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More Toyota Cars Recalled: Time to Buy Shares of TM?

by Flexo on January 28, 2010. Filed under Consumer, Investing.

Another day, another recall. Normally, automobile recalls are not much of a problem. A recall usually involves bringing your car to a dealership, subjecting yourself up to some sales pitches, getting your car fixed, and driving home. Toyota’s recent string of recalls is more complicated because some of the problems do not have solutions yet.

If you own one of the many Toyota cars affected by one of the company’s recalls, you probably have already received a letter.

Here is what has happened so far:

  • November 2, 2009. Toyota/Lexus recalls recent models of the Camry, Avalon, Prius, Tacoma, Tundra, ES350, IS250 and IS350 due to a tendency for the floor mats to obstruct the accelerator pedal. This was a voluntary recall whose solution was simply to remove the driver’s side floor mat. Later that month, Toyota announced a solution to the problem that will require a visit to the dealer.
  • November 24, 2009. Toyota recalls 2000-2003 models of the Tundra due to the possibility of excessive corrosion on the frame rear cross-member caused by road salt.
  • January 21, 2010. Toyota issues a voluntary safety recall for recent models of the RAV4, Corolla, Matrix, Avalon, Camry, Highlander, Tundra, and Sequoia. This recall is to remedy another problem with the accelerator. In these cars, there may be a tendency for the accelerator pedal to stick, and this is not related to the floor mat problem. On Tuesday, January 26, after months of working with federal safety officials, Toyota decided to stop selling these cars until the problem has been fixed.
  • January 27, 2010. Last night, Toyota added to its initial recall pertaining to floor mats obstructing accelerator pedals. Added to the initial list are recent Highlanders, Corollas, Venzas, Matrixes and Pontiac Vibes. The Vibe shares design and construction with the Toyota Matrix.

According to the New York Times, sudden, uncontrolled acceleration in Toyota vehicles has caused 275 crashes and 18 deaths. Researchers have identified 2,274 incidents of sudden acceleration.

Over the past few months, Toyota has recalled 7.6 million cars. General Motors was quick to respond with an incentive for Toyota owners who want to get rid of their cars in favor of one of the American automaker’s vehicles.

Toyota has a strong reputation or being reliable, but these recent events inspire doubt. Here in the United States, shares of Toyota Motor Corp. (TM) have fallen 13% since January 19. If you believe that Toyota will recover, and if you have money you don’t mind losing while gambling in the stock market, it might be a good time to buy Toyota’s stock. I expect Toyota will recover and after some time, their reputation will remain mostly unharmed.

Update: I decided that if I should talk about buying TM, and if I think it’s a good idea for the long term, I should live up to my decision. I bought 10 shares of Toyota Motor Corp.’s ADR today.

Do you see the latest string of crises as an opportunity for investors?

Photo credit: Collin Allen
Dealers Swamped by Worried Toyota Drivers, Associated Press, January 28, 2010

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    38 comments 38

Buying a Second Car

by Kelly Whalen on January 28, 2010. Filed under Consumer.

If my husband had a car to drive to work and had taken my son to school, I would have saved three hours of my day. Yes, three hours.

We are a family of six with one car. This is the result of a decision we made a few months ago when our second car needed extensive and expensive repairs. For a while I thought it was great, as I explained in an article on Wise Bread and described my one-car experiment on The Centsible Life.

Long gone is the optimism and the “gee-isn’t-this-great!” feeling. Now I just want my life back.

So we are seriously talking about replacing the second car. We’ve discussed:

  • what we will buy
  • how we will pay for it
  • paying off my car vs. saving for the new car
  • buying a “beater”
  • thinking up crazy alternatives (my son suggested Daddy could FLY to work!).

What we can’t change is that we need a car for my husband. He has a job that occasionally requires him to stay late or come in early. His income is our main source of income.

My car is the family car. We have four kids, so it had to be a minivan or a bulky SUV. We chose a minivan for fuel efficiency and safety.

I would discuss more about pros, cons, makes and models, beaters versus running your car into the ground, but I have to go make the house half decent so I can get up at 6:00 am to get everyone ready and out the door so my husband can be at work early.

What have your car buying experiences been like? Do you buy beaters or brand new and run it into the ground? Are you a fan of used cars, or do you think new cars are a better deal?

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IRS Will Force Businesses to Disclose Borderline Tax Shelters

by Flexo on January 27, 2010. Filed under Taxes.

Starting in 2011 or later, the IRS will be requiring businesses to volunteer more information about their tax avoidance practices and transactions. I use the word “volunteer” loosely. Currently, businesses and even savvy individual taxpayers do all that is possible to reduce the amount of tax owed to the government, even to the point at which the practices, although not illegal, may be flagged for scrutiny by the IRS.

The new regulations would force businesses to list their questionable transactions and calculate how much additional tax they would owe if the IRS were to disallow their practices.

Here are more details from The New York Times:

Corporations routinely use sophisticated tax transactions to lower their federal tax bills by billions of dollars. While the new rule will provide the I.R.S. a glimpse into aggressive shelters, it will also allow the agency to study whether companies are correctly computing tax benefits.

The rule covers transactions for which companies have not established tax reserves under Fin 48 rules because they think they would win any legal skirmishes with the I.R.S. in tax court. And it covers transactions that have not traditionally been the focus of I.R.S. legal actions.

Companies that fail to report this information on an annual basis could be required to pay penalties. This seems to ensure that someone at every corporation will perform a cost-benefit analysis to determine whether it’s better to pay a penalty or risk being required to pay the estimated additional tax reported.

The fact that this would be necessary is just another indication that the income tax system needs to be drastically overhauled. I still haven’t read about a replacement plan that I like — not the flat tax, “fair” tax, nor a value-added tax. A better system might involve lower overall rates with fewer deductions. With so much political disagreement, I expect there will never be a major shift in tax policy.

I.R.S. Moves to Uncover Dubious Use of Shelters, Lynnley Browning, New York Times, January 26, 2010

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Smithee Debt Update, January 2010

by Smithee on January 26, 2010. Filed under Credit.

The last time I talked about my credit card debt here, one of our community said that he didn’t know the specific numbers of my problem, and it got me thinking that I’ve probably lost sight of one of the main reasons I wanted to be writing here in the first place: to keep myself honest. I feel worse about my behavior when other people know about it.

So, here is exactly where I am:

I have one credit card that lives in my wallet (and it does seem like it’s alive sometimes), the Charles Schwab Signature Visa. I’ve been using it instead of my bank debit card for daily purchases because I get 2% back from the money I spend, and I thought I could handle the temptation. The current balance is $5,724, obviously more than I should have spent since I last paid it off, which I should be doing every cycle. The interest rate is 13.24% and the last finance charge was $74.49.

I have one other credit card currently owned by Chase that was cut up a long time ago, and represents the remaining debt I started building up in 1997. The remaining balance on it is $1,104. The interest rate is 12.24% and the last finance charge was $11.92.

In my bank account is $10.17, because the last time I got paid, after making the necessary transfers to cover monthly expenses, I had $1,000 leftover, which I sent immediately to the nice people at Charles Schwab. The only money that gets used to pay off the Chase card is what I earn from my side jobs.

And now I’m thinking that I should probably forgo the 2% cash back on the Schwab card and go back to using my debit card for daily purchases. I thought I could rely on my self-discipline not to spend more than I could pay back, but it looks like that wasn’t true. Bummer.

Now, I guess I just need to figure out what is a reasonable amount to let myself spend during an average week. I can’t really go on historical data, because I’ve been doing it badly for quite a while. So, ignoring the credit cards for a second, after contributing my share of the family expenses, I have $1,723 leftover every month. I’m going to try restricting myself to $100 a week, which will enable credit card payments of about $1,300 instead of $1,000.

I don’t know if I can afford breakfast, lunch, gasoline, and doing something occasionally nice with my wife on $100 a week. But if I’m going to get serious, I have to get serious now. Summer weather is going to start in about a month, here in Texas, and when it’s hot outside, I get depressed, which turns to self-destructive behavior like spending too much and eating Chocolate Zingers. I need to make this a habit so I can avoid that.

Thanks for listening, you’ve been a good ear. You don’t mind if I come to you with my problem again in the future, do you? I hope it’ll seem rosier, then.

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12 Greenest Cars of 2010: Do You Consider the Environment?

by Flexo on January 25, 2010. Filed under Consumer.

The American Council for an Energy-Efficient Economy (ACEEE) recently released an updated list of the twelve greenest cars of 2010. The council rates each car with a score, with higher scores going to those cars produce less pollution and are more fuel efficient, resulting in lower energy consumption and carbon dioxide emissions.

Here are the top twelve greenest cars of 2010.

  1. Honda Civic GX automatic transmission, compressed natural gas
  2. Toyota Prius automatic transmission
  3. Honda Civic Hybrid automatic transmission
  4. Smart Fortwo Convertible/Coupe manual transmission
  5. Honda Insight manual transmission
  6. Ford Fusion Hybrid / Mercury Milan Hybrid automatic transmission
  7. Toyota Yaris manual transmission
  8. Nissan Altima Hybrid automatic transmission
  9. Mini Cooper manual transmission
  10. Chevrolet Cobalt XFE / Pontiac G5 XFE manual transmission
  11. Hyundai Accent Blue manual transmission
  12. Honda Fit automatic transmission

When shopping for a car, do you consider your effect to the environment? Most personal finance advice will guide someone to the best car for the available money or the car that is the least expensive to own. New, cleaner technology is often more expensive. Is being green a “luxury?”

American Council for an Energy-Efficient Economy, January 19, 2010
Photo credit: Daquella manera

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Podcast 40: Getting Back on Track in 2010, David Bach

by Flexo on January 24, 2010. Filed under Podcast.

Today’s guest on the Consumerism Commentary Podcast is David Bach, author of Start Over, Finish Rich: 10 Steps to Get You Back on Track in 2010, a book in which David discusses getting out of debt in 2010 and how to make the most of the recovering economy. David is a former senior vice president of Morgan Stanley and has authored eleven bestselling books, most notably his “Finish Rich” collection of works. He is also the creator the “Latte Factor.”

Tom Dziubek speaks with David Bach about his latest book. You can visit David’s website and follow him on Twitter.

Production Number: S02E14
Segment Number: 56

 

To listen, use the player above (Adobe Flash required), download the podcast here, subscribe to the podcast RSS feed, or use the iTunes link. Note: open links in a new window (Ctrl-click or Command-click) to avoid interrupting the podcast.

[00:00] Introduction from Tom Dziubek
[00:31] Interview with David Bach
– [00:47] David’s personal “start over” story
– [04:28] Taking advantage of the stock market now
– [10:01] The American dream of home ownership
– [14:20] Going beyond the “latte factor”
– [16:37] 10 steps to get back on track in 2010
– [19:39] David’s best money-saving tip
[21:13] End

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.

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In Detail: How to Claim the New Home Buyer Tax Credit on 2009 Tax Returns

by Flexo on January 23, 2010. Filed under Taxes.

In November of last year, President Obama and Congress expanded the home buyer tax credit to cover more people who have purchased houses in 2009 and 2010 and to further stimulate the real estate industry. Earlier this month, the IRS released an updated tax form to include the new rules. If you want to claim the home buyer tax credit, you must file your tax return on paper. You will not be able to electronically file because the IRS requires additional documentation.

Here is what you need to know in order to receive the full tax credit offered by the government.

TurboTax - Do your Taxes for Free - It's Easy

How to qualify for the home buyer tax credit

Both first-time home buyers and long-time owners can qualify for a credit. A first-time home buyer for the purposes of the credit is someone who has not owned a home (or whose spouse who has not owned a home) during the three-year period that ends on the date of purchase of the new home. If the house was purchased on November 30, 2009, to qualify you must not have owned a home since December 1, 2006. The earliest date to qualify for this credit is January 1, 2009.

To qualify for the credit given to long-time home owners, you must have owned your current home for any five five year period during the eight year period ending on the date of purchase of the new home. The earliest home purchase date to qualify for this credit is November 8, 2009.

For either credit, if your date of purchase is in May or June 2010, you will need to prove you entered into a contract to buy the house before May 2010. Read below to determine what documentation is necessary.

Members of the military and the “intelligence community” have an extra year to purchase a house and qualify for the credit.

Restrictions for qualifying for the credit

Even if you qualify as a first-time home buyer or a long-time home owner and you have purchased a qualifying house within the permitted time frame, you might still not qualify for the credit. You will not qualify if:

  • you purchased your house after November 6, 2009, the price of the house may not be more than $800,000
  • your modified adjusted gross income is $95,000 ($170,000 if you are married filing jointly) or more and you purchased your house before November 7, 2009. A phase-out of the credit begins with a MAGI of $75,000 (or $150,000)
  • your modified adjusted gross income is $145,00 ($245,000 if you are married filing jointly) or more and your purchased your house after November 6, 2009. A phase-out of the credit begins with a MAGI of $125,000 (or $225,000)
  • someone else claims you as a dependent on their tax return
  • you purchased your house after November 6, 2009, and were under the age of 18 on the date of purchase
  • you are a nonresident alien
  • your house is located outside the United States
  • you sell your home or it ceases to be your main residence before the end of the year in which you purchase it
  • you received the house as a gift or inheritance
  • you acquired your home from a relative or a related corporation or partnership

The amount of the credit

First-time home buyers qualify for a credit of 10% of the purchase price up to a maximum of $8,000 ($4,000 if married filing separately). Long-time residents qualify for a credit of 10% of the purchase price up to a maximum of $6,500 ($3,250 if married filing separately). As mentioned above, if your modified adjusted gross income is above a certain level, the credit will be phased out until eliminated entirely.

How to claim the tax credit

TurboTax - Do your Taxes for Free - It's Easy

Because the IRS requires additional documentation, taxpayers who wish to claim the home buyer tax credit must file federal tax returns on paper through the mail. You can, however, still use tax preparation software like H&R Block At Home (formerly TaxCut), TurboTax, and TaxAct to calculate your taxes and complete your return, but you will need to print the paperwork and send it in.

I confirmed this with the TurboTax team:

Yes, TurboTax will stop taxpayers who have claimed the Homebuyers Credit from e-filing and let them know that the IRS requires them to print and mail their return with the appropriate documentation.

1. Download and complete the revised Form 5405. This form is available here. The form will guide you through the process, ensure you qualify for a credit, and determine the amount of your credit. Alternatively, prepare your taxes online, ensuring your answer questions about your home purchase correctly.

2. Collect your required documentation. You will need the Form HUD-1 Settlement Statement or other settlement statement outlining the names and signatures of all parties to the sale, the property address, the price, and the date of purchase. If you do not have a settlement statement, as you might not if you purchase a newly-constructed home, attach your certificate of occupancy.

If you are under contract but have not taken occupancy of the house by the time you file your taxes — and you still qualify under the date restrictions above — include pages from your signed contract including the signatures and names of all parties, the property price, the address, and the contract date.

If you qualify as a long-time homeowner rather than a first-time home buyer, include Form 1098 (Mortgage Interest Statement), property tax records, or homeowners’ insurance records. The forms must cover a full consecutive five year period within the eight years ending on the date of the purchase.

Be sure to send copies of these forms, not the originals.

3. Complete your Form 1040. Include your bottom line on Form 5405 on the appropriate line on your income tax return. On the 2009 Form 1040 return, this is line 67. You can’t claim this credit with Form 1040EZ.

4. Double-check your work. Check for the most common mistakes, such as not signing the return or using the wrong Social Security number. Review each form line-by-line and check your calculations. Any mistake will cause a delay.


5. Mail your forms and wait. When people began claiming the first-time home buyer tax credit last year along with an amended 2008 tax return, people were receiving the credit within six weeks. As more people began applying, receiving the credit took longer, particularly if documentation was missing.

Good luck! Let us know about your experience claiming the tax credit or if you have any questions.

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    25 comments 25

Democracy, Incorporated

by Smithee on January 22, 2010. Filed under Society.

The following is at least as much opinion as fact, but if I say something that isn’t factual, please tell me.

Our American version of democracy has never been pure or particularly representative. From women’s suffrage to civil rights to lobbyist influence to rumors that can spread around the world before truth gets up off the couch, something has always gotten in between a citizen’s wishes and her elected leaders.

I had thought things were moving in a positive direction with the proliferation of the Internet. It’s never been easier to encounter dissenting opinions or do your own research. I’ve been having some healthy (and some insipid) debates through Facebook for the last couple of years, the kind that would’ve otherwise happened only with friends or co-workers. I like having those. It’s incredibly important to be available to hear other points of view. Not to mention the continued release of government data available for analysis by anyone. Together, we can help each other get to the truth.

A giant step backward

Yesterday, our Supreme Court ruled that since money is considered a kind of free speech, and because corporations are considered a kind of people, (I’m not sure I agree with either of those assumptions), then corporations are free to spend as much as they want to promote or condemn a particular political candidate.

The problem, from my point of view, is that corporations only ever have one priority: increase profits. And especially in America, they want to increase profits in as short a time-frame as possible. We don’t take a long view in this country, as they tend to do in Europe and Asia. That’s why, for example, the electric car took an extra few decades to go into production, and why we’re still dumping toxic chemicals into otherwise useful water. We avoid doing the right thing, because that would be expensive, and shareholders would not be pleased.

You and I, as individuals, are limited to donating $2,400 to a federal candidate. Corporations can now spend as much as they want. Not in donations, exactly, but in other creative ways.

Two days ago, the Shell Corporation would’ve been unable to produce and distribute a feature-length movie explaining that oil is the obvious and only logical way to fuel your car, and therefore you should vote for Sarah Palin.

Clearly, I made up that example. But I feel confident that if Shell could spend a billion dollars to elect a candidate that would help them realize $4 billion in profit, they would.

Is this a partisan issue?

(For the record: I’m registered Independent, and always have been. I tend to vote Democratic, because Republicans push me away with their talk about abortion, civil rights, lower taxes in the face of enormous deficits, and the general idea that individuals fending for themselves is more American than people coming together to help each other out.)

The Supreme Court didn’t have to make such a large ruling. They specifically asked to review the long-standing precedent while in the middle of a much smaller case. Conservative opinion holds a majority in the Supreme Court at the moment.

In 2008, Barack Obama was able to raise more than John McCain by switching from federally-supplied election funds to private sources. The Obama campaign raised a previously-unheard-of amount through “micro-donations”, such as the $160 I donated over the course of three or four months.

But corporations, because they are almost always motivated only by profit, will want Republicans to win more than they want Democrats to win, because Republicans tend to vote to protect profits more than anything else. And corporations will always have more to spend on candidates than individuals will.

I acknowledge that some corporations, while incapable of having their own ethics, are run by ethically-minded people. Not all of them want to see America continue its dependence on foreign oil, High Fructose Corn Syrup, ammonia-laced beef and unnecessary medical tests.

But really all it comes down to is who is willing to spend the most money in an election. It could be Starbucks, it could be Walmart, it could be Sichuan Tengzhong, that previously-obscure Chinese business that recently bought the Hummer brand.

Wait, foreign-owned corporations?

Yes. There’s no difference, according to the law. Chinese, Saudi, German, Australian, it doesn’t matter. Any corporation operating in the U.S. is equally unrestricted.

What about unions?

Yes, this recent ruling also allows unions and other advocacy groups to spend as much as they want in a given election. But who has more to spend, the American Federation of Teachers, or Microsoft? There’s no contest between unions and corporations.

Is there a silver lining?

One possible silver lining to what the SCOTUS did yesterday is that the already-existing problem of “corporate personhood” will be apparent to more people. I’ve never much liked that precedent. It’s illogical to equate a business with a person. A business is a collection of contracts and bank accounts. It doesn’t have a brain with which to generate opinions, so I don’t think free speech applies to it.

Additionally, before the millions start flowing, the Federal Election Commission will have to come up with updated regulations and enforcement processes. I don’t really know what to expect here, though.

What can be done?

To begin with, I’m throwing my lot in with a group who is pursuing a Constitutional Amendment to clarify that corporations are not people. Frankly, I’m worried for my country that it’s come to that: we have to write down that a business and a person are different things. But in general, once the Supreme Court has spoken, changing the Constitution is the last thing you can try.

Here’s a pretty good video explaining what happened, what it means, and what can be done:

Landmark Supreme Court ruling allows corporate political cash, Reuters, 21 Jan. 2010

Free Speech for People

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