Quoted in Bloomberg Article

Hey Friends: I have been quoted in an article written by Seth Lubove, Los Angeles Bureau Chief for Bloomberg. You may view the article at the following link: http://www.bloomberg.com/apps/news?pid=20601109&sid=a8N_74GdteOg&refer=home While I was mentioned only briefly, much of the information in the article came from me. Attribution was light, in order to protect me from any liability. Enjoy the read. See you next post! Randall Parker, MBA

Health Insurance

Health insurance is a topic often debated by two of the presidential candidates, with these two individuals each touting some form of Universal Health Care. This means that the government would provide health care to everyone, whether you feel like you need government "help" or not.

This is an inherently bad idea. Sure, it sounds good, but it just won't work here. Many other countries around the world have tried to provide universal care. Canada has created a dismal system that patients, doctors, and nurses all hate. It doesn't work there. The only example of a working universal health care system is in Australia. Australians seem to have a different view on consumption of medical services than Americans, so it seems to work just fine there.

I'm not writing this article to compare and contrast the two candidate's positions. Neither plan is workable, so let's just leave the argument right there. I want to discuss the benefits of having health insurance, and show you how to protect your family, if you are one of the many families who does not have health care.

You have three basic choices for health insurance: HMO, PPO, or 80/20. 80/20 is the coverage that most of us grew up with, but due to the high cost of health care, HMOs and PPOs are now proliferating.

HMO stands for "Health Maintenance Organization," and generally means that you must go to a certain facility and see your assigned doctor whenever you need healthcare. If you need more specialized attention, you must beg for it, and you may not be able to get all of the care you would like, because someone is making decisions based on the cost of care to the organization, rather than your health needs.

PPO means "Preferred Provider Organization." In this structure, an insurance company signs hospitals, doctors and specialists to agreements, which detail what each member provider may charge to the company's policyholders. As an insured, you are free to see any provider in the network, and you will pay a copay, deductible or both. If you need a specialist, just find one on the list and go. No other permission is required for basic office visits.

80/20 is the traditional type of health coverage. Generally, you will have a deductible that you will pay before obtaining benefits under the policy. You will then have a co-insurance corridor in which you will pay 20% of the cost and your insurance company will pay 80%. You will have a stop-loss point, after which the insurance company then pays 100% of your expenses.

You also have the choice of a traditional policy or an HSA (Health Savings Account), which can be used as a retirement tool and comes with some tax benefits. If this is something in which you would like to have more information, please contact me directly. HSA is an advanced financial concept and planning tool that is not appropriate for everyone, so I won't address it much here.

Depending on your age, health condition, financial status, and other issues, the best type of policy for you may vary. Usually, PPO policies have the lowest premiums, followed by HMOs, and then 80/20.

You can get an instant quote by visiting the following website:

https://www.sales.healthnet.com/Brokers/RandallParker_RANDALLLEEPARKER.asp

One key reason to have health insurance is for the negotiated rates that you will get from the insurance company. For example, I don't go to the doctor very often. Most men fall into this category. Unless I'm am bleeding profusely or I have a body part hanging off, I'm not likely to waste my time on an office visit. Judge me later, but you know a lot of other people like me.

For my own use, I purchased a PPO policy with a $1,500 deductible that also had $15 generic prescriptions. As a 42-year old male (I know, I don't look that old), my premium is $124 per month. I rarely go to the doctor, and I probably won't hit the deductible. However, if I do have to go to the doctor, I will save a lot of money as compared to going to the doctor without insurance.

I had two office visits last year, which included some blood work and a minor in-office procedure. The doctor billed me $200 for each visit. My insurance company had a negotiated rate of $80 per visit, so I saved $120 per visit, just because I had insurance. Even though the insurance company didn't pay out any money, because of the negotiated rate I saved almost enough to pay my monthly premium on each visit. i also saved 80% on my lab expenses, and my prescriptions were only $15 each.

If you plan carefully, you may be able to obtain health insurance for much less than you think. Covering children can also be inexpensive, especially if they are added to your plan. Use the link above, where you can get a quote and complete an application online, or give me a call with your questions.

Be healthy, stay healthy, get insured, and don't vote for anyone who thinks we need Universal Health Care. That is one policy we cannot afford!

Who Controls Gas Prices?

Gas prices are all over the news right now, and I'm sure that the amount of your budget dedicated to fuel has increased dramatically over the past year or you have made significant changes to the way you use fuel. Without taking a political stand in this blog, I would like to shed some light on the fuel price situation, because a lot of unsubstantiated information and claims are coming across the media, and you deserve to know the truth!

The gas price that you pay includes all of the following expenses:

• Crude Oil (72%)
• Marketing and Refining costs (18%) - Includes Port of Entry to Refinery to Local Gas Station
• State and Federal Taxes (12%)

With crude oil now topping $100 per barrel, and no end in sight, the proportional cost of crude oil will continue to increase. Now, you might be outraged to know that it only costs the Arabs $2.00 to get one barrel of crude oil out of the ground. That is not a misprint, IT ONLY COSTS TWO DOLLARS TO PULL ONE BARREL OF OIL OUT OF THE GROUND!

In case you don't know, one barrel of oil is 55 gallons, so at $110 per barrel, the cost of crude oil is $2 per gallon. For those who think that the US oil companies are taking advantage, get over it! It's not true. They keep about 9% of sales as profits, which seems like a lot, until you start to compare with other industries. Also, much of their profit is reinvested in exploration and R&D activities. You may also be surprised to know that the oil companies give more money to the government in taxes than they keep as profits.

Why are we in this mess, anyway? What do we do about this? Who can fix this?

Well, worldwide consumption has increased, and continues to increase. You can blame China and India for this. Global oil demand is about 87 million barrels per day. At $100 per barrel, about $9 billion worth of crude is sold worldwide daily for an annual figure that staggers the mind at about $3.175 trillion!

We all know that OPEC in the Middle East controls the worldwide supply of oil, because they pull more of it out of the ground than anyone else. Good ol' Hugo Chavez in Venezuela makes a bunch of the stuff, and we have some here, but we can't drill for it. I'm sure it will surprise you to know that the Middle East only supplies 14% of the crude oil consumed in the USA. In fact, 55% of the crude oil we use comes from within our own borders. 12% of our oil comes from South America, and 15% of our oil comes from Africa. Africa could be the answer to a very interesting trivia question! Who knew we bought more oil from them than from the Middle East?

The falling US Dollar is another factor affecting oil prices, because oil prices are always set in Greenbacks. Some have called for the Euro to become the standard, although I don't think the argument has much traction. Regardless of the currency used, the effect is the same. A falling dollar increases our cost of imports. This is a basic Macro-Economic principle.

Crude oil prices are set based on Supply and Demand. OPEC has the capacity to produce a lot more oil, but they have no economic incentive to do so. Even as prices rise, our demand has not diminished greatly, yet. If OPEC made more oil, they would lower the price and their own profits, because a lower price would not increase demand to a point that would increase their overall profits. We need to find a way to increase the supply of oil, without counting on them to do it.

We have enough oil in the USA to serve our nation's needs for the next 100 years or more. Why don't we increase drilling here? Short Answer: The Environmentalists won't let us. Even if we opened Anwar (Alaska), allowed drilling off the coasts of Florida and California, and increased drilling in South Dakota and other oil-rich areas, it would probably take ten years for us to be producing enough oil each day to really make a dent in the world market.

We are going to have to find a way to decrease our demand, if we want to see any lowering of prices. Keep in mind that crude oil doesn't just affect the price of gasoline. Crude oil also affects the cost of heating your home. The high price of gasoline affects the price of every product you consume and most services that you use. Trucks need fuel to operate, and these increased costs are added to the price of the products you buy. Airlines use a lot of fuel, and they are already losing billions of dollars due to the rising cost of fuel. Airlines are instituting new fees to offset these costs, because they can't charge more for the tickets; we simply won't pay higher fares.

The best recommendation at this point is to limit your driving, if possible. Join a carpool. Use public transportation (buses and trains). Ride a bike. Consider buying a vehicle with better fuel economy, but be careful about hybrids. The higher price of a hybrid can take from one year to sixty years (no fooling!) to recover through gas savings, even at $4.00 per gallon.

As we are about to enter the general election cycle for President, it may become harder for me to avoid political issues, but I will do my best to discuss some of the topics, so that you can make an informed choice. I won't tell you how to vote or for whom to vote, unless you ask for my opinion.

See you next week.

Mortgage Modifications

After last week's post, many of you have sent emails asking about Mortgage Modifications, which I promised to discuss this week. Sorry for making you wait, but I was out-of-town most of this week. (Actually, I traveled back to California, arriving on Monday, El Cinco de Mayo). I then spent some time in Bakersfield and Fresno, and just got back to the LA area yesterday.

A Mortgage Modification is a renegotiation of the terms of your existing mortgage. This is another tool that we use to help people to avoid foreclosure. For the most part, you will have the best results renegotiating for your personal residence. If you have investment property, you may face more resistance from the lender, but approval is not an impossibility.

Mortgage Modification makes sense if any of the following apply to your situation or your loan:

• Your property value has declined to the point that you owe more than its market value
• Your loan interest rate has increase or adjusted (ARM loans) to a point that you cannot afford
• Your job situation has changed or your income has been reduced for any reason beyond your control
• You are now behind in your mortgage payments due to a temporary situation that has now passed, but you are unable to raise the money to bring your mortgage current

If your mortgage is current, you may have a tougher time trying to get a modification on your loan, but if you just explain to your lender that your income situation has just changed, they may be willing to work with you, before your credit score goes into the toilet.

If you have one of these situations, you may be able to get a modification of terms from your lender. A modification may include changing your ARM to a fixed-rate mortgage, an increase in the number of years of your mortgage, which would lower your payments (i.e. 30-year to 40-year), a permanent lowering of your interest rate, and forebearance, which capitalizes your late payments, and adds them to the principal balance on your loan.

Every modification plan is different, so the only hard-and-fast rules here are those that the lenders place upon their loan negotiators. Generally, if you are three months behind in your payment, you are in a position to renegotiate your terms.

Now, you may be asking, "Should I contact my lender and negotiate this myself, or should I pay for help?"

You could try to do this yourself, but this is about as effective as trying to beat the dealer when buying a car. They play this game all day, every day, and you are (hopefully) only going to attempt this once. My recommendation is to get help. A third-party, who is not emotionally involved in your situation, and has the experience and relationships with the lenders from having done this many times, will negotiate a much better deal on your behalf, than you would ever be able to negotiate on your own.

As part of the negotiation, your loan will be brought current, and you generally will get to skip one month's payment, while the lender goes through the paperwork process of modifying the terms of your loan.

You will want to stress to your negotiator what is important to you with regard to the mortgage, so that s/he may best represent you. You should determine how much payment you can afford, how long you plan to keep your home, and convey any other information that may be helpful, such as any knowledge of recent sales prices for similar homes in your area.

We offer mortgage modification services, which are provided by a legal team that we have under retainer. Generally, we charge the greater of $1,995 or one month's mortgage payment (after modification) as a fee. Our negotiators will save you much more than the fee by getting you a much better deal than the lender would likely offer, if you were to negotiate a plan yourself. We also have a 72-hour turnaround on most files.

You will need to provide information on your income and debts, including credit cards, student loans, and support payments. If you have additional regular expenses, such as children's or your own current educational costs or ongoing medical expenses, be sure to include these as well. We will determine what payment you can afford, based on your financial situation.

If a workable agreement cannot be reached with the lender, then go back to last week's article, and read up on short sales. If this is the route for you, let me know, as we can refer you to a short-sale experienced Realtor who can assist you.

As always, I hope this information proves helpful. Your comments and subscription to this blog are always welcome. See you next week!

*** Just a reminder: All reader comments to this blog are moderated and approved before they show up on the website. You may contact me via email at randall_parker@yahoo.com or by posting a comment to this article, and I will contact you, but remove your comments, so that your personal information does not appear in the blog. ***

What is a Short Sale?

We will be discussing Short Sales this week. A number of other planners' clients have come to me recently wanting to know about these, so I thought it would be a good idea to touch upon short sales in this week's post. We are talking about Short Sales with respect to real estate, and not the White Sales that you might see at Sear's, Target, or Wal-Mart. Of course, if you find a good deal on Havana's or Dolphin shorts, go for it. Speedo's, not so much!

The reason a short sale helps you is that your lender does not want your home to go to foreclosure any more than you want that to happen. If property values have dropped, and you can no longer afford to make your payments, then a short sale is one way to avoid foreclosure. Another viable method is a loan modification, but we will talk about this next week.

Short sales basically help you to avoid foreclosure. If you are going to lose your home anyway, a short sale can help you retain some of your dignity in the process, and may even help you to save your credit. Basically, a short sale allows you to sell your home for less than you owe against it, with the lender accepting the sales proceeds as full satisfaction of your loan. If you never paid your loan late, your credit report should show a paid-in-full mortgage with no hits after close of escrow. In short (pun not intended), it will appear as though you simply paid-off your mortgage. If you already are late on your payments, you will still have the mortgage lates, but you will avoid the damage that a foreclosure would cause.

Many people who are in financial trouble would like to sell their homes, but the market values have dropped to the point that they are underwater. This means that the potential sales price is not enough to cover the costs of sale and the liens (mortgages) that exist against the property. By agreeing to a short sale, the lender is allowing you to sell the house at market value without you having to come out-of-pocket to pay-off the balance of the loan.

A short sale does require pre-approval from your lender. You will have to explain to them that you cannot continue making your payments, and that your only solution is to sell your home. The lender will order a Broker's Price Opinion (BPO) to get an idea of the value of your home. From this price, they will deduct their estimated costs of foreclosing and reselling your property. Generally, if you can get an offer that exceeds this amount, they will accept the offer, and let you sell the property.

If you have two loans on your property with two different lenders, you will have to work-out arrangements with both of them. If the same lender holds both loans, this may work to your advantage. In any event, it is illegal for you to profit from the sale of the home, so don't expect this option to put any money into your pocket.

Short sales aren't for everyone, and not everyone will get approved for a short sale. Many lenders will reject offers that seem valid, so you want to ensure that you are working with real estate professionals who have experience in this arena.

If you have run into financial difficulty, and you would like to explore the benefits of a short sale, feel free to contact me, or contact a Realtor in your area.

Special Edition: Philippine Peso vs. Dollar Valuation

I posted this information in response to a question posted in Yahoo!Groups, "LivingInThePhilippines3." I thought that it would be appropriate to share here. Enjoy!

The peso and dollar should fluctuate within a narrow range for the rest of this year, at least through the time of the American election. The worst of the sub-prime mess is over now, but corrections continue in the real estate sector. Housing prices bottomed-out in many traditional markets in November, but other areas are still seeing fallout. The main reasons that real estate is still falling in certain areas, and will have a long climb back in others, is due to the high vacancy rates of homes (bank owned), tightly enforced requirements on borrowing (which are starting to ease), and a general credit crunch that is now shifting towards consumer borrowing. Average credit scores of Americans are dropping due to foreclosures, short sales, and Deeds in Lieu thereof, as well as people renegotiating their upside-down mortgages.

Higher interest rates, higher fuel prices, and an increase in unemployment are causing more credit card defaults as well, while banks are trying to raise interest rates into the stratosphere on credit cards (up to 30% or more)! Bankruptcies are also on the rise, and this trend will continue into the foreseeable future. Some banks will still incur multi-million or multi-billion dollar write downs (B of A/Countrywide $2B for renegotiations), and a couple of major bank mergers are on the horizon yet. All of this will eventually settle down, and we will have an American real estate economy again. This total recovery will take at least two years to get back to the price levels of 2006, but five to seven years to get back on track to long-term average year-on-year returns. Real estate is still a great investment if you are a buy-and-hold investor with enough liquidity and good enough credit to qualify for a mortgage.

The rental market prices are increasing, due to high numbers of recently-displaced families, so CAP rates in the multi-family housing sector remain low (gradual increases in CAP rate, but good increases in cash flow), in spite of the recent fall-out in values. Commercial credit is still surprisingly easy to attain for real estate or unsecured obligations.

In addition to the sub-prime mess, the peso has enjoyed certain benefits over the past couple of years. First, the economy has improved, so rather than the cheese heads in government taking all the money for themselves, they have chosen to try to balance the budget. This still doesn't help that poor family of 16 on the corner who can't afford rice, but the country looks better (on paper) to the rest of the world.

The improved credit rates achieved by the Philippine government have allowed fewer pesos to go farther with regard to reducing debt. The BSP's (Bankgo Sentral Philippines - Central Bank of the Philippines) policy of hoarding dollars has created an effective, although limited, hedge against fluctuations, but has put the country in the position of having to reverse itself in order to reduce inflation. In other words, they over-bought dollars, and inflation is already starting to affect the average Filipino. Over the past two years, only we (who get paid in dollars) have noticed the double-digit inflation rate, as peso-denominated prices didn't change, but our purchasing power dropped like a rock!

The Federal Reserve Boards' actions in keeping interest rates low (2.00% as of today - Don't expect it to fall any farther), as a hedge against both inflation and a total meltdown in financial markets, has fueled an exodus from investments in the dollar, as higher interest rates are to be found elsewhere. Just look in the newspaper at the difference in interest rates offered by banks for the dollar vs. the peso. European banks give higher rates for Euros as well. If the demand for dollars was higher (usually meaning a lower trade deficit and/or more foreign investment streaming into the country), interest rates would have to rise, and the currency would do the same. (Side Note: Local banks have now adjusted CD rates on peso and dollar accounts to about the same rate, whereas the peso paid much more for the past few years This is an indication that the dollar and peso are expected to hold steady for the next year.)

If not for the sub-prime mess, we probably would have seen the dollar recover to at least 45:1 by now, with a target of 50:1 possible within the next 12-18 months. As it stands, 42:1 or 43:1 is the best it is likely to get by the year-end, unless some major breakthrough happens in the world. Unfortunately, big news is usually negative, so don't hold your breath for this one. The good news is that the dollar is unlikely to fall any lower against the peso, as Malacanang is not going to be able to balance the budget this year. Rising gas prices, a worldwide food shortage, and tightening of financial markets have served to rein in the currency exchange markets, and reduce volatility. In English, this means the exchange markets should be pretty stable the rest of the year, and trade in a narrow range.

Barring any terrorist attacks on US soil, the nuking of any rogue state, global warming putting us under water, or the Lord returning to take over, the exchange rate should be within 41:1 to 43:1 the rest of the year. In sum, a peso:dollar rate of worse than 40:1 is highly unlikely, as is 45:1, in the next six months. We could get to 45:1 by this time next year, if the world economy improves and fuel prices drop (they actually should), but don't expect to see a ratio of 50:1 or better anytime soon (perhaps never).

If you are looking for ways to increase the total return to your portfolio without taking on aggressive risk, please contact me regarding solid investment opportunities in the Philippines.

Received this the other day from a client. (Thank you, Samantha!) I think you might enjoy it:

I had a bunch of Canadian dollars I needed to exchange, so I went to the currency exchange window at the local bank. Just one lady in front of me, an Asian lady who was trying to exchange yen for dollars and she was a little irritated.

She asked the teller, "Why it change? Yesterday, I get two hunat dolla fo yen. Today I get hunat eighty? Why it change?"

The teller shrugged his shoulders and said, "Fluctuations". The Asian lady said, "Fluc you white people, too"