple when they make one choice or the other. It’s not that I have my money and my wife has hers. Since we were married it’s all been our money. If I happen to be short on cash, she’ll just give me $100 from her wallet without keeping track. If her bank account gets low for some reason, I’ll just write her a cheque. Sharing a bank account feels sort of like sharing a toothbrush to me. It can be done, but you’d have to be in quite a romantic mood to think that sharing a toothbrush is a good idea. It just seems like a pointless hassle to balance a chequebook when two people are making withdrawals. Misunderstandings with joint accounts must lead to the occasional bounced cheque. It’s possible that having separate accounts but not really keeping our money separate is only possible because we both tend to ...