The Current Trend of Consolidation/Centralization in Corporate America

I recently read in the Wall Street Journal an article on how Yahoo! is beginning to consolidate/centralize their different business units.  This is an interesting trend where during economic slow downs corporations try to consolidate and centralize for “synergy” and “cost savings.”  In economic booms, the corporations reverse course and decentralize (usually though the creation on new business lines/unit, but rarely breaking apart existing groups).  Yahoo is doing it, my company is, and I’m sure many others are as well.

A Managing Director at my firm recently commented that it is one big cycle that he’s seen time and time again; we’re in cost savings and consolidation mode right now and eventually we’ll be in spend mode and decentralize mode again (new lines of business).

It makes sense that when money is tight you look to cut the fat and concentrate more on business as usual rather than the new great idea.  The shame is that by Yahoo combining business units such as mail and search a lot of creativity will be lost.  You know how it goes…the too many cooks in the kitchen concept.  Does anybody see a business unit the size of the new Yahoo entity agreeing that it is a good idea to take the risk and revamp Yahoo Mail using unproven Web 2.0 technology?  It worked out great (check out Yahoo Mail if you don’t already have an account), but it might not have and that is what large groups are always afraid of.

Google still pumps out the creative ideas because it is decentralized.  If we ever read that Google is “centralizing” we’ll know it is all over for them and we should sell, sell, sell!

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iPhone New Pricing Scam

I’m sure many of you have been tracking the new 3G iPhone coming out on July 11th.  It is faster, sleeker, and and more versatile model of the previous version (plus it has GPS).  Furthermore, it is cheaper.  That’s right, only $199 for 8GB of memory and $299 for the 16GB version.  However, the data pricing plan has gone up from $20 to $30 a month.  Ten more dollars, not including applicable taxes (meaning we’re probably talking $12).  That means that you’re paying upwards of $144 a year more for this new iPhone.  After 2 years you might have just paid the full price for the iPhone and not have to continue bleeding money.

But here is the worse offense: the new data plan doesn’t include text messaging.  That’s right, an unlimited data plan with no texting.  Assuming that the texting will be around $5 more a month, we’re now paying between $38 and $42 (w/ taxes) a month on top of your normal phone plan.  Ouch!

I’ve been wanting to get the new iPhone for some great reasons like, I need it for, well, ah basically just want it because it looks cool.  However, paying $100+ for my phone plan plus data plan just isn’t going to fly with my bank account or my wife.

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Online Money Management Site Review: ‘Mint’

I’ve recently been hearing a lot about the new personal money tracking/management site called Mint, so I decided to check it out.  Mint is similar to Quicken or Microsoft Money, allowing you to link up you bank, brokerage, and credit card accounts.  You can then track you finances, transactions, and overall net worth.  However, one key difference is that Mint is online, so you’ll need to trust them with you financial login information.  Right off the bat, you’ll notice how visually pleasing the site is. The design is clean, the colors are appealing, and graphics are fancy.  A fine example of a Web 2.0 site.  For those tech guys out there, I’m pretty sure Mint is built in Adobe Flex.

I signed up for the service fairly quickly (standard registration with ‘Favorite pet’s middle name’ sort of questions).  I started linking up my various bank and brokerage accounts and…hey, how come I can’t find some of my accounts?  Where is my 401K…what about my wife’s?  Can’t find my 529 plan either.  Hmmm, not a good start that they are missing some standard financial institutions.  However, I’ll give them a break considering that Mint does claim this to be a Beta site (whatever that means for a public/all access site).

The real issue I have with Mint is that they seem to have spent more time with the pretty colors and less time on functionality, especially when you compare it to Yodlee’s Money Center.  You can’t see the overall trend in net worth or perform bill pay.  The page layout isn’t built for a large number of accounts and becomes cumbersome the more you add.  Also it is very difficult to isolate on your portfolios (stocks).  I found that while Yodlee’s Money Center focuses on the management of your overall financial life, Mint is more of a snapshot of your current accounts.  

Mint certainly has potential and might become a contender in the online money management space.  However, right now I would say peruse Mint, but go to a place like Money Center for a more mature and functional money management site (or Quicken or Microsoft Money…but don’t get me started with what is wrong with those!).

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Took the Plunge Into Bank of America

So I finally did it.  After checking the realtime BAC quote of Yahoo! Finance about every 5 minutes for the past two weeks, I decided to buy on Friday.

I picked up 165 shares at $30.50 (was down 4% on Friday).  After commission it came to a cost basis of $30.66 (I screwed up an forgot to check to “All or None” box on the order entry ticket…so the trade executed as two separate orders and I got charged two commissions [$35 each]).  

Couple of things on why I decided to buy BAC.  

1. Even though the current market is very unstable and BAC certainly could drop more, I think that BAC and Wells Fargo are the two strongest retail banks.  They hopefully will both eventually recover.
2. The current dividend yield is at an incredible 8.3%!  This is not only a rate several time better than any bank account, but you’re also only paying 15% taxes on the income (please see my previous post were I discuss the fact that you actually might be paying 22%).  However, there is a risk…
3. BAC might lower their dividend which would hurt point #2.  I don’t believe this is likely because of the Countrywide purchase.  If they have the money to buy Countrywide, they most likely won’t need to lower their dividend anytime soon.

We’ll see if I made the right move.  My sell target for BAC is $40.00.

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Raising the Conforming Mortgage Loan Amount in New York City

Have you heard that they are raising the conforming mortgage limit from $415,000 (depending upon the area you live in)?  In New York the new conforming limit will be: $729,750!  I can’t tell you how excited I was to heard that.  I recently bought an apartment in Manhattan and had to get a Jumbo Mortgage since prices here are so inflated (i.e. good luck finding a place less than $500K).  

Looking at the rates on Wells Fargo’s Mortgage Rate Site there is a full percentage point difference between the conforming and jumbo loans.  Money in the bank, baby!

Here’s where reality sets in and the saying “no such things as a free lunch” comes into play.  It seems that there is an extra “fee” being charge for the extra risk of these larger loans.  The extra fee essentially wipes out the savings of having a conforming loan.

Guess I won’t be refinancing anytime soon.

Here is an article explaining more. 

Also, here is what my mortgage broker said when I asked him (this is from a few weeks ago, so the rates aren’t up-to-date): 

The new “High Balance Conforming Program” is up and running on 30 Year Fixed mortgages, but not as attractive as we had hoped. The 10/1 Arm is “out” as no investor is really buying Arm’s at the moment (they are shelled shocked) so pricing is really quite bad. The 30 Year Fixed is by far the most attractively priced from a historical perspective.
 
Regular Jumbo 30 Year Today is about 6.875% at Zero points
New High Balance Conforming 30 Year is about 6.625% at Zero points.

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