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How do you say “bubble” in Chinese?

Edward Chancellor, author of an excellent book on past financial manias called Devil Take the Hindmost: A History of Financial Speculation (my review is available here), believes that investors will be grappling in the future with the bursting of a bubble, this time in China. In a recent article on the GMO website, China is a massive asset bubble. Vitaliy Katsenelson, author of the excellent book Active Value Investing (read my review here), is another skeptic. He calls China the “mother of all Black Swans” and has written numerous articles (such as this one) on the subject.

In a span of just ten years, investors have dealt with the aftermath of an internet bubble and a real estate bubble. Will the China be next?

Related Reading:

How do you say “bubble” in Chinese? is brought to you by Canadian Capitalist — Helping you to invest & prosper.

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Changing 401k Contribution Rates During Year, Catch-Up Contributions

401k company matches are great ways to boost your retirement savings, but sometimes you have to be careful in order to capture it all. My wife’s company offers a 3% match, but only up to 3% of whatever you contributed that pay period. What if you contribute less than 3% for some period, and then a much larger amount a later period, with the overall total being much more than 3%? With some plans, you are simply out of luck and have missed out on potential money. Other plans offer what is called a “catch-up” or “true-up” contribution. Do you know which one you have?

I wrote about 401k true-up contributions and maxing out 401ks earlier, but finally got my hands on the employer’s Summary Plan Description which addresses it explicitly. Luckily, my OCR software was working, and I scanned it in below:


Is a year-end Matching Contribution provided if I changed my saving percentage during the year?

If you are employed by the Employer on the last day of the Plan Year, a true-up calculation is made so that your Matching Contributions will be maximized even if you changed the percentage of your Compensation that you elected to contribute during the Plan Year. The amount, if any, of the true-up Matching Contribution is the excess of (i) 100% of your Employee Contributions for the entire Plan Year that do not exceed 3% of your Compensation for the entire Plan Year that was paid to you while you were eligible for Matching Contributions, over (ii) the total amount of Matching Contributions already contributed to your Account for the Plan Year.

For example, John was eligible for Matching Contributions for all of 2010. John, who earned $40,000 evenly throughout the year, did not elect to contribute to the Plan from January 1 to June 30, 2010. From July 1 through December 31, 2010, John made Employee Contributions of 12% of his Compensation (12% of $20,000 = $2,400), and received Matching Contributions of $600. His year-end Matching Contribution is calculated as (i) minus (ii), as follows:

(i) 100% of John’s Employee Contributions to the Plan for the entire year that do not exceed 3% of his Compensation for the entire year. 100% x 3% x $40,000 = $1,200

(ii) The total amount of Matching Contributions already contributed to his Account for the year = $600

Year-end Matching Contribution to John’s Account for 2010 = 1,200 – 600 = $600

The year-end Matching Contribution generally is contributed to the Plan within a few months after the end of the Plan Year. hi some cases, IRS rules limit or reduce the amount of Matching Contributions the Employer can make on your behalf if you are Highly Compensated, as defined in Question 1, above. You will be notified if you are affected by this limit or reduction.

An important note here is that, at least for this plan, you must be employed on the last day of the Plan Year in order to be eligible for this catch-up contribution.

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Leash those dogs…

Ah, it’s Spring! Time to go outside, clean your yard, and watch your unleashed dog chase the poor redheaded runner down the street.

Oh wait. That’s probably just my spring season fun.

I hate the first signs of warm weather. Cooped up homeowners and their ‘nice’ dogs hang out on front porches across my neighborhood – dogs who have pent up frustration and aggravation from being chained or penned for the last 4 months.

For runners, cyclists, and pleasure walkers, this is the most dangerous time of year. Last year at this time, a pit bull jumped me from the side and knocked me into the street while his owner yelled, ‘Don’t worry, he’s nice!’

And I promise, no matter what the actions of the dog, the owner will always say how ‘nice’ their dog is. Yes, your dog is nice…now will you kindly remove his or her teeth from my arm?

While I can appreciate that these dogs motivate me to run faster and set new personal distance records, I don’t particularly like the ‘running for my life’ aspect.

I know my readers would never allow their animals to pounce on poor unsuspecting exercisers, but if you happen to know someone who does, help me out and… yell at them.

What does this have to do with finance? According to the City of San Diego (and I’m sure your neighborhood too), pet owners are obligated to provide public protection from their dogs:
‘Each year thousands of area residents are bitten or attacked by dogs. Many bite victims are substantially injured and children sustain the majority of injuries. As a result of these incidents, owners are often subject to administrative action and may also incur criminal responsibility and/or civil liability’

Three words…

Lawyers are expensive.

Leash those dogs folks – even the ‘nice’ ones.

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State Tax Rate Maps: How Does Your State Compare?

I ran across some nice visual maps from TaxFoundation.org today. Each one compares a different type of tax across all 50 states. How does your home state choose to extract revenue from its residents?

Click on the images for a bigger version.

State Sales Taxes (Yellow Lowest, Blue Highest)

State Income Taxes (Highest Marginal Rate)

State Property Taxes (Yellow Lowest, Blue Highest)

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Competition Bureau versus CREA, Round 2

The Canadian Real Estate Association (CREA) tried its best to beat back the charge by the Competition Bureau that CREA’s rules that limit the choice of consumers as “anti-competitive”. The Association voted to change the rules requiring agents to represent sellers for the entire duration the property is listed on the Multiple Listing Service (MLS). CREA says the change will address the Competition Bureau’s concerns and provide consumers with the choice of listing a home on the MLS for a flat-fee and handling the rest of the home selling process on her own.

While that sounds like the Competition Bureau has prevailed in its attempt to inject competition, CREA’s proposal is reported to include an escape clause that would allow local real estate boards to enforce their own set of rules. The Competition Bureau lost no time in firing back that the amendments do not go far enough:

“There is nothing in these proposals that we haven’t seen before and they do not solve the problem,” said Melanie Aitken, Commissioner of Competition, “They are a step in the wrong direction. These amendments amount to a blank cheque allowing CREA and its members to create rules that could have even greater anti-competitive consequences.”

The Competition Bureau will now take its case to the Competition Tribunal but CREA can be expected to put up a good fight. It will be a fascinating battle to watch but you do get the feeling that CREA is fighting a losing battle. It is naive to expect that the real estate market will remain immune from the competitive forces that have brought in discount pricing in so many other industries.

Related Reading:

Competition Bureau versus CREA, Round 2 is brought to you by Canadian Capitalist — Helping you to invest & prosper.

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