Bing Cashback is back! Sort of... well, not really

It was the best of times, it was the worst of times.

Today, I finally redeemed all the Bing Cashback rewards I had accumulated over the past year. But it was bittersweet. A few weeks ago, my go-to cashback site announced its closing. So, through misty eyes and a heavy heart, I made the redemption for both the first and the last time.

Build it and they will come.

Perhaps that's Microsoft's thinking behind the announcement of Bing Rewards, the replacement for Bing Cashback. Here's how it works:

1) Download the Bing Bar
2) Register with a free Windows Live ID
3) Start earning credits

How do you earn credits? By doing things like searches, setting your homepage to Bing or trying out new features of Bing. When you've earned enough credits, you can redeem them for gift cards, electronics, digital downloads, and movie tickets, to name a few.

Of course, earning enough credits to get a substantial reward could take quite a while. In fact, this is the same business model behind Swagbucks.com. I have an account on Swagbucks that I rarely use because it was taking forever to earn enough points to redeem anything worthwhile. And more importantly, I didn't like the search results.

And that's what this is really all about... search.

You see, Bing Rewards is mostly a poorly disguised effort (if not ill-conceived) by Microsoft in its never-ending battle to drain market share from Google's bread and butter — its search engine. The good news for Microsoft is that Bing has not only been a solid performer, but in the grand scheme of things, a grand-slam. The problem is, the score was 55 to 2, with Microsoft on the short end. So maybe now it's 55 to 6. But to make the deficit reasonable, you're gonna need a constant stream of base hits plus the occasional home run here and there.

The question then becomes: Is Bing Rewards even a base hit? Maybe. Some won't like that you're required to download the Bing Bar (which is used to track your credits). I don't care for that either, but it doesn't bother nearly as much as the requirement to use Microsoft's Internet Explorer browser. I'm a Firefox user and will not switch browsers just to participate in Bing Rewards.

For Bing Rewards to bat some runners home, Microsoft will have to open it up to other browsers and remove the requirement to download the Bing Bar (and even then I'm skeptical how much it would help). If they do that, I'll participate because I quite like Bing and use it for my searching already. But it doesn't mean I have to be happy about it. Bing Cashback had set the standard and I'll be reminded of that every time I earn a single, lousy credit.

You can't always get what you want... But if you try sometimes you might find...
You get what you need

That may be true, I'm just not thinking this is one of those times.

Posted by Matthew at 9:25 AM | Comments (1) | TrackBack
Category(s): Family Finances
Tag(s): family finances, money-saving tips

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Bullish potential

It's been three years now since the stock market peaked in the fall of 2007. During those three years, we've suffered terrible financial and emotional damage from a punishing bear market, watched our economy go through its steepest contraction (a decline of 4% in GDP) since the Great Depression, and been awakened to the fact that our financial system had been hollowed out and was/is in very shaky condition.

That's a lot to process and enough to turn even the most optimistic sorts into pessimists. But on top of that, we're watching a slow-motion government financial train wreck unfolding before our eyes. Huge deficits and debt are piling up with seemingly no willingness to recognize the extreme challenges about to hit our system in a decade or so (much of it in the form of increasing Social Security, Medicare, and health care obligations).

For three years now, many investors have been marinating in the toxic stew described above. Against that backdrop, how could anyone be bullish on stocks?

The key is recognizing that stock prices are not merely a reflection of current conditions. Rather they are a reflection of future expectations, and even more precisely, future expectations relative to current business valuations.

In other words, a change in expectations from "imminent Armageddon" to merely "terrible" can send the stock market soaring if stocks have been priced for the former. That's what we saw through 2009. And should the improvement go from "terrible" to "not so bad," that trend may have plenty of room to continue.

I'm not going to try to build a comprehensive bullish case in this post, but rather just relay some of the interesting bullish points I've noticed in recent weeks. I know it's hard to let this type of positive information in when many of us are still stuck in a reflexively defensive/pessimistic posture from the events and fears of the past few years. But for the first time in a while, it seems to me that the bullish case is looking pretty strong.

Let's look at some of these bullish factors. First, the market finally broke out of a four-month trading range last week by punching through the 1,130 level on the S&P 500. Many Wall Street watchers expected this trading range would be resolved when the market returned to business following Labor Day, and that appears to be happening.

From the March 2009 low of 666 to the April 2010 high of 1,217, the market rallied roughly 83%. It then fell 16% to a low of 1,022 on July 2. That correction was 35% of the prior move (a drop of 195 points — one-third of the prior gain of 551 points). That is a pretty textbook definition of a minor correction, although it certainly didn't feel that way at the time.

If we view this year's correction in terms of common, typical bull market behavior (rather than as the start of a new bear market), it's easier to look forward with more confidence as to what commonly transpires next.

What is that? As our October SMI newsletter piece on the election cycle and annual seasonality (subscribers' link) points out, we're nearly finished with what is typically the worst six-month stretch for stocks in each four-year presidential cycle. And we're on the cusp of beginning what is typically the best six months of that four-year cycle. Since 1950, the six-month period we're about to enter has averaged a gain of 21.8% for a portfolio split evenly between large and small stocks.

If that's not optimistic enough for you, the Stock Trader's Almanac reports that since 1914, the market has averaged a gain of 49.2% from the mid-term-election-year low to the high of the following year. (That's not the product of a few good years either — only four of those 24 instances saw advances of less than 32%.) If we assume the July low of 1,022 is indeed the low for 2010, that would imply a gain to 1,500 by sometime next year would be normal.

Hello? Do you hear anyone talking about a gain back to the levels of the 2007 peak by sometime next year? It sounds crazy, but a further gain of 32% from today's levels would merely be following the normal mid-term election pattern.

Sure, it's great to look at all these historical patterns and technical analysis mumbo jumbo. But is there anything in the fundamentals to support this kind of optimism? It turns out, there is.

The other day, I came across a great article by Jon Markman in which he points out that much of the "September surprise" in stock prices this year has been due to companies solidly beating earnings expectations. But more importantly, he references material from a British money management firm called Collins Stewart that makes a compelling case for stocks advancing strongly on the basis of their likely earnings and current valuations.

As we have noted several times in SMI, earnings estimates are often way too optimistic, thus we're skeptical of valuation methods relying heavily on those estimates. But Collins points out that following bear markets, it takes a while for analyst optimism to return, and in fact their estimates tend to be too low for the first three quarters of bull markets.

Based on the fact that Markman thinks analyst estimates will prove to be too low compared to how earnings come in (which has, in fact, been the case so far through this recovery), he thinks the market's current valuation (12 times expected 2011 earnings) is too low, not too high.

I encourage you to read his full argument, but the short version is that if the average P/E were to rise to just 15 on the back of stronger-than-anticipated company earnings, the market would likely move to around 1,440. (And he notes that when inflation and interest rates are as low as they are currently, P/E's typically wind up around 20, so 15 is hardly a stretch.)

Then he writes:

Before you scoff at this — and who could blame you — credit analysts say that bonds are already trading at levels that correlate with the S&P 500 topping 1,500.

So now we've got:

• multiple long-term historical trends,
• a fundamental earnings-based analysis, and
• the bond market

all telling us that it shouldn't surprise us to see the S&P 500 trading around 1,500 within the next year.

Okay, that's enough. I don't want to overstate the case. As I mentioned at the outset, there's still plenty of risk in this market. The possibility of a "worst case scenario" is still present, as the financial system remains fragile enough that an unexpected shock could still topple it. These bullish factors represent a shifting in the most likely outcome, but not an elimination of worst case scenarios. Risk has been reduced, but certainly not eliminated.

In recent years, the economy took some really tough punches, has been wobbling, but might not actually be knocked out. If that is the case, and we get back to something resembling "normal" again (ideally with our politicians straightening up their spending act) the stock market may have some catching up to do.

As we noted earlier, when the market is priced for a knockout and it doesn't happen, there's room for stock prices to advance. As businesses recover and the global economy (hopefully) continues to find its legs, investors could find themselves surprised by the sun starting to shine through the thick cloud cover they've been living under. It certainly wouldn't be the first time that has happened.

Posted by Mark at 11:55 AM | Comments (0) | TrackBack
Category(s): Current Market Events
Tag(s): bull market

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3 tools that could help you save money

I'm a sucker for most calculators, sites, graphs, apps — essentially any techie tool — designed to help me save money. I've recently come across three tools aimed at doing just that.

1% More Savings Calculator: This aptly named tool does one thing and does it well. Simply put in a few pieces of data (income, savings balance, time horizon, etc.) and it'll produce a graph showing your ending savings balance at your current rate of saving, your balance at an additional 1% of saving, and finally, your balance if you could save by an additional 1% each year until you reached 16% total savings.

The real fun comes by moving the "Percent You Save Each Year" or "Expected Annual Return" slider one notch to the right to see what a difference a single percentage point can make.

Takeaway: It's a nice little motivator. Working hard to eke out an extra percent of savings each year can make a big difference over the long haul — but not as big as increasing the expected rate of return by 1%. But, of course, we applaud both.

Springpad: An app that helps you remember stuff: Essentially, Springpad is a free service that tries to help you keep track of everything from recipes to movies you want to see to gift ideas and more.

Where Springpad gets really interesting is that it can alert you when a particular item that you've added has dropped in price. For instance, as this nice review points out, Springpad may let you know when an item that's used in one of your recipes goes on sale.

I've been playing around with Springpad for the past few weeks. When I logged in today, I saw I had an alert. Turned out, an album I had added from Amazon had a price change by $2. And what's interesting is the price change came from Buy.com. So even though I only added it from one vendor, it tracked the price from multiples, and when there was a price change it let me know.

Furthermore, it also alerted me to a special offer with a promo code from Amazon on how to save $3 on an album. Pretty nifty.

I did this all from my computer. There are also free apps — iPhone, iPad, and Android — to help you keep track of stuff on the go. Your accounts will sync across all platforms (so if you add something from your phone, it will show up when you log in on the computer). Springpad recently updated the app to include alerts on special offers and price drops. I'd also like to see an email or SMS option for these alerts, but this is a good step in that direction.

Takeway: This a pretty useful little service — and seeing how it's free, it certainly worth a try! (The only sticky note I'll need now is the reminder to actually use Springpad.)

Abogo: Transportation costs made transparent: This is a great site for those who are moving and are curious about transportation costs for getting around town. As this NYT write-up points out, you simply enter an address and Abogo will tell you how much the average household in that neighborhood spends on transportation costs. Now keep in mind, this is an average, not a projection specific to you. There are just too many variables to get that precise.

For instance, when I entered my address, it gave me a cost that was much higher than we pay (thankfully). But then again, I'm only about 15 minutes from work, my wife is a stay-at-home mom (i.e., no commute), the kids carpool to school, my car ownership costs are reasonable, etc. Of course, even approximately determining the amount one spends on transportation costs takes a crazy amount of math (PDF). So don't expect super-high accuracy — but since the tool is free, it certainly doesn't hurt to consult it.

Takeaway: If you're moving and transportation costs among prospective neighborhoods are a concern, might as well check it out. If you're staying put but want to feel better about your costs cause you walk to work, then by all means, Abogo.

Posted by Matthew at 8:55 AM | Comments (0) | TrackBack
Category(s): Family Finances
Tag(s): family finances, money-saving tips

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New season, new issue of SMI

As summer officially gives way to fall, we're rolling out the October 2010 edition of the Sound Mind Investing newsletter. It's now live online — and, even if you're not yet an SMI subscriber, you can still access our October cover story and a few other goodies (just use the links below).

The cover story focuses on the always appealing idea of market timing: be invested when the market is rising; be out of the market when it is falling. Appealing, yes, but extremely difficult to pull off consistently — and the process is emotionally gut-wrenching.

In The Realities of Market Timing, SMI founder and publisher Austin Pryor discusses the ins and outs of timing — and explains why avoiding a timing approach is likely to be more profitable for most investors over the long haul.

Also free this month: Finding the Right Prescription: How to Save on Medications — with tips on comparison shopping for prescription medicines.

And in Don't Confuse "Yield" with "Total Return," we explain why two savings vehicles can have the same yield, yet end up with returns that are quite different.

Rounding out our October issue are these subscriber-only articles:

• "Are Stocks A Bargain Right Now?" (on why the experts don't agree);
• "The Impact of the Election Cycle on Annual Seasonality" (history shows there's likely to be good news for investors in the months ahead);
• "Health Savings Accounts: A Primer" (what you need to know if your employer is offering HSA arrangement starting in 2011).

In addition to the kind of encouraging and informative articles described above, the SMI newsletter offers guidance on how to implement our performance-producing and time-tested investing strategies. Plus SMI web members gain access to online tools such as our 401(k) Fund Tracker.

Not yet an SMI print subscriber or web member? Today's a great day to sign up! If you become a web member, you'll gain instant access to the October 2010 issue, plus back issues all the way back to January 2007.

What are you waiting for?

Posted by Joseph at 10:55 AM | Comments (0) | TrackBack
Category(s): SMI General Announcements

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Report: College grads play financial catch-up until age 33

At a Capitol Hill briefing yesterday, the College Board Advocacy & Policy Center released its third "Education Pays" report, aimed at countering the idea (that seems to be growing) that a college education isn't as valuable as it once was. We explored that idea in our October 2009 cover story, Is a College Education Still Worth the Investment?

The new College Board report (in PDF here) offers "detailed evidence of the private and public benefits of higher education, including the impact on health, family and community, in addition to the financial returns," according to a College Board news release.

USA Today's education reporter Mary Beth Marklein has a summary:

For the typical student attending a four-year public university, the financial investment in college begins to pay off at about age 33, [the College Board] report says....

Compared with a high school graduate, the typical four-year college graduate who enrolled in a public university at age 18 has earned enough by then to compensate for being out of the labor force for four years and for borrowing enough to pay tuition and fees without grant aid....

"Questions have intensified about whether going to college is worthwhile," says [the report]. "For the typical student, the investment pays off very well over the course of a lifetime — even considering the expense."

Pay parity at age 33 is roughly unchanged from the data (shown in the graph below) that we used for our October 2009 story.

One way of thinking about this is that, generally speaking, the first decade after college is no financial picnic for college graduates. And, of course, those 10 years tend to be the time when college grads are making the transition into the workplace, getting married, and starting to raise children. (In many cases, a grad with a heavy school-debt load marries another grad with a heavy school-debt load, increasing the financial pressure.)

Seeking to highlight the upside of a college education, the report notes (as summarized by reporter Marklein) that recent "unemployment rates have increased faster among people with a high school diploma but no college degree" and that "college grads are more likely to exercise, volunteer, vote and read to their kids, and are less likely to be obese or smoke."

Of course, in weighing such findings, one runs into the problem of a "selection bias" that can lead to questionable conclusions about cause and effect. For example, it may be that people who are the sort to volunteer may already be the sort more likely to attend college. In other words, the two things (college and volunteering, in this case) are not necessarily linked in a cause/effect relationship.

The same could be said on the earnings side: is it that a college education itself leads to higher earnings, or is it that people who are likely to do well in the marketplace are more apt to go to college?

These matters aren't necessarily "either/or," of course. Surely, many people do become more valuable in the marketplace because of their educational attainment. But, as the report notes, a significant percentage of those who attain a college education do not find greater prosperity: about one fifth of male four-year college graduates earned less than $39,000, the median earnings of high school graduates.

The report concludes that the solution to the college-or-not quandary "is not to advise students to forgo college" but to "provide better information and advice — and more generous financial support."

I'm not too sure about that last point. Maybe a better approach would be for the price to come down.

Posted by Joseph at 9:35 AM
Category(s): College
Tag(s): Collge, student loans

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Missed it by that much

American workers are short on retirement savings. How short? $6.6 trillion short, if this new study is to be believed.

As usual, there are things to quibble about with the study's methodology. In this case, the study assumes a paltry rate of return of 3% on invested assets. Given that the survey covers workers aged 32-64, hopefully that rate will end up being too low.

But if they're even half right, that's still a big deficit to make up.

Posted by Mark at 10:20 AM | Comments (0) | TrackBack
Category(s): Retirement

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An app that will save you money... or cost you money

A few hundred thousand cell phone apps are available to help you do everything from catalog your wardrobe to organize your grocery list. But in my experience, what often sounds like a useful app ends up being one I rarely use. For every 10 I get, I probably use only one with any kind of regularity. Even less often does an app actually help me save money.

That could change with the release of Shopkick. It's part of a genre of apps, known as "check in" apps, that use the GPS features of the phone to let others know where you are and what you've been up to. You can also use such apps to win virtual prizes or score points toward physical prizes. So far, the most popular of these apps is FourSquare, though others such as Gowalla, Whrrl, and SCVNGR are gaining in popularity.

Shopkick wants to take the idea of a location-based social app and put some real financial incentives behind it, so that it becomes more than just a passing fad but an actual money-saver for the user (and, of course, a revenue producer for businesses). If they keep signing big name retailers, as they've done with Best Buy, Shopkick could become a game-changer.

Shopkick has also upped the ante by installing custom hardware in participating Best Buy stores that will allow targeted offers and rewards based on the department you happen to be shopping in. To see the possible future of Shopkick, you can watch the video below.

I see some upside in this free service, though consumers will have to be careful. I mean yes, it could save you money. But there's also the possibility that Shopkick will have you doing scavenger hunts around the store, tempting you with special one-time offers that could lead you to spend more than you had planned. Time will tell.

If Shopkick signs up enough stores that I shop at regularly (grocery stores, gas stations, certain restaurants), significant savings could follow. But I'll have restrain myself and stick to my list. Impulse buys have been known to wreck many a budget.

Posted by Matthew at 1:22 PM | Comments (0) | TrackBack
Category(s): Family Finances
Tag(s): apps, money saving tips

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Past as prologue?

Here's an interesting study from Bespoke Investment Group. They went back to 1928 looking for the six-month period where the stock market most closely resembled the six months we've just been through. Then they looked to see what the future held from that point.

See their study and charts here.

Particularly noteworthy is the way that 1959/60 period lined up with both a prior recession and a new "double dip" recession just ahead. That's very similar to the scenario today (no surprise that the stock market responded in similar fashion, I suppose).

As the study points out, it's also very interesting to note that while April 1960 did indeed bring about a dreaded "double dip" recession, the stock market didn't really suffer much from it, declining just 6% from the point we're at now to its ultimate low. And following that second recession, the market was ready to leap higher.

Of course, none of this means anything concrete for the future we face today. But it's interesting to see all these similarities lined up and then realize that the bad outcome for the economy that many are fearing today didn't impact the stock market in that prior period the way most are assuming it would today. (And, of course, we may not even get that double dip recession this time around — the jury is still out.)

It's also interesting to me that in that 1960 example, the pivot point occurred right around the end of October. The seasonality and election cycle influences seem too obvious to ignore, but perhaps I'm reading to much into it. Given our own proximity to the seasonality and election cycle pivot point, that would seem to be encouraging.

Posted by Mark at 1:05 PM | Comments (0) | TrackBack
Category(s): Current Market Events

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College students and credit cards

If you have son or daughter in college, you're sure to be interested in how the new Credit CARD Act affects card marketing on campus. Also, the new law restricts card availability for those under 21.

SMI assistant editor Joseph Slife discussed the details this week in a conversation with host Bob Crittenden on Faith Meeting House from Alabama's Faith Radio.

You can listen below (12 min.) — or download an mp3 (Windows users: right click, then "save link as").

A related story — from the September issue of the Sound Mind Investing newsletter — is here (subscribers' link).

Posted by Matthew at 2:05 AM | Comments (0) | TrackBack
Category(s): Family Finances
Tag(s): college, credit cards, radio

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Of bonds and bubbles, part 2

A couple of weeks ago, I raised the question of whether bonds were looking bubbly. A day later, Bespoke Investment Group published a pair of charts that add another angle to that discussion.

Bespoke's first chart shows that in absolute terms, the rate on 10-year Treasuries is indeed at historical lows (surpassed only during the worst of the financial panic a couple years ago).

However, as we've written before regarding fixed-income yields, the most important number isn't necessarily the apparent yield you earn, it's your net "real" return after inflation is factored in. And on that score, today's inflation-adjusted yields — while below average — are nowhere near the extremes we've seen at other junctures.

These charts don't answer the "bond bubble" question, but they do indicate that when the full economic picture is taken into consideration, current bond yields don't seem that crazy. Bottom-line: if our economy truly is "going Japanese" — i.e., several years of deflation, or at least no real return of inflation — current bond prices may not be inappropriate at all.

The question, of course, is how likely is that deflationary outcome? (Here's a rather technical analysis that concludes the bond market is pricing in a 70% probability of this type of Japanese deflationary outcome.)

Posted by Mark at 11:35 AM | Comments (0) | TrackBack
Category(s): Current Market Events
Tag(s): bonds

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Are stocks cheap right now, or not?

This question is more difficult to answer than you might expect.

On the one hand, plenty of observers are ready to declare that stocks are very attractively priced. Most focus on the traditional price-earnings multiple (P/E) we discussed in detail in our June and July SMI newsletters.

Here's an example (from an Associated Press article) of this type of analysis, suggesting that "stocks are dirt cheap now":

Stocks are looking almost as cheap as last year when prices hit 12-year lows — at least according to Wall Street analysts.

It was easy to miss the development amid news of falling home sales, a drooping dollar and sluggish orders for big-ticket goods. But stocks in the Standard & Poor's 500 index now trade at just 11.7 times analyst estimates of operating earnings for the coming year. That is one of the lowest — read cheapest — levels for this key figure.

In fact, this so-called price-earnings multiple is roughly back where it stood at the end of March 2009 just as the market was starting an 80 percent surge.

Thankfully, this AP story does curb its enthusiasm by mentioning the main point we also made in our July story about "forward" P/E ratios: You can't trust analysts' earnings estimates.

Our article showed that between 1995 and 2009, Wall Street analysts as a group expected earnings to grow 14.3% on average. Actual growth? 5.8% on average. That's a pretty big margin of error.

So if we have to take forward P/E ratios with a grain of salt due to the typically over-optimistic forward earnings estimates they contain, what other valuation gauges can we look at?

Brett Arends of the Wall Street Journal has a few suggestions of alternative valuation measures. Unfortunately, they don't paint nearly as optimistic a picture of current stock prices.

In his article, "Why Stocks Still Aren't Cheap," Arends looks at four alternative valuation measures and finds them all saying roughly the same thing — stocks are still somewhat higher priced right now than their long-term averages. Granted, in most cases they are back to the valuations of roughly the mid-1990s. But those aren't bargains when viewed against a longer view of market history.

You can read the article to get the details on each of the four measures he uses. And it's worth noting that he isn't necessarily arguing that stocks have to fall from their current levels. He just isn't buying the earlier argument that today represents a great contrarian buying opportunity.

Posted by Mark at 11:45 AM | Comments (0) | TrackBack
Category(s): Current Market Events

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Uncertain times, a certain God

Ever struggle with trusting God in your finances? Join the club.

When economy seems to be teetering and the stock market is a roller coaster, trusting God for your financial future (and, yes, your financial present) can be tough.

In a conversation Monday on Minnesota-based Faith Radio, SMI's Assistant Editor Joseph Slife talked with host Neil Stavem about being confident in our "certain God" in an uncertain world.

The Faith Radio Network, a ministry of Northwestern College, includes stations in Minneapolis/Saint Paul and Duluth, Minn.; Madison, Wis.; Fargo, N.D; and Sioux Falls, S.D.

You can listen to the 14-minute conversation below — or right click here (and "save link as") to download an mp3.

Posted by Matthew at 9:12 AM | Comments (0) | TrackBack
Category(s): SMI General Announcements
Tag(s): christian financial, radio

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