James Cayne: “We Ran Into a Hurricane.”

According to the Wall Street Journal that’s what Bear Stearns’ former CEO said during the final meeting as stockholders approved the sale of the company for $1.4 billion to JP Morgan.

To say such a thing would insinuate that what happened to Bear Stearns was out of management’s control. This is the typical BS we hear from management when they do something stupid and things don’t work out. They either point the finger at someone else or blame circumstances. Of course, when things go well, they are happy to accept responsibility.

I only wish Cayne would walk away penniless, which would be justified based on what he allowed to transpire over the last few years of the company. Although I haven’t read anything about Cayne’s severance package (or even if he has one), I seriously doubt that he will walk away with nothing. He already sold $61.3 million worth of Bear Stearns’ stock back in March (5.7 million shares at $10.84 each).

How Long Will it Take to Improve a FICO Score?

On Wednesday I received this email from reader, Joshua:

Good Morning,

Thank you for reading my email.

My question regards my credit score. I recently got my credit report and score. My score as of right now is a 577 which as you know wont get me very far. I make decent money now and I am paying off my accounts although I haven’t been delinquent since February of ’05. I know that has a negative effect on my credit. But I also noticed that what else is screwing up my credit is the fact that my amount owed is close to the maximum amount I can borrow. I basically took the money that I’m putting towards savings this paycheck and I put it all towards my credit cards along with my usual amount of credit card payments that are in my budget. My question is, how long will these payments take to get to the credit bureaus so that my score can raise? Before I made these payments I had 13.55% of my available credit left and after I made my payments I have 22.26% of my available left. So I guess I have 2 question:

1. How long will these payments take to filter into the credit bureaus?
2. What’s the ideal percentage of available credit to have left?

Thank you,


FICO scores are one of my weaker areas so I sent Joshua’s question to Liz Pulliam Weston, an MSN Money contributor, credit expert, and author of Easy Moneyand Your Credit Score(Affiliate Links). Here’s Liz’s response:

Hi, JLP.

I’m delighted to help out.

Joshua’s score will improve as soon as his credit card companies report the new, lower balances to the credit bureaus. When will that happen? It depends on the lender, but most report once a month, so it should happen within 30 days. (If you check your credit reports, your credit cards will generally show the balance from your most recent statement.)

As to his second question: the less of your available balance you use, the better. I generally advise people to use no more than 30% of their limits at any given time, but you’ll typically continue to see score improvements until you get your credit utilization down below 10% of your limit.

Hope that helps.

Liz Pulliam Weston

Bottom line: Joshua’s on the right course and I respect the fact he is making an effort to pay deliquent accounts even though they can hurt him in the short run. Eventually his FICO score will move up.

Interesting: St. John’s Required Reading

I wish more colleges would follow St. John’s reading program. This is what one would call a classical education. Oh, and all of this will only set you back $48,000 per year!


HOMER: Iliad, Odyssey
AESCHYLUS: Agamemnon, Libation Bearers, Eumenides, Prometheus Bound
SOPHOCLES: Oedipus Rex, Oedipus at Colonus, Antigone, Philoctetes, Ajax
THUCYDIDES: Peloponnesian War
EURIPIDES: Hippolytus, Bacchae
HERODOTUS: Histories
PLATO: Meno, Gorgias, Republic, Apology, Crito, Phaedo, Symposium, Parmenides, Theatetus, Sophist, Timaeus, Phaedrus
ARISTOTLE: Poetics, Physics, Metaphysics, Nicomachean Ethics, On Generation and Corruption, Politics, Parts of Animals, Generation of Animals
EUCLID: Elements
LUCRETIUS: On the Nature of Things
PLUTARCH: Lycurgus, Solon
NICOMACHUS: Arithmetic
LAVOISIER: Elements of Chemistry
HARVEY: Motion of the Heart and Blood
Essays by: Archimedes, Fahrenheit, Avogadro, Dalton, Cannizzaro, Virchow, Mariotte, Driesch, Gay-Lussac, Spemann, Stears, J.J. Thompson, Mendeleyev, Berthollet, J.L. Proust

Continue reading Interesting: St. John’s Required Reading

How to Write Your Very Own Investment Policy Statement – Getting Started

In his book, Optimal Investing (Affiliate Link), Scott Frush writes this about the importance of having an Investment Policy Statement:

Much like a blueprint for building a house, an Investment Policy Statement serves as the blueprint for building your optimal portfolio. This policy is crucial to the long-term achievement of your specific financial goals. First and foremost, an Investment Policy Statement helps you learn more about what your needs and priorities are, how to best address them, and the risks involved with investing. Secondly, this policy allows you and your portfolio manager (if you elect to employ one) to gain a better understanding of your objectives and constraints and how to best manage your portfolio to accomplish your specific financial goals.

A written Investment Policy Statement will not alone guarantee success in protecting and growing your optimal portfolio. Rather, it will shelter your portfolio from ad hoc revisions, made by either you or your portfolio manager, from a sound long-term asset allocation policy.

Basically, an Investment Policy Statement should explain why you’re investing (your goals) and what you are investing in. Why is this important? Because human nature tends to take over when times get tough and might cause you to make changes to your investment plan based on emotion rather than sound logic. Being able to pull out and read through your Investment Policy Statement (IPS) will give you comfort and just might keep you from making a serious mistake.

Continue reading How to Write Your Very Own Investment Policy Statement – Getting Started

The End of the World as We Know It?

Will our kids be dumb and broke? That’s the question/headline of a recent MSN Money article.

I sure hope the answer is no, but I’m not very encouraged. Every single one of my friends and peers it seems, are people who couldn’t explain compound interest if they had to, ignore the 401k matches offered by their employers (despite my pleas), are comfortable having debt, and spend like they all have huge inheritances coming to them.

And these are my college-educated peers. Fellow finance majors for crying out loud. There are many more who start with much less, have unique disadvantages, and don’t have an education or support system in place to assist them.

All these folks are starting to have children. Children! You can’t teach what you don’t know, and it seems to me that we all know precious little (a real irony in this Information Age). Is it simply a lack of experience so far, or are we actually getting dumber as the generations pass?

The truth is that we don’t know less about financial matters than our parents and grandparents did. The difference is that they didn’t need to know as much. They had pensions, they didnt’ have credit cards, and no lender would give them a loan they couldn’t afford to pay back. You had no choice but to live within your means. That is obviously not so today.

But it’s not just finance; we seem to know a lot less than we should about everything, from history to literature to science. As the information in and about our world grows, it seems our schools – and parents – are actually spreading around less of it than ever! Kids at the good schools can barely read, much less think critically.

Part of the problem may be that our parents and grandparents didn’t have mindless activities like TV and with video games competing for their attention (92% of people 18 and under play video games regularly, a quarter admit they’ve felt addicted, and almost 10% can be considered pathologically addicted, according to a recent U.S. News article). They were forced to read books, talk with each other, create and play physically active games, and so on.

Another part of the problem could be that no one in the younger few generations has ever faced a major threat to our way of life – no major wars or recessions, for instance. We seem, perhaps consequently, to be lacking the fierce patriotism, independence, and drive of our forefathers.

I’m staunchly anti- government regulation, but I’m feel less and less confident that Americans can or will make rational decisions in their own best interests. And without that, capitalism doesn’t work. “Dumber” people, for lack of a better word, are less valuable to society. And the more uneducated people there are in a society, the less valuable and productive that society is. In a that kind of society you end up needing a big government monitoring and regulating all the ignorant masses (unless you’re OK letting said ignorant masses wallow in their own poverty and misery, which a truly capitalist society would allow and recognize as necessary, as that would be the only motivation for said people to work hard and strive for education).

I realize every generation probably goes through some sort of “we’re going to be the end of civilization as we know it” crisis, and maybe I’m just pessimistic. But is it just me or are things actually getting worse – at least for Americans?

More from Meg at The World of Wealth

What Are Your Thoughts on Fake Grass?

The Personal Journal section in today’s Wall Street Journal had an article ($) about how some homeowners are turning to fake grass for their lawns instead of the real thing.

My thought:


It just seems wrong to me. What’s next? Fake trees and flowers? Fake birds and insects? Fake kids playing out in the front yard?

Can you imagine a world covered in plastic? I don’t want to.

The manufacurers of fake grass say that people are installing their products to conserve water. I gotta say, if you take care of your yard properly, you shouldn’t have to use that much water. Of course, I do live in an area that normally gets lots of rain. Still, even in drier areas, it’s possible to have a decent looking yard if you:

1. Don’t cut your grass to short. Mowing your grass higher helps to shade the roots and can actually keep the ground moist. I mow my grass on the highest setting possible. In August, my grass looks awesome while everyone else’s looks burnt.

2. Water less frequently but more thoroughly. I read somewhere that you can actually water your grass for two hours every two weeks and get better results than by watering it more frequently. Watering more often trains the roots to stay close to the surface of the ground instead of growing deeper.

Anyway, I think it is safe to say that fake grass isn’t in my future.

Larry Winget’s 12 Ways to Go From Getting By to Getting Ahead

I found this list of 12 Ways to Go From Getting By to Getting Ahead on page 200 in Larry’s book, You’re Broke Because You Want to Be (Affiliate Link). My thoughts are added in italics:

1. Know where you are. This is THE BEST place to start. Like Larry says in his book, most people don’t know how much they owe nor do they know how much they make. You gotta figure this out if you really want to make changes.

2. Take responsibility for the situation. Although it may be easy to play the victim of your circumstances, it won’t get you anywhere. Accepting responsibility for your situation is actually liberating.

3. Feel bad about it. Experience remorse. I’m of the opinion that if you don’t feel remorse, you’ll simply do it again. It’s kind of like when I get after my kids for doing something wrong. If they show no remorse, I’m almost certain I’ll be getting after them for the same thing in the future.

4. Make the decision for things to be different. I have nothing to add to this.

5. Know exactly what you want your life to look like. As Larry suggests in his book, write down exactly what you want your life to be like. How much do you want to make? Where do you want to live? How much do you want in your retirement account? Write it all down and memorize it.

6. Create an action plan to get there. If you’re currently earning $30,000 per year but you’d like to be making $100,000 per year, you’re gonna have to make up a plan to get you there. Do you need to go to college? Do you need to network with others in order to get where you need to go? Figure it out and make a plan.

7. Know what you are willing to give up to get what you want. If you have to make changes, you’re gonna have to give up something to make those changes. If you don’t, you’ll still be in the same position one year, five years, and ten years from now.

8. Spend less than you earn. DUH! You’ll never be able to outspend yourself to prosperity!

9. Figure out ways to earn more. Take a second job? Start a blog? There’s lots of different ways to earn more money.

10. Stop all unnecessary spending. This goes hand-in-hand with number 7. If you’re spending $500 more per month than you make, you’re gonna have to cut $500 (or more) from your spending. Make a list of all your bills and outgoing expenses and prioritize. If it’s not absolutely important, cut it out for now.

11. Pay off debts as quickly as possible and only go into debt for things with long-term value. You’ll be amazed at how much more you can do when you have no credit card debt. A reasonable house note is an example of acceptable debt. Notice I said REASONABLE HOUSE NOTE!

12. Build a cushion. Save! An emergency fund is absolutely critical to long-term financial success. Why? Because emergencies are ALWAYS going to pop up. Being able to pay for them without piling on more debt will give you the warm fuzzies. Trust me!

I like this list.

Larry goes into detail for each of those twelve points in his book.


Larry Winget on the Housing Crisis – An Interview

Ten Questions For Larry Winget, The Pitbull of Personal Development®