Focus 580; Personal Finance

580 it's our morning talk program. My name is David inch. Glad to have you with us we're also happy to welcome back here to the program David Scinto He's a clinical professor of finance at the once a month always on a Friday he is on this program and we talk about personal finance issues the way we do this is we start out and Dave has some comments to make him sometimes talk about the economy sometimes it might be something specific a kind of a specific financial planning topic. And then we will take questions and it can be on whatever it is that that Dave will be talking about here at the beginning or anything else that has to do with financial planning. I know that he will do his best to help you out. So I will say to our guest David SNOW Welcome back. Glad to have you here. Well good morning David and of course it's a genuine pleasure to be with you. I'd like to spend a few moments speaking about a financial problem which really is growing geometrically and literally affecting all of us. That problem being identity theft and of course the thieves of our identities are becoming very sophisticated and extremely tech savvy. Yesterday for example we learned from the Wall Street Journal that

approximately one hundred eighty thousand customers of the Ralph Lauren Polo stores who used credit cards to make purchases have had their credit card information stolen by hackers who broke into that particular database. And that's just one of a myriad of examples. One hundred forty five thousand customer records maintained by Choice Point a data storage service were compromised in February. Some 300000 credit card customers records maintained by the London based company Reed were recently compromised as well. And all of those cards apparently belong to U.S. citizens. College campuses have not even been immune to hackers have they found their way into several student databases. Even in northwestern uncertain Ivy League schools as well. Indeed Congress is planning to hold hearings on the matter as estimates run as high as 10 million records of U.S. consumers are at risk of some type of identity theft in 2005.

Now of course as individuals we probably have very very little control over these massive database storage facilities. But there are some steps we can take to slow down theft of our own identities before irreparable damage is really done to our credit. And once that happens as you know it's mighty mighty tough to get it repaired. Hundreds and hundreds if not thousands of hours of time to get those things put back in order. So my suggestions really are pretty low tech so I'm going to talk about the low tech side of the equation because frankly I'm not very high tech savvy. So first here's my first suggestion. The next time you order checks have only your initials and last name put on them. Do not put your first name on printed checks thereby If someone takes your checkbook they will not know how you sign your checks whether you use your full name your initials or just your first name

but your bank may well know how you sign your checks especially if you do business with a smaller community bank. Second do not sign the back of your credit cards. All right we get our credit cards and we what do we do we immediately sign them on the back instead. Someone pointed out that it's a lot smarter to put on the back of your card photo I.D. required photo ID required. So don't sign David Jones or Davidson Oh put photo I.D. required. This is an excellent safety measure. If your wallet is lost or stolen. Third when you're writing checks to pay on your credit card accounts do not under any circumstances put the complete account number on that check. Instead just put the last four numbers. It's typically a 60 number anyhow and the credit card company knows

the rest of the number. And anyone who might be handling your check as it passes through all the check processing channels won't then have access to that entire account number. So change that behavior immediately. Fourth. Put your work phone number on your checks instead of your home phone number if you put a phone number at all. If you have a peel box use that instead of your home address. If you don't have a P.O. Box use your work address. Never ever ever ever put your Social Security number on your track especially in printed form. You can always add it if necessary because if you have it in printed form anyone can get it. And if you currently have your Social Security number and in fact even your driver's license number printed those checks shred them immediately and get new ones.

That is the bottom line so you can see these suggestions that I'm making are pretty low tech and they really respond to the issues of a lost person or a lost wallet or indeed even something worse and more heinous. A stolen purse or a stolen wallet. Now fifth. Place the contents of your wallet on a photocopy machine. That's not too tough. And do both sides of each license credit card etc.. That way you will at least know what you had in your wallet and all of the account numbers and phone numbers to call and cancel. If your wallet is lost or stolen. Now keep the photocopy in a safe place. And I also carry in my wallet a photocopy of the original a photocopy of my passport when I travel. In fact I just recently learned that if you're going to travel in and out of Canada driver's licenses don't work anymore.

Passports are going to almost entirely be insisted upon or at least a photocopy of your passport. And we've all heard horror stories about fraud that's committed on us by stealing our names or addresses us Social Security numbers our credit cards etc.. So you've got to have copies of that. By the way for goodness sake do not put your original of your social security card in your wallet. Don't carry it. All right. It's a number that you should have had memorized anyway or you've got it somewhere else but for goodness sake take that little Social Security piece of paper in blue and white out of your wallet and store it in a safe place. But I want to go on with some additional critical information to limit your damage in the case. It happens in the case that your wallet or your purse for example are stolen. Now we're all told that immediately we should

cancel our credit cards. But the key of course is to have the toll free numbers and your card numbers handy so you know who to call. So keep those where you can find them in the event your wallet is lost or stolen. Now here are some additional things you need to do. First of all you mediately file a police report. In the jurisdiction where your credit cards your wallet was stolen. So if you're on vacation and you get picked pocketed or something is stolen you file a police report immediately. In that particular jurisdiction whether it's Reno Las Vegas San Francisco Chicago or champagne Urbana a mediately file that police report because this proves to credit card providers you were diligent. And this is a first step toward perhaps even a credit card investigation. But here's something

far more important. First of all you call all 3 national credit reporting organizations immediately not only to tell them that your wallet and your cards and your credit has been stolen. But to play something called a fraud alert. That's the magic term fraud alert on your name and your social security number. Now I've never frankly heard of doing this until I was advised by a friend who works for one of the major credit card agencies and the fraud division of one of these agencies they say you call up and you say I need to place a fraud alert on my name and Social Security number. What this means is this alert means that any company that checks your credit. So if someone else is now going to try to use your card it's going to go through the system. Your credit knows your information was stolen

and to replace that card or use that card. You have to be contacted by phone directly. To authorize new credit and basically that is the most important thing you can do because that effectively ends anyone using your credit cards in your name. Once you have posted that credit fraud alert. Now here are the numbers you will need to contact if your wallet or your identity has been stolen. There are three national credit reporting agencies in order to post this fraud alert. The first one Equifax Oh goodness they have enough data on David engine David Scinto probably to write a book. 1 800 5 2 5 6 2 8 5. That's 1 800

5 2 5 6 2 8 5 toll free Experian and Experian is really easy x p e r. I am Experian that was formerly TRW now it's called Experian and their phone number is 1. Triple 8. 3 9 7 3 7 4 2. That's the second major credit reporting agency and the third being Trans Union. Their phone number is 1 800 6 8 0 0 7 2 8 9. So you've got Equifax Experian and TransUnion. And finally after spending a lot of time Social Security has a direct toll free fraud line. I actually called it. Somehow I got through. All right. 1 800 2 6 9 0 2 7 1. Now additionally all of

us including myself have to be vigilant with respect to our e-mails. Remember that no financial institution that is legitimate is ever going to ask you to provide your sowl security number over the internet or other sensitive information. These innocuous looking emails from all of these financial institutions that we receive all of the time saying that we're just checking to make sure that you don't. You are a victim of fraud. You're set to a copycat website and they try to procure sensitive information don't even go there just delete the e-mail immediately. I mean I almost got fooled one day by e-bay it looked so real to me that I started to go to and I said wait a second. So I mean even someone who is reasonably savvy can be fooled. Finally under recently passed federal legislation you are entitled to a free credit report annually

from each of the three major credit reporting agencies Equifax Experian and TransUnion you've already got the numbers. This is by Congress in Illinois and now has met its date. So essentially you can get a credit report annually from the three credit reporting agencies. Therefore it seems to me it makes sense every four months to make a request. Rotating among these three credit reporting agencies. So every four months you can get a free update on your credit. Well you can basically stay abreast of your credit status if you desire however an actual credit score sometimes it's referred to an empirical score. These credit agencies are authorized by law to charge you a fee if you want to actually know your actual credit score. And typically that fee is 10 to 15 dollars

but you can get that other information which is so important. Every four months you get it free. Incidentally when you request credit information on yourself it does not impact your credit rating. It does not impact your credit score. If you get 15 or 20 other financial institutions checking on your credit. Yes that is negative and that does impact your credit score. But when you check with one of these credit agencies yourself for information about yourself that does not impact negatively on your credit. So there you have it David gosh a whole new financial arena. On April 15th I didn't even hardly mention that word what is that word income tax whatever that word is all about. You know I hardly even mention that. No let's worry about something else on April 15th. Credit card fraud lost and stolen cards you name it. Because let's hope that our listeners haven't had any negative

experiences and maybe this will help just a little bit in the event something bad happens. Very good well I guess mourning is part of focus 580 David Sinhalese clinical professor of finance at the University of Illinois. And for some time now has been stopping by in a regular basis always on a Friday to talk about money management questions are welcome we have a couple of people who are ready to go. Others If you'd like to call talk to Dave the number here in Champaign Urbana is 3 3 3 9 4 5 5. We do also have a toll free line so that if it's a long distance call for you. We will pay for the call 800 to 2 2 9 4 5 5. We have some callers here ready to go and we will start with someone listening this morning in Villa grove on our line 1. Hello. Hi Dave thanks a lot for the low tech solutions. I think I have writer's cramp already. OK good morning. I put really good info and I copy all that stuff down I've got a question regarding

that. Well how can I determine whether it's preferable to him alone or a fella from mutual funds to purchase some farmland. So you're thinking about assuming a loan is this a loan on this farmland right alright or selling some mutual funds. Yeah all right. Now I've looked into own and it it would appears right now that the loan payments would exceed my net monthly income by over $3000 and I have to sell some of our mutual funds over the next five years to make up for the annual shortfall of about 36000. So it seems to me that it would be preferable to make a lump sum payment by selling those funds and pay them maybe 10000 or so in taxes in one year because of the capital gains versus assuming a loan in pain over 40000 interest. Over the next five years. So what's your what are your thoughts regarding the loan versus selling it to fund

purchase. Well let me ask you a couple of threshold questions if you were to assume the loan what percentage of that loan does it represent versus the purchase price. Priest and in other words is the loan that you'd be assuming on this farmland is that 50 percent of your purchase price or is it 100 percent of average 100 percent so you have the opportunity to purchase this loan with a 100 per this farmland with a 100 percent loan. Correct. All right and that of course would require you to have all of this massive negative cash flow because obviously the operating income would not be as high as the principal interest payments for it. All right and tell me just out of curiosity at what interest rate is this loan six point three five six point three five and what are the terms of the loan. Well that's guaranteed for 5 years. And is this seller financing as opposed to a bank financing. No it's not. All right all right. So six point three five five years and what type of amortization schedule.

Well monthly payments. But again it doesn't advertise complete does it amortized completely over the five years. Right. Oh so it's a very very short term amortization schedule which is pretty tough. Six point three five my opinion would be basically I hate debt. I'm not a big believer in debt and less it really makes good sense and certainly 100 percent leverage to me doesn't make any sense at all. So I'm with you if I have a series of stocks or mutual funds that are basically not going to trigger an enormous capital gain I would be more likely to sell those and then buy my property and enjoy my operating income and have a cash flow. Yeah. How do you feel about it. Well I feel the same way that so many people are saying oh you should leverage you should take a long look at the return on your investment. No I don't think so. I don't think so. I don't think that's the case I mean we could put a pencil to it and this is just sort of a basic overview. Can I ask you your age.

I'm nearly 70. Well I think it's 70 Why do you want to take on a lot of debt. Doesn't make any sense to me. So I think you'd be far better off enjoying a cash flow as opposed to putting thirty six to forty thousand dollars a year in someone else's hands. Yeah and in top of that on top of that I think that way if if you're buying the farmland reasonably farmland historically has been a good investment and there's no guarantee that your equity mutual funds are going to outperform your farmland anyway. Yeah and an awful lot of people would rather have the farmland than the equity mutual funds. Right. So I think bottom line is if you're in a position to do it and it's not going to be an arduous capital gain then pay cash for the farmland or at least at least pay a substantial portion so you have the leverage to yourself. There's always and there's always another position that you don't have to take the hundred percent you could take 30 40 percent. So at least then you don't have a negative cash flow right now. Well. I mean you know I thought I was crazy

for shelling out so much of our actual saving but I still have some left so I thought wow that's not a problem I can build it up again with income when I'm in other places. So no I don't feel bad about that at all. Now if you were telling me that you had a six point three five percent mortgage that was a 20 year fixed mortgage I'd feel differently about it. But basically you're on a very short lease with a five year amortization if interest rates are moving up you're going to pay it off anyway. Yeah yeah. OK thank you very good I had the information and thanks so much for the phone Denny. My pleasure. All right let's go next to another caller and this person here is in a line number two. Well you know this is somewhat Sankey because this was one of the items the identity theft that I want to bring up and see what's the liability there's another problem where you don't even know that somebody has stolen your identity and they're maybe out in California

and can really be you. Don't apply in whatever way the means they get. What is your liability then typically. So long as you have acted prudently. Once you have become aware of the situation it typically is between 50 and 100 dollars on a card. So the banks are the people who really have the problem but it's not the money it's not the money it's the destruction of your credit. That's the problem. So while you may be able to limit your liability on a credit card to fifty one hundred dollars when someone has run up thousands and thousands of dollars to unwind that problem has an enormous impact on your credit. Now if you never borrow money if you never need money if you don't need a bank if you don't need credit cards or anything like that well then you know it's not quite as bad a problem but that's very very few Americans very very few people talk to people who bought cars and all.

Absolutely. Absolutely. I don't know if you know the newest thing is that credit card companies not credit your home insurance is now added. Sort of like you know the protect you against it or something or other I guess the financial part is or financial down say like $35 a year which you know that if they're not going to charge very much there's a good chance they're not going to be paying much outright. Right. OK what about either a happy or unhappy owner of a new house. I've been running for a bit. What about the idea of liability additional liability insurance. There tends to be I think about 300000. Well that's right typically it's one hundred three hundred that's what most people have which means that if someone is injured due to your negligence on your premises an individual you have insurance to the tune of $100000 per person $300000 per accident. As I continue to counsel for anyone who has any kind of net worth that's simply not enough. And typically people even on automobiles may well have just $100000 per person

$300000 per accident. So you have a couple of choices what and that's called primary limits or primary liability. If you have a couple of choices Choice number one is to increase your primary limits or your primary liability limits on both your homeowners and your automobile or any other property exposures that you have or alternatively what most folks do is simply buy what's called an umbrella policy. It's additional liability coverage that kicks in if you exhaust your primary limits and it's usually written with the same insurance company where you have your primary coverages. And frankly it's dirt cheap insurance. It's often as low as two hundred to two hundred fifty dollars per million. And I think that's a very important kind of insurance to have. I'll take the small risk I'll pay the two hundred fifty dollars and I'll let the insurance company take the big risk. The million dollar risk. So you just. Will even at least a million dollars. Absolutely absolutely. Because what typically happens with primary limits

if God forbid that you find yourself in a situation of being sued in an automobile accident. The lawyers fees alone can run up one hundred two hundred three hundred thousand without any claim or any injury relief for the actual plaintive. So that's the that's the problem that typically the legal fees can be so arduous that it can run right up to policy limits and you're not covered. That's one of the major reasons they have umbrella because it covers the lawyers fees and it also covers obviously injuries to any aggrieved party. And the final one is what's your reaction to I guess the legislation is headed from the one of them in terms of bankruptcy. Through the credit card companies favors the creditor It certainly does it certainly doesn't mean I think what you're reading is that anyone who is not very well-off to begin with is going to suffer more under this particular type of legislation. There are a number of articles that appeared in The Wall Street Journal I think in the last week that this legislation could

impact tremendously on divorced moms and non-working spouses who are relying on essential alimony payments and maintenance payments which now may be at risk if that particular other party declares bankruptcy that that those dollars can now be seized by the credit card companies. So no question that this is not A or what. What should I say. It's not a victory for consumers. It's certainly a victory for credit card companies and let's face it credit card companies want to be paid. And it makes it easier frankly to go after people who find themselves in difficult circumstances. So I'm not very crazy about this pretty popular piece of legislation. They create the problem too. You know these multiple offers and you know whatever. Well that's right. That's right I mean it really is disgusting when all of us including our kids are receiving these offers. There isn't a week that goes by I would just

love to have the postage that goes up by the credit card companies you know put that all in a great big barrel and see how many millions and hundreds of millions of dollars just in postage in soliciting us to have another credit card. And every time that we have a credit card even if we don't use the credit card that impacts our credit score. Most people don't understand that I teach this at the University of Illinois. I'm amazed at the seniors at the U of I in my finance class the number of credit cards they have they maybe have eight or 10 different credit cards and they said well we don't use them. It doesn't matter because each of them carries a line of credit. So when it comes to your credit score it negatively impacts the more. Essentially the more credit that you actually have access to as a result of all of these credit card so it's another good reason not to carry a lot of credit cards. Thank you very much. My pleasure to you for the call. Well the past mid-point Here again our guest is Dave snow He's a clinical professor of finance at University of Illinois once a month on Friday he's here on

the program we talk about money management personal finance issues and if you have a question obviously we want you to think very carefully do a lot of research do your homework before you make any decision. This is one one could be one piece of the puzzle if you're looking for a little advice. I know Dave will help you out and give you his opinion. 3 3 3 9 4 5 5 here in Champaign Urbana toll free 800 to 2 2 9 4 5 5. We go on to another herb and a caller this is lie number three. Hello. Hello and good morning. Thank you for taking my call. And I wondered just a little late and I started writing furiously but I missed one of those for you. That used you mentioned what to say to the credit reporting organizations you want to place what's called a fraud alert and fraud alert on your name both your name and your social security number. OK that's the key.

That's all I needed to know this is a great show. Thanks very much for being with us there. Thank you for the go. Let's go out to a listener in Terre Haute. Why number four. Hello hello. Yes my question is the dollar. Way back when it was $20 million and you could you could exchange dollars for gold. When the depression came on with 35 and then after that they went. I think foreigners could do everything with 35 domestically you could redeem 70 or something I remember right. And then they sort of the dollar. So it's not reviewable and golden. Right that's correct we went off the gold standard many many many years ago. OK so what's all the gold there for doing now. What's it for. Sitting sitting gathering dust. You know I I haven't thought about it

economically. Why we still have that particular gold I need an economist to call in. I you just stop me I really haven't given it any thought and I don't have any good response to it. What I think is the most interesting part about the gold are all the people who didn't turn in their gold when it was called in when we went off the gold standard and all of those gold coins those new numismatic gold coins have just escalated dramatically in value but I don't have a good answer for you. So we need an economist to call in and give you that answer. And what I will do is I've written that question down. So I if if no economist calls in then I will talk to two or three over in the. Economics Department and say what are we doing with all of that gold in Fort Knox and is it simply a psychological type of impact that we have on our currency and the financial viability of our system or is there some really good reason to have it.

So I just don't know. OK well thank you very highly. Thank you. So what do you get for an ounce of gold these days. Well you're in the 400. David you're in the four hundreds now in the olden olden days which were I think about the nineteen eighties the gold really went up to about $800. Yeah that's right eight hundred. So people who were buying it five six seven and eight the gold bugs Well they haven't been very very happy. But then gold dipped down in the two hundreds to 50 and now we're back above 400 So that's what an ounce of gold brings today. OK let's go next caller is in Urbana line one. Oh yes. Well if you're pleased to have me. Phone numbers again for Equifax and Experian TransUnion. Sure be happy to Equifax is 1 800 5 2 5 6 2 8 5 6 2. OK and Experian is 1 8 8 Triple-A 3 9 7 3 7 4 2

and Trans Union is 1 800. 6 8 0 7 2 8 9 7 2. Ok 1 800 5 2 5 6 2 8 5. Well on a day 3 7 3 7 4 2 1 868 0 7 2. Right. Yes. Thank you very much and thank you and I know that all and I know obviously not everyone has Internet access but all of these three have websites. Absolutely. If you want to get that information or other information about them you can always do it. Do it through the Internet. Can you request your credit report over the Internet or would you say you wouldn't want to do that because what you're going to do is give them your social security number and your personal you know I'm old fashioned David I always get like you know the you know I even I have to laugh. For my daughters they actually use tele file right as opposed to e-file for their tax return so they actually I said well

you know use the telephone as opposed to the e-file. So I'm sort of old fashioned but yes you can even do search you can find the websites and then you can request it. You do that. Yes. OK wery good. The next caller is in Indiana on the line too. Hello hello. Actually just for comment on this recent thing there is their website you can go to it. I think it's free and no reporter an a report dot com. I've already done it and then I forgot about it was already. But they give you all three and you just check on them and they go through procedure defying you then you can print it out. I discovered that Equifax had the most information on me it was up to date and I tried to do another one and they had addresses from one thousand eighty eight and eighty nine as where I was living. And so I I didn't go ahead with the procedure for that because it put out a lot of pages on me. The original one did.

Equifax So I just used that and I'm going to go back to the other two and you know my leisure because it turned into a hellish situation on the net to give all the information they want they were asking for old you know number of credit card numbers that I don't use anymore which surprised me I thought they were all you know simply up to date. Well that's what's so interesting about the credit reporting agencies remember that while they share major databases they're also independently gathering information and that's why it's so important eventually to look at all of this stuff and see what they have. You know I would certainly agree to that. What I'm going to want to bring up I hope it's within your purview or release you might make a comment is three things have happened with my bank or banking that concern me. The first thing was a number of months ago I received a handwritten letter from another bank from a lady asking me to you know change over to their checking and savings etc. and I couldn't understand how she pulled that off because my bank has a privacy. You know a

situation where they don't hand out that information they said. So I jumped on him and I found out the lady I talked to talked to somebody in the other bank found out that they were going through checks that came through their bank and getting local addresses and trying to you know get business from them. Then I was told if I wanted to carry this any further I could do it and you know what the chain of command sort of backed you know in the banking world and make you know some nasty remarks and stuff would go on the record. The bank wouldn't do it for me was all up to me. I had to prove it. And they have copies of everything so I you know I ended up yelling at the other bank and they were you know very supplicated and everything said they were sorry would never do it again. But you know did they admit that this was the process that they were using. Yes. And I frankly don't know the legality of that process maybe. Legal it's what it was not legal but it was sort of like a quasar saying if you had to do a lot of stuff to prove intent. Period. I mean you might as well forget about that if you Well that's right.

That's right you could spend thousands trying to get it and I guess the woman who has this rather progressive view of getting new customers for the bank was slapped on the knuckles but she's still running the show. Now secondly I received a rather nice form letter in a pamphlet everything from the same bank that was trying to get my business some time ago and they stated in the letter that they got our you know Division talking you know and you know the general sense got your information from exchanging of bank information among banks you know to help themselves get new customers. And I looked in on that it turned out to be about the same situation but it was a little more you know 50/50 and I didn't carry that sort of either. But the third thing you have to me last week sort of got me gone is that I received a letter from my bank. Congratulations you now have. See what was it called a bank protection or something like that were they. Every customer had a checking account was given $300 back up on their

account in case they overthrew. OK of course there's a charge for that. Yes and I called and I said I said I know I did I got enough trouble these people care my own money I don't have another $300 show it shows up as your you know your balance. That's right and it doesn't it's not you know there's nowhere else point to it or anything and I think her thing not only me but a little lady's going to get trapped in this thing because it's this seems like a thing built to get you to you know why I don't have to worry you know and also when you've got some nice easy to you never had before. Well that's right and if you overdraw the fuzzier bothers me is that it's a blanket thing no one ever wrote me a letter and made me fill out a form if I wanted it to go to. The bank did send and sign some forms to which you didn't want it. Yeah that really upsets me about American banking. I mean that's only the spankings and I know about it but I just sort of wonder you know were there fingers are all going now you know it's just it's just something it's bothered me and I thought I'd bring it up to you and I don't know if it's in your purview or something you have a view on it watch it as well.

Well excited me I'll tell you it would excite you and I think it tells you that there is just enormous competition among banks I mean let's face it we are a very sound financial system in the United States everybody looks to us in spite of the value of our dollar. It it's of high integrity and these things do bother you and what it really is is very aggressive marketing and searching out areas for new fees because of the difficulty of really making substantial amounts of money. By loaning money any longer and that many many banks are looking for alternative sources of fees whether it's trust income whether it's checking income whether it's credit card income wherever that they can find it. And this is one more place and at the same time occasionally this may do some good for someone who periodically over draws their account. But what's unfortunate about it is that the default suggestion should be gee if you'd like this if you like this we'll be happy to send you a form so you can add it as opposed to the other way around you now have it. And if you want to get

rid of it you've got to come in and sign some forms so that tells you that we're doing some very aggressive marketing at that particular institution ensure I would be upset about it also and thanks for bringing those items to our attention. Very good. All right well we'll just continue to take calls here we have a number of people try to get in as many as we can in the time that remains which is about 15 minutes. The next is someone here in Urbana and I believe that would be line number three. Hello. Their call their line 3 in urban. Well let's go to we have somebody on line. Oh yes go ahead. Yes. I have a question. I'd like to get your feel. About taking a home equity loan and reinvesting that relatively safe thing that might yield a greater return like an investment grade life insurance or or something else is that a good idea a sound idea.

No that's my opinion. OK. I don't think it's a good idea. I don't think it makes any sense to take an equity loan because typically equity loans are adjustable loans they're not fixed interest rate loans they move with the direction of interest rates. If you feel as I do that interest rates are still going to move up higher you're borrowing money at maybe six six and a half seven whatever unless you have a teaser rate and then you're looking for something relatively safe if you can tell me something relatively safe or safe that will pay that level of interest that you are borrowing money at. I'd sure like to hear about it because I don't know of any investments quite like that just aren't any Sure things and the last thing I would do is take that money and purchase life insurance with it. I don't think that makes any sense at all. So I think you have to have a better reason for taking an equity loan out of a personal residence.

OK but I have a friend of mine is read a book I'm gonna seminar and. Seems to have bought the idea that this is a good idea I don't know who's selling it but I want to check that with with someone else. All right thank you very much. Oh pleasure yeah. Next we'll talk with someone on a cell phone on a line for a look at the very free theorem. Number one first of all credit reports are all full. And the prospective employers. Absolutely. One can't be careful what to find for a job. I've been asked that question whether they regard divorce bankruptcy and all the awful state that we will check your credit report. Well people have to be careful about that is that my second. That was a comment My question is if I have several credit cards that I am not used to currently do I write the companies that say that I have no power. Some I'd like to be removed from my record.

Well actually you have to cancel the credit card that is the only way that you can have this done as you must actually cancel the credit card because as long as you have the credit card as long as it is current even with zero balance it will have a negative impact on your credit score. OK that's what the company's done right. And also something else you made a very important point that when you are applying for a position with a particular company that company more often than not now wants to check your credit but they have to notify you of that and typically you sign off and you authorize them to check your credit. Very good. Thank you very much. My pleasure. Very good on we go and next up will be line number two and this is no on second thought let's do like number three in urban a hello with that line number three. Yes thank you. Just a quick question then David. I'm wondering what the point is of not having your full name on your checks when it's

already there in your wallet on your driver's license and your signature is there and it's on you. Credit card and I didn't quite get the point. Well checks may not be carried at the same time with your wallet. That's number one and number two by not having your full name on your checks. Then if your checkbook is stolen separately for example it is a little bit more difficult to figure out what the signature is required on the check to make the check valid. OK the other question I have my son just had an identity alert from the University of California Berkeley. Yes that was one of the ones that were written up in the journal. Yes and I'm sorry I've been dealing with that because it overseas and tell us a little bit about that I'd be interested. What what's going on with that. Well they just sent a letter saying that on March 11th a computer was stolen from The Graduate division and that his name

and Social Security when he was among those on it. And they tell you what to do they gave you the three agencies that you've given. Yes. To put a fraud alert on them. That was basically the suggestion. Good. And but you can't do that when you're overseas of course because you can't get to those agencies with an eight hundred. Well that's right. So they are then. To get to someone else. And there's a special e-mail that gives you an e-mail that so that they can do it by e-mail from overseas to report to the credit agency that they want the fraud of that phone. But one of the things she told me was that it was sufficient to just to contact one of the agencies which is I wondered about that. You definitely said all three. Well I would suggest calling all three I don't like to leave anything to chance. Now remember that these credit agencies do share information. There are all kinds of

national data banks that share information. But earlier in the program if you'll recall there was a gentleman who called in and said that he checked with Equifax. Yeah I had a pretty complete report. Then he checked with one of the other organizations and they had things that were out of whack old databases old credit cards. So to me I don't leave things to chance. And I would much rather make certain that I've got a live person a real person I've talked to who has my fraud alert and. The other thing that actually University of California did they have an 800 number to deal with this problem. They have separate stationery that's printed with ID from sprawl hall. They're taking it seriously at that time magine it has a rather large quantity of people. She also said so far they had no reports of anyone having their identity theft stolen. Well that's that's the positive part just because the computer is stolen or someone hacks into the database. Typically what they found out statistically is a very very tiny number of identities are actually stolen or hacked into and dealt with.

Right well this was the computer that was stolen. Yeah that's a whole different sort of and it's I show you something a little strange that an individual not yet identified. And so. I didn't know what that implied whether it was internal stuff. Well it brings up a whole list in litany of legal issues for example was Berkeley for example negligent to begin with in allowing someone access and being able to steal a computer. That's a tough question. That's sort of a threshold question. And then even if Berkeley was negligent and someone was harmed is the University of California at Berkeley a suable entity for purposes of repaying the aggrieved party just to get their credit straightened out. So there's a whole litany of issues but it sounds like most universities obviously even the University of Illinois is really looking at this very issue. I was reading just yesterday and some basic literature at Champaign-Urbana that this whole thing is being looked at very very carefully.

It's a tough area it's a tough problem and it's going to grow. But thank you so much for sharing that. Very good and thank you and let's try to get in line. One in Urbana Hello. Hi modern portfolio theory what do you think about that. I think it's excellent. I think it's excellent what it teaches you is that it pays to diversify among different asset classes I teach it at the University of Illinois it's not an end all be all. But for most folks it teaches you that diversification pays off and effective diversification reduces the volatility of a portfolio. Yes. Well then according to that theory I heard that it was broken down into an 18 year time periods like 30 to 40 a one thousand thirty to forty eight that the market was the same and then the next 18 years it jumped a thousand points in the next 18 years it was the same then the next 18 years it jumped a thousand points. So according if history repeats itself or at least rhymes with itself they say that the next About 18 year period will be about

say. A sideways market. Well I don't want to go there that's just speculation but what I do think is important for all of history remember and this really is a segue to the very issues you're raising is if you are going to be an investor in equities and you're going to be well diversified you must be a long term investor because it is absolutely true that you could find for example a 20 year period where you would have been better off investing in certificates of deposit down at the local bank than owning a diversified portfolio of stocks. But if you are a legacy investor if you are an investor for life you cannot find a consecutive period of time in U.S. history when I'm talking now 25 to 30 years. That's what I'm talking about not 8 6 10 where you would have been better off in a properly diversified portfolio of equities than even the best fixed income. So if you're going to be a stock market investor you must think long long term longer than even going to college for your

kid. Absolutely absolutely. Oh my goodness. Do you think that IP as OEM chart is project length the gypsum chart. Yes. Is fraudulent. Do you think it represents. And will the growth of stocks accept are a fraud. Are you talking about Ibbetson. Maybe Ibbotson the way the graph of inputs and stocks and bonds. No it's some of the most respected academic and intellectual research that's ever been produced. So absolutely not on the contrary I think some of the best databases and data series that we have access to. Hello. Yes go ahead. Modern portfolio theory. They had the chart of the Japan market and how it's been down there for so terribly long and then the American market just meringue that only about 10 years or so later in time. Do you think that we're headed for something that happened to Japan.

No and I really just don't. I'm not into the predicting business. What I would say however is that modern portfolio theory would suggest to us that not only do we own asset classes in the U.S. but we own asset classes internationally. So for example just this year well the Dow Jones is down 4 5 percent for the year. Dow Jones. In Europe for example the big Europe stocks there are up 4 5 percent and that's what modern portfolio theory teaches us. You don't want everything behaving in the same direction all of the time. So that way you reduce portfolio volatility. Great questions and thanks so much. Thank you. Well there we're going to have to wrap it up for this time round with our thanks to our guest David Scinto He's a clinical professor of finance at U of ice with us every month on a Friday and we do these programs. We appreciate you being here and thanks so much for inviting me to the program Focus 580 these made possible in part with support from the art mart in the Lincoln Square Mall Urbana the art Mart is pleased to support public radio in east central Illinois. The broadcast also is made possible with support from Owens funeral home at the corner

of Elm and university in Champaign locally owned and operated and serving families since 1925 funeral home invites you to join them in supporting public radio a little bit later today in the afternoon magazine will take a look at Ben Franklin's life in France. He spent eight years there and biographer Stacy Schiff says that those years should be considered his crowning achievement. Her new book is titled A great improvisation Franklin France and the Birth of America. And she will be talking with Celeste Quinn in the 1:00 o'clock hour of the afternoon magazine today. But later on today in the second hour of this show our number two our guest is Jeffrey stone He's a professor of law at the University of Chicago and we will be talking about his book perilous times which takes a look at six points in American history when there was an attempt by the government to restrict civil liberties very specifically here we're talking about first amendment freedom of speech. He's here visiting the campus we'll talk with him in a little bit. First though we'll take a break for news and update on the markets. Please stay tuned.

The Carle Center for Rural Health and farm safety is proud to underwrite agricultural programming on WRAL the site or helps residents or Brule communities with education and training and farm safety. For more information call 2 1 7 3 8 3 4 6 0 6. Good morning everyone this is Dave Dickey with a look at the markets corn futures are trading steady to lower in light dealings midway through today of session on the Chicago Board of Trade. Prices drifting into negative terrain on what has been.