Dikkii's financial tips index

Welcome to Dikkii's financial tips.

This is an index post for a new series where I attempt to provide some sort of guidance to financial matters without breaching the Corporations Act by actually providing advice.


1. A brief history of bank fees
2. Why are there so many different types of bank accounts?
3. How do I reduce my bank fees?
4. A case study in banking
5. How the hell do cheques work?
6. Risk and inflation
7. Superannuation. What is it?
8. Shopping around for superannuation
9. Liquidity
10. Managed funds
11. Retirement income streams


This is designed to be a series for the layman, and is really only relevant to Australian readers, although from time to time, I may include stuff of relevance to other users as well. I'll try to keep this index post updated and I'll include a link to it in the sidebar.

I'd also like to point out that none of this is advice, it is merely information only, and certainly may not be appropriate to your personal circumstances. If you need advice, speak to an independent financial adviser on a fee-for-service basis.

This blogger used to be a financial planner and still works in the financial industry. I do not provide advice as part of my job at the moment, and am not authorised to do so. It goes without say that I will not be taking commissions for any recommendations that I make - partially because I have no such arrangements in place, but also because I simply will not be making any recommendations.

Also, if you would like me to look at a particular financial area, please let me know. I'm always open to suggestions.

Enjoy.

Standard but necessary disclaimer: This is not advice. Only a complete idiot would think that any of this constituted advice. It's not even vaguely reasonable to consider this to be advice. If you are in any doubt as to the content of this, see a good, independent financial adviser immediately. They do exist.

A blast from the past: Simple Minds

The Apple iPod stands to revolutionise everyone's personal stereo experience. But not this blogger yet. He's not yet sold on the way that iTunes catalogues tunes on his hard disk, nor with the proprietary format that Apple uses for music files - he's still on mp3 and prefers it that way. aac doesn't really allow for file sharing, which is today's version of lending your CD out to your friends so that they can have a listen.

Also, I think that there is more to follow on the solid state memory front - a hard disk means moving parts, and it is this blogger's view that as flash memory gets better and better, the need to carry round a hard disk drive - for that is what the iPod is, essentially, will get less and less.

In the meantime, however, the fact that CD stackers are now redundant is a plus. This ties in well with my post.

I went and saw Simple Minds, INXS and Arrested Development recently.

Not really my choice of gig, but having said that, I enjoyed myself immensely.

Arrested Development were good, and Speech sings a mean rendition of 'Redemption song', however, without crucial early member, Headliner, I felt a bit cheated.

INXS did quite well, even though it was clear that singer JD Fortune was about to lose his voice. Fortune has a voice that is quite close to the late Michael Hutchence's and they did reasonably well. My complaints from their set mainly centres around the fact that apart from 'Don't change' (off Shabooh Shoobah) and 'Original sin' (off The Swing) they didn't do any more earlier stuff.

But Simple Minds.

You know, I wasn't really a Simple Minds fan back in the day. I remember thinking that 'Love song' was pretty cool, and also 'Someone somewhere in summertime', but I wasn't really prepared for the ripsnorter of a live set that these guys put in.

I told my travelling companions that they would start with 'Love song' and finish with 'Waterfront', and sure enough they did, although, I checked their set list online, which had them doing 'Alive and kicking' last which I'm sure isn't right. Also, I was a bit surprised to find them leaving off 'Promised you a miracle' and 'Someone somewhere in summertime'.

But all that aside, what I remember of Simpler Minds was largely of their earlier New Wave period where they were largely synth heavy. Live they're still a very much ROCK!! proposition.

And even though only Jim Kerr and Charlie Burchill remain from the original line-up - although drummer Mel Gaynor pretty much qualifies as he was in the 'classic' line-up - I still thought they were the real deal.

Incidentally, Burchill has aged disgracefully.

So I went back through the bargain bins and picked myself up a copy of The Best of Simple Minds together with Early Gold - a compilation from their first 6 albums.

It's really quite revealing the change that happened to this band.

Early Gold starts with two songs from their first album - Life in a Day, and these songs suggest both a punk and glam rock influence as well as an underlying suspicion that this band should not have been in the studio at this point in their careers.

Reel to Real Cacophony is represented by three tracks - and these show a darker edge, most notably a heavy Joy Division influence in the tracks 'Changeling' and 'Premonition'.

Empires and Dance appears to have a huge almost industrial feel - and given that this was the heyday for bands like Cabaret Voltaire and Throbbing Gristle, this is hardly so very surprising. the 3 tracks represented give a great idea of what this album must sound like.

Sons and Fascination and Sister Feelings Call were recorded and released at the same time, and are well represented by 3 tracks on Early Gold. The Best of includes a fourth track - 'Theme for great cities' (from Sister Feelings Call) which is an instrumental. There appears to still be a proto-industrial influence here, although it's waning. The overall feel is terribly typical New Wave, which is really where audiences started noticing this band. 'Love song' and the almost funky 'Sweat in bullet' are off Sons and Fascination and are pretty good examples of the work of this period.

The last album represented by the early compilation is New Gold Dream - which appears to be pretty much pure New Romantic. There is a fairly obvious Cure influence showing itself here, as well as an overt Roxy Music one, and the more polished stadium rock sound that they ended up with over the late 80s is starting to exert itself - notably on 'New gold dream (81-82-83-84)' and 'Glittering prize'.

The Best of is divided into two disks. The second one is pretty much the nineties onwards, which is kinda interesting, as it shows quite well how the band managed to completely lose their way.

The first disk has some overlap with Early Gold, but given that Early Gold includes album cuts, and not the hated single edits of The Best of, this is not too bad. It isn't in chronological order, though.

Sparkle in the Rain is the next album represented by these compilations. The tracks chosen for The Best of - 'Waterfront', 'Up on the catwalk' and 'Speed your love to me' - show a very much rock edge where the stadium rock feel is starting to gain traction. It appears that this was the last album where Kerr sounded like a strangled cat, as by the next album, his voice had been cleaned up immeasurably.

It's probably Keith Forsey's fault that the band went into free- fall, quality wise from about this point. On the soundtrack to the movie, The Breakfast Club, their contribution, produced and co-written by Forsey, 'Don't you (forget about me)' changed their sound to production line stadium rock and led to the first of many unfavourable U2 comparisons.

Their next album, Once Upon A Time was really them milking this teat and probably the only redeeming tracks, 'Sanctify yourself' and 'Ghostdancing' really give an idea of what the band were really capable of during this period.

After this, the band's stuff is a mixed hotchpotch of ideas half-baked and not really properly realised. Although, I am reliably informed that their two most recent albums are a return to form of some sort.

The good thing about all of this, is that you can take Early Gold and The Best Of and create a bitching playlist for your iPod.

Blogger and comment emails

Not sure if anyone else is copping this, but over the last 48 hours, Blogger hasn't been good about emailing me whenever I get a comment.

I estimate that about half a dozen comments didn't make it into my inbox.

Is this happening to anyone else?

Edit: 22 April 2007 - Something I didn't notice when I published this is that it's Dikkii's Diatribe's 100th post. Somewhat fitting that this blog's 100th post would be Blogger glitch.

Frustration

Here's the story.

Late last week, my online stockbroker sends me an email to say that they would be handling the upcoming float (IPO) of a particular company whose business model I respect greatly and would very much like to own shares in.

I immediately rang my margin lender and asked if they could approve me investing in the float. They said that they would pass on the pdf copy of the float prospectus to their risk area and let me know in the next working day or so if this would be OK.

On Tuesday of this week, the company in question started getting applications via an electronic form online at my stockbroker's website.

Still no word from the margin lender.

I learned today that the electronic application facility for this float had closed - a mere 48 hours after being opened - and the company has indicated that the float has been, from what I can tell, massively oversubscribed.

And still no word from the margin lender.

So I've missed out on what I think might have been the float of the year due to my margin lender's tardiness.

Now I'll have to invest the hard way when the company lists in May.

I am so totally not happy.

Disclosure: This blogger wishes!

Standard but necessary disclaimer: This is not advice. Only a complete idiot would think that any of this constituted advice. It's not even vaguely reasonable to consider this to be advice. If you are in any doubt as to the content of this, see a good, independent financial adviser immediately. They do exist.

Rock Paper Scissors for the Truly Hardcore

Love Jack Marx' The Daily Truth.

I had to post a link to this for my own benefit - it's Rock Paper Scissors for those who are bored of playing this the normal way.

Do I have my favourites?

Well, Alien and Devil would have to be they, but you can make your mind up for yourself.

Click here.

Why did you end up agnostic?

Well, I've come to the end of the line on this one, so here's the obligatory index post.

If you'd like to read them from beginning to end, here they are again:

Part 1

Part 2

Part 3

Part 4

Please enjoy, and feel free to comment.

Cocksnack gone? WTF?

(Via 95% Of You Are Morons, and Pooflinger's Anonymous)

For those of you who enjoy reading this blogger's favourite skeptical blogs, it is sad to note that a blogger known as Weapon Of Mass Information (we call him Cocksnack) has disappeared off the face of the blogosphere.

For those who weren't aware, Cocksnack was a creationist who had a blog committed to "debunking" "Darwinism" and "Evolutionists".

A bit sad, but nonetheless, to see what IDiocy creationists are capable of, check out the exchange that Rockstar Ryan has reproduced at his blog. This is but the tip of the iceberg with this guy. He was (and probably still is) one insane dude.

And then check out Matt Pooflinger's assessment of Cocksnack's disappearance.

Infophile has commented that Cocksnack may have re-located to another blog - is this Cocksnack?

Only time (pause, Kent Brockman style) will tell.

Dikkii's financial tips #1: A brief history of bank fees

Welcome to Dikkii's financial tips.

This is a new series where I attempt to provide some sort of guidance to financial matters without breaching the Corporations Act by actually providing advice.

Today, we'll be looking at bank fees.

Now this blogger worked for 6 years at a major Australian bank. This is not meant to be an argument from authority, however, one of the things that I used to have to deal with from time to time was people whingeing about bank fees.

I still cop it from time to time, although not working for a bank anymore appears to work in my favour, as people no longer feel that they have to unload on me over the fees that banks charge. However, as soon as I open my mouth and mention that I've worked for a bank in the past, the gripes will, sooner or later, make themselves known.

And before I start, I'll let it be known that I am absolutely the last person that you should be complaining to about bank fees. I do not have any sympathy for you at all. More often than not, if you are complaining to me about bank fees, it's because you have not even bothered to put in the hard yards shopping around for a better deal.

So how do we get that elusive "better deal"?

Well, for that, let's take a brief look at bank fees. It's important to know your enemy, and bank fees fall into this broad category. How do they come about? How are they charged? How can they be avoided?

It is important at this point that I mention that it is impossible for me to cover off on all the different types of bank fees out there, but in the meantime, this is a brief history of bank fees.

A brief history of bank fees

The first thing that is obvious is that, unlike a lot of other things, when people talk about "the good old days" when Telstra's customer service was good, crime was non-existent, sex happened only on one's wedding night and drugs were what you got at the pharmacist after a visit to the doctor, this one is actually true:

There actually was a time where bank accounts didn't get charged account keeping fees and transaction fees.

Oh yes. Such a time existed.

In Australia, this was prior to the banking reforms that came about in the 1980s.

The theory, as it was at the time was this: you lent your money to the bank in the form of a savings account, and the bank lent it out afterwards to borrowers in the form of loans.

The bank charged a rate of interest on the loans, and from that it paid a smaller rate of interest on the savings account money. After administration costs, anything left over was profit in the hands of the bank.

This was what I'm calling the "cross-subsidisation model", and it was a very simplistic way of looking at the banking system. Essentially, the admin costs of depositors was subsidised by borrowers.

Now it should be patently obvious to even the biggest bank-hater out there that this was a grossly over-simplistic way of looking at banking. Not all depositors are savers.

Quite a few of them were "Transactors". A Transactor is one who puts money in, just to withdraw it soon after.

A great example, which this blogger saw lots of, were pension recipients. Often a lot of them would come in the day after their pension was credited to their accounts and withdraw all but a few cents.

And it's not just pension recipients, either. Some people just keep bank accounts open to receive their pay, or other moneys and will withdraw the lot soon after.

So this model fell down in that some depositors were essentially getting something for nothing, and borrowers were paying for this.

This blogger had a great conversation with a regular customer whom we'll call Mrs Jones which went like this:

Mrs Jones: "I've been waiting in that queue for twenty minutes."
Me: "Sorry, ma'am."
Narrator: Mrs Jones came in promptly every second Thursday to withdraw her pension payments. The pension payments would always be credited the day before.
Mrs Jones: "Not good enough. You're always busy when I come in. Why can't you get some more staff?"
Me: "The day after pension day is the busiest day of our fortnight. You don't think that it would be silly for the bank to get on a couple of part-timers once a fortnight?"
Mrs Jones: "No I don't. After all, we pay your wages."
Narrator: Words cannot describe the anger I felt at that point in time. She did not pay our wages, nor did any other Transactors receiving their pension payments in this way. I noted that she had an exemption for fees, too.
Me: "Here's your money, Mrs Jones. Have a nice day."
Mrs Jones: "You have no idea, do you?"

This all may seem a little trivial, but when you're working on the cash as I was for the first couple of years at the bank, this kind of ridiculousness grates after several thousand similar comments. And although this was many years after the fee-free banking utopia that many bank customers used to enjoy, the sentiment is still the same.

So de-regulation came into effect in the mid 1980s, and soon after that, the Commonwealth Bank, formerly owned by the federal government, was privatised. About this time, banks that were owned by state governments were also privatised.

Competition was allowed to take its course and bank fees started popping up on bank accounts, now that the banks didn't have to compete with state owned enterprises. Transaction accounts appeared that pay no interest whatsoever.

A shift had taken place. No longer were depositors considered to have lent money to banks - depositors were now considered to be using banks for secure money storage facilities. Banks now provided networks of ATMs for people to get money whenever they liked rather than toting wallets bulging with cash. Banks provided phone and internet facilities for customers to move cash around easily. And banks still (although the importance of this was decreasing) provided staffed cash handling facilities all around the country for customers to drop off and pick up cash and other requests.

This was reflected in the types of deposit products banks now offered. Banks' core offerings now included transaction accounts for easy access to cash. Higher interest accounts for serious savers. Cash management accounts for people who needed to move larger amounts of money around. And more.

Lending products were rewarded with lower rates of interest as banks competed with one another for the lending dollar. Offsetting this was a new raft of admin and, sometimes, transaction fees on lending products.

Complicating this was the fact that banks were now not just competing with other banks for borrowers. There was renewed competition from building societies, credit unions, mortgage funds and other non-bank lenders.

Banks responded by slashing interest rates some more, adding more features to their loans such as redraw facilities and offset accounts and bumping up admin costs generally.

Of course, they had to respond by then going in and raising fees higher still to compensate.

The general public were not pleased with this direction. To this day, the top rating current affairs shows are guaranteed to use a "bad bank fees" story for ratings mileage at least once every six months.

And while banks are still suffering from over 15 years of bad press over fees, and trying to repair the damage, most of the bad press comes from misconceptions about why fees are charged.

To their detriment, banks aren't a good case study in how to manage expectations. Banks have never made a good case with the general public as to why fees have gone up, or been introduced to begin with.

The following are 7 points that banks have failed to make clear to consumers:

• Money doesn't manage itself. Unless you are sinking a large amount of money into an account for the small to medium term, you are not lending the bank a cent, except for accounting purposes. You are storing your money somewhere so you can access it later on. Which pre-empts points two and three.


• ATMs and other access mechanisms don't magically materialise on their own. Banks have to pay for implementation and maintenance of these. If you are purely using a bank as a cash storage medium for immediate use, or in the short term, it is totally not unreasonable to expect to pay a fee for this.


• Don't expect a decent rate of interest to be paid on accounts that, more often than not, have no money in there. Bank accounts with balances close to zero are a major administration drag on resources - they still require all the usual services such as statements, monitoring, the occasional bit of tax compliance etc.


• Fees can be avoided. Yes, this is true. Banks do a pretty poor job of conveying this message, but the vast majority of fees that bank customers pay are completely avoidable. Most of them are charged on a user pays basis, with little extra bits if you request something unusual.


• Expecting borrowers to cross-subsidise depositors' (and others') admin fees is completely unreasonable. I don't think that this point really warrants further discussion.


• Bank shareholders aren't twee altruistic schmucks. They expect banks to be profitable, the evil bastards. Except the "evil bastards" are not just a small cartel of Monty Burns types closeted up in castles in the wilds of Transylvania. Thanks to compulsory superannuation, bank shareholders are effectively you and me and pretty much most of the Australian population. And, because we all expect our super funds to perform, we all, by logical extension, expect our bank shareholdings to do likewise.


• Borrowers have it easy. Oh yes. I remember when I was young, the best interest rate that you could get on your savings was about 8 percentage points lower than the best interest rate borrowers could get a loan for. Now that gap is as small as 1 percentage point. In an environment like this, how could you not expect banks to seek alternative methods of remuneration?

And that is my brief history of bank fees.

In the next exciting installment, I'll tackle some of the fees that exist out there and look at ways that these can be reduced, if not avoided outright.

--
Dikkii's financial tips index

Standard but necessary disclaimer: This is not advice. Only a complete idiot would think that any of this constituted advice. It's not even vaguely reasonable to consider this to be advice. If you are in any doubt as to the content of this, see a good, independent financial adviser immediately. They do exist.

The Thinking Blogger Award

Well folks, Ted has nominated me for a thinking blogger award. Naturally, my ego being what it is, I'm quietly barring-up at this. Thanks Ted.

Plonka's Blog which Ted puts together is one that I read quite frequently, and his subject matter is a veritable cornucopia - and very similar subject matter to mine, although, he has excellent manners where I tend to get emotional from time to time.

But anyway, the fact that a blogger who I very much admire has nominated me is totally cool in my book.

Without further ado - here are the rules of nominating:

1. If, and only if, you get tagged, write a post with 5 blogs that make you think
2. Link to this post so that people can find the exact origin of the meme.
3. Optional: Proudly display the “Thinking Blogger Award” with a link to the post that you wrote (there is a silver version if gold doesn’t fit your blog).
4. Your chosen blogs cannot have been previously awarded.

Not bad, eh?

I describe my blog, and have done so since 1997 as:

This page is an outlet for my own hate-filled vitriol and spiteful opinions. Uneducated as I am in the ways of the world, it's still necessary to vent my spleen at the media, the music industry, the AFL and anyone else who could have offended my sensibilities. I plan for this to be updated occasionally, depending on my state of mind. So you can either look forward to, or avoid my one-sided, uninformed and dangerously unbalanced opinions on the state of the world and everyone in it.

While this isn't exhaustive, I think that these days my targets probably tend, more often than not to be woo, religion, the finance industry and the media.

But anyway, without further ado, here are my nominations, bearing in mind that some of the blogs I frequently read, such as The Bronze Blog, The Two Percent Company Rants and 95% of You are Morons don't usually respond to these tags.

Also, BeepBeep!ItsMe and Plonka's Blog have already been nominated.

These are the blogs that make me think:

Dubito Ergo Sum (Tom Foss) - "Extraordinary claims require extraordinary evidence. --Carl Sagan"

Silly Humans (Michael Bains) - "We are what we only pretend to be. So we must be careful about what we pretend to be. Kurt Vonnegut"

Die Eigenheit (Einzige) - "Ownness [eigenheit] includes in itself everything own... But ownness has not any alien standard either, as it is not in any sense an idea like freedom, morality, humanity, and the like. It is only a description of the - owner."

The Church of the Everlasting Groove - (The Rev. Jenner J. Hull) - "The Funkiest Religion Under the Stratosphere, Baby..."

Action Skeptics - (Akusai with help from Magus) - "Annoying stupid people, one woo at a time."

Read folks, and enjoy.

Easter. Yay!!

I'm thinking of doing an annual Easter blog post with my thoughts on this joyous time of year.

I did one last year, and it was, after I re-read it, quite interesting I thought.

So this time around, I thought I'd look at the central underlying concept behind this annual free-for-all. The central essence. The meaning of it all. The one single most important thing that binds humanity at this yearly love-in:

Chocolate.

Yep. The wondrous brown stuff that we all love.

I was reading a book by Allan Pease, recently, titled Why Men Don't Listen, And Why Women Can't Read Maps, and there was an interesting bit about taste.

Now this book is a few years old, so the bit about taste has undergone a scientific paradigm shift since the book was written. Mainly in that science now acknowledges a fifth taste, now, that being "umami", or savoury.

Also, we now know that the taste centres on the tongue are not as clearly delineated as what we previously thought. But we still think that sweet is still there.

Consequently, the stats that the book quotes that have women as being more likely to be chocoholics than men still holds, although this is probably has to do with a lot more than just taste centres in the brain and tongue. Dopamine receptors is one. There are others.

Chocolate has been around for quite a while, but it was the Aztecs and Mayans of Central America who started cultivating it in a big way. I found a Wikipedia reference that had the Mayans consuming it as long ago as 2,600 years ago.

It comes from cocoa, which is itself produced from seeds found in the seed-pods of the cacao plant.

They basically brewed it into a drink, much like the hot chocolate that we drink now, although I can't find any info anywhere to suggest that they might have sweetened it at any stage. I did find out that the Aztecs liked theirs bitter and spicy, mainly due to the fact that they liked to try to concentrate the theobromine content. Theobromine is a bitter alkaloid with properties similar to caffeine - although it's not quite as strong a stimulant.

And, just like caffeine, theobromine is a mild diuretic which also increases serotonin production, although in large doses, theobromine also increases melatonin production as well in the human body.

The Aztecs called it Xocoatl.

Anyway, in Jamaica in 1689, a pharmacist named Hans Sloane is credited with inventing what we now know as milk chocolate.

Basically, Sloane had tried chocolate in its Indian form and found it vile. But when he mixed it with milk, he found that it was much better tasting.

Meanwhile, chocolate was becoming a much sought after commodity in Europe. The Cadbury brothers, John and Benjamin, were importing cocoa and selling it. The Cadbury brothers bought Sloane's recipe and found it to be massively popular when they started producing cocoa in Britain in the town of Bournbrook, which they got renamed, Bournville.

Bournville is now a suburb of the city of Birmingham, Britain's second largest city.

It wasn't long before solid chocolate was invented. Firstly, in the form of dark chocolate, and then later milk and white chocolate.

Today, most of the world's cacao is grown in Western Africa, with most of that grown in the Ivory Coast, or Cote d'Ivoire, if you like.

Chocolate is considered an addictive substance, with several chemicals contributing to this:

• Sucrose - the predominant sugar found in chocolate these days. I have seen diabetic chocolate which uses, amongst other things, fructose as a replacement. Not very diabetic friendly.
• Caffeine - the stimulant which gives tea and coffee their kick. Not much of this is in chocolate, but enough.
• Theobromine - this is chocolate's main stimulant. It's not as powerful as caffeine, but still reasonably potent.
• Anandamide - this is a cannabinoid which is also created in the human brain. Love this one.
• Tryptophan - this is an amino acid required for human nutritional needs. An excellent reason for eating chocolate. Tryptophan is used in the human body's production of serotonin, melatonin and also nicotinic acid, otherwise known as niacin, or vitamin b3.
• Phenylethylamine - this is an alkaloid and aromatic monoamine, which, it is suggested, may have psychoactive properties in large consumption.

At Easter, which is a global festival celebrating all things chocolaty, we celebrate this amazing food by eating loads of chocolate eggs, rabbits and chocolate in general.

In Australia, there is increased consumption of chocolate bilbies - the bilby is a large-eared marsupial which is the largest member of the bandicoot family.

Christians celebrate a festival at this time of the year, too, also called Easter. They have widely co-opted the chocolate motif, and shown great creativity by selling things like chocolate crosses and chocolate anatomically-correct effigies of Jesus. Sometimes this is considered controversial.

Man, I love chocolate. I'm pushing hard for an international chocolate festival in Melbourne during the Easter weekend in 2008.

It's just a shame that it would conflict with other major events.

The major one being the Melbourne International Comedy Festival.

But anyway, have a good Easter. Partake of the chocolate sacrament.