Author Archives: Shalina

Tips for Teens – Thanksgiving and Mobile Wallet

The aftermath of the recent Santa Rosa fire is, needless to say, devastating. Roughly 3,000 homes were lost, causing $1.2 billion dollars in damage. Homes and money can be replaced, but the pain and suffering of the 43 families who lost their loved ones to the fires is priceless. On October 9th, the Red Cross put out an online volunteer form and they reached their immediate need of volunteers within hours of posting it. Lost and missing pets were sent to different shelters and foster homes across the Bay Area where they were cared for until their families were ready to take them home. Neighbors supplied each other with air masks once the hardware stores ran out. Despite the negative tone that seems to plague the downfall of society, genuine kindness and desire to help really shined through a difficult week.

I’d like to thank all of the First Responders, volunteers, pet shelters and foster homes, neighbors, and everyone else that truly made a difference to someone in need.

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With the holiday season quickly approaching, there’s something that comes to mind that I can’t seem to forget no matter how hard I try. Remember the 2013 Target hack and the 40 million affected people? While I was fortunate not to be effected, I want to do everything I can to minimize the chances of being the 40 millionth and 1 person to have to call my financial institution and the credit bureaus.

The two safest options when making payments are to utilize the chip on your debit/credit card or to use Mobile Wallet. They both work the same way. In short, the chip creates a unique code that the merchant receives with just enough information for that transaction to go through but not enough for a hacker to steal your information. The process is repeated with a different code the next time you use your card for a transaction.

The only downside to using the chip, as you may have noticed, is that it can take a little longer to approve the transaction. A friend of mine worked at a restaurant before and after chip cards became common practice, and their feelings toward the chip cards were mixed. They believed it was a safer option, but it also slowed down the checking out process dramatically.

Enter Mobile Wallet. This refers to Apple Pay, Android Pay, Samsung Pay (and others) but it’s all the same technology. Like a chip card, a unique code is created when you go to pay at a terminal, but instead of waiting after you insert your card, the process happens quickly on your phone, therefore, avoiding those death stares from the people behind you who wait while you hold up the line.

Sounds like something you would like to test yourself? You can try it now with your 1st Nor Cal debit or credit card! 1st Nor Cal now supports Apple Pay, Android Pay, and Samsung Pay. (We’ve created a page with all the info here).

Sure, there’s always the option to use cash to avoid your information being stolen. However, these two methods have proven themselves to be safer than the old magstripe. I personally look forward to finally being able to rock out to Android Pay this season and enjoy the 10 seconds of amusement that comes with each transaction.

Luis Dominguez
Student Social Media Intern
1st Nor Cal Credit Union

President’s Corner – Nobel Prize in Economics

Every year at this time, the Nobel Prize winners are announced. These prestigious honors, which are worth about $1 million to the winners, are awarded in Physics, Chemistry, Medicine, Literature, Economic Sciences, and Peace. Alfred Nobel established a foundation upon his death to recognize outstanding achievements in these disciplines, sort of an Oscar for brainiacs.

Dr. Richard Thaler of the University of Chicago is this year’s recipient of the Nobel Prize in Economics. Usually, this particular Nobel Prize goes to someone who developed a complex economic theory. Recent winners tackled the rarefied subjects of contract theory, empirical analysis of asset prices, cause and effect in the macro economy, and markets with search friction. Dr. Thaler’s subject earned his Nobel Prize for his contributions to behavioral economics. His body of work is a little less Econ 101 and a little more Psych 10, which was the basic survey course at my alma mater. This is not to denigrate Dr. Thaler’s research, but rather distinguish it from past honorees.

Dr. Thaler’s hypothesis is known as limited rationality, which theorizes how people make financial decisions by focusing on the impact of the individual decision rather than its overall effect. In other words, people make bad financial decisions using only a limited amount of information which usually means thinking short-term instead of long-term. For example, an investor will sell a strong stock to feel they made money instead of a weak stock which they hold to hopefully make their money back. “Buy low and sell high” looks good on a billboard and sounds nice in theory but rarely is utilized in practice.

This theory is nothing new to anyone who works or has worked in a credit union, bank, securities brokerage, or financial planning company and is something we’ve known and I’ve mentioned in this column for many years. For whatever reason – family history, preconceived notions about investing, or trying to “time the market” – economic decisions are made on a human level and are not made strictly rationally. Human behavior is the reason why we buy a shirt at Nordstrom instead of the exact same but cheaper shirt at J.C. Penney, why people buy a Lexus instead of the lower-priced Toyota (it’s all the same under the hood), and why amateur investors think they will be millionaires by day trading.

But this doesn’t mean people can’t change their behavior. With apologies to Dr. Thaler, people’s mindsets can change from wants to needs. If a consumer focuses on their needs instead of wants, they will look for the best price for a product or not even buy that product and save the difference. For instance, Walmart, for better or for worse, has changed the way consumers shop for everyday goods. Online shopping has also changed consumer behavior but has turned out to be a convenience rather than cost saving.

The Nobel Prize for Economics is a relatively new award, starting nearly 70 years after the other disciplines started to be awarded. As a result, some doubt Nobel winners in Economics are the equal to the other winners. However, Dr. Thaler brought humanity to the forefront of an otherwise pretty dry and statistics-heavy subject. The good doctor himself brought some humor into his award when he replied to the question of how he will use his award winnings, “I will say that I will try to spend it as irrationally as possible.” He also expressed disappointment for not being considered for a real Oscar for playing himself in the 2015 film “The Big Short.” Yes, economists are humans, too.

David M. Green
President/CEO
(925) 335-3802

Tips for Teens – Winter Is Coming

Graphic of squirrell drinking coffee with mittens and earmuffs with the words Winter Is Coming underneath.While I personally don’t watch Game of Thrones, I completely understand and sympathize with everyone who does that have to wait for two years for the next season. Some of my friends are starting to show signs of what I would call “binge-watching crash syndrome”, a seriously benign condition in which the viewer slips into a minor state of grief. Stage one and two, denial and anger respectively, usually manifest themselves by researching the history of the show, and in extreme cases, looking up the bonus features and cast commentary. You know the viewer has reached bargaining when they start looking up possible theories and/or reading the source material. Depression hits with a loss of viewing appetite followed by thoughts of canceling a video streaming subscription. Finally, the viewer reaches acceptance when someone recommends another show or a show they were previously watching uploads their next season.

Here are some tips on how to reduce these effects and make your day a little brighter:

  • Make Your Bed
    I know, I know. Here me out though. Making your bed in the morning only takes a few minutes – five at most if you happen to be making the bed from The Princes and the Pea. But at the end of the day, nothing really beats a made bed. It welcomes you into its arms whether your day was a good one or not.
  • Make a Bucket List
    A while back, I read a story about a summer bucket list that was found in an Urban Outfitters dressing room. After I finished reading the hilarious list, I couldn’t help but wonder why I hadn’t thought of making one sooner. This gives you a list of goals to complete or at the very líst (that was an awful joke), an idea of what do that weekend instead of going back and forth on a group chat of what you all should do.
  • Go on a Walk
    Let me guess, you don’t want to go outside? Fall is the perfect time to go on a walk because it’s cool, windy, and grey, but not too cold, so you won’t sweat as much, if at all! Get in touch with what’s bugging you with no distractions. Just you, yourself, and yoi? Go on a walk from 4:00-5:00pm for optimal results.
  • Drink and Zennnnnnnn
    Find a window with lots of sunlight during a cold day and drink something sweet. This can give a similar effect as going on a walk but without any physical effort!

Winter is almost here and the lack of sunlight has some negative side effects. I’m no doctor, but what I’ve noticed is that by doing these things, it makes winter that much more enjoyable for me.

Happy Halloween!

Luis Dominguez
Student Social Media Intern
1st Nor Cal Credit Union

President’s Corner – Bitcoin

I jumped on Jamie Dimon pretty aggressively earlier this year when he proclaimed in JPMorgan Chase’s recent annual report that a failure of any of the “too big to fail” banks would not harm the U.S. economy. The top ten U.S. banks hold almost $12 trillion in assets. The top five banks (Chase, Bank of America, Wells Fargo, Citibank, and U.S. Bank) make up nearly half of the total assets in all financial institutions. Credit unions, by the way, represent 7% of all financial assets. His argument is tenuous at best.

According to Reuters, Mr. Dimon, Chase’s CEO, has spent much of his summer vacation in Washington, D.C. opining on everything from immigration to criminal justice reform. He even has occasional flashes of humor. One day, he spotted Democratic Senator Richard Durbin, no friend of the banks or credit unions, at a non-Chase ATM. He approached the senator from behind and wisecracked, “We welcome competition.”

The Guardian reported Mr. Dimon said recently bitcoin is a fraud that will ultimately blow up because the digital currency was only fit for use by drug dealers, murderers, and people living in places such as North Korea. I thought this might be an example of Mr. Dimon’s sarcastic sense of humor, but he added that he would fire “in a second” anyone at his bank found to be trading bitcoin “…for two reasons: it’s against our rules, and they’re stupid. And both are dangerous…It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed.” I’m quite certain he meant that figuratively (I think.)

Bitcoin is a virtual currency that emerged after the Great Recession. It transcends all national borders, but no country has adopted it. Bitcoin is traded like stocks but can be used to purchase goods and services from merchants which accept the currency. Several British apartment complexes accept rent payments in bitcoin, which has approximately $70 billion in total market capitalization as of last month.

The problem is that while the thought of a digital currency not controlled by a government entity sounds idyllic, it also means there are no rules. The lack of rules, especially when associated with money, attracts the worst our society has to offer, like drug dealers, murderers, denizens of the “dark web,” and rogue countries.

The other problem is that bitcoin is subject to the whims of the investment market. When a high profile investment gets a lot of airplay in the media, the amateur know-it-alls come out of the woodwork. After Mr. Dimon’s “tulip bulb” comments, bitcoin’s value dropped 9% in one day and 31% in a recent two-week period. In the movie “Wall Street,” Gordon Gekko (played by Michael Douglas) explains to Bud Fox (played by Charlie Sheen) the price of anything is not determined by its intrinsic value but rather by irrational beliefs and expectations of buyers and sellers. Gekko is showing Fox a painting and says, “I bought it ten years ago for $60,000. I could sell it today for $600,000. The illusion has become real, and the more real it becomes, the more desperate they want it. Capitalism at its finest.”

On this subject, I agree with Mr. Dimon and admire his directness and brutal honesty. The world’s central banks like the U.S. Federal Reserve Bank, aren’t perfect, but it’s the best we have now. If someone comes up with a better mousetrap, then I’m all for it. I’m not sure bitcoin is that mousetrap.

Mr. Dimon and I still don’t hang out together, but some of our views are a little more closely aligned than even I originally thought. But, I’ve still never had the shrimp cocktail at Nobu.

David M. Green
President/CEO
(925) 335-3802

Tips for Teens – Time Is Money

Last semester in my Economics class, we talked about a fairly simple, yet fundamental concept: Opportunity Costs.

It goes something like this:

Graph showing quantity of guns producted vs quantity of butter produced.

The more a nation or industry invests in a product, such as guns, the more of that product will be produced, at the cost of the opportunity of producing another good, say butter, as we see in point A. The idea is that there needs to be equilibrium to maximize efficiency, close to or on point B. This ensures that you’ll have an equal amount of defense and goods. While this may be an economic concept, it can easily be applied to just about anything in life.

Say you have two choices: a nice two week long vay-cay to the sunny, sandy beaches of Hawaii or earning a couple thousand freshly minted green fresh off the press by working those two weeks. Your opportunity cost of going on vacation would be a paycheck. However, the opportunity cost of working is a much needed vacation. If you split your time evenly, you’re achieving the most benefit of your time. By taking a one week vacation instead of two weeks, you could make at least half the money you would have lost, spend less on the vacation, and still enjoy some time off.

It’s like the old saying goes, “Time is Money”.

Luis Dominguez
Student Social Media Intern
1st Nor Cal Credit Union

President’s Corner – Personal Finances

Married members came into our office recently to consolidate their debts into a second mortgage loan. They wanted to amortize the loan over fifteen years, but we felt a second mortgage loan based on old debts should not have a term more than five years. We explained to the couple that in order to get rid of their debt as soon as possible at the smallest possible cost to them, they would have to accept the lower term. We showed them how much less interest they would pay with a five-year term versus a fifteen-year term, and they could afford the monthly payment on a five-year loan.

Our members hemmed and hawed but eventually accepted the loan. Before the ink on the documents had a chance to dry, however, they took out a cash advance on their Credit Union credit card for $6,000.00. To quote Captain Jack Ross (played brilliantly by Kevin Bacon) after giving his opening statement during the murder trial in the 1992 classic “A Few Good Men,” “These are the facts in the case, and they are undisputed.”

Why did our married members advance on their credit card? Was it to buy a new refrigerator? Could it have been a down payment on their child’s college tuition? Or, as I suspect, was it to show the Credit Union that they thought they knew best when it came to their finances?

This scenario happens much too often. I’ve thought about why some people are frugal with their money, while others can’t wait to spend it? I watched my parents manage money growing up and came to the conclusion they did it the right way. I certainly did not get everything I thought I wanted. Mom and Dad took a lot of nice vacations, both with and without my brother and me. I did not attend a private college but was fortunate an excellent university was close by. When Dad passed away, I helped Mom with her finances and was pleasantly surprised at how much Dad squirreled away. Mom is living a stress-free life because she doesn’t have to worry about money. According to her financial advisor, she can live well into the ripe old age of her early three figures.

However, many people struggle in their later years because they did not prepare earlier in life. They saw their parents struggle with money but did not make any adjustments to their own finances. I understand what parents say can influence one’s life. Mom once told me that croutons were bad because they were just fried bread. Croutons are actually sautéed or baked, but the fact that Mom said they were fried stuck in my head.

Croutons haven’t changed much over the years, but personal finances have changed substantially. I receive an annual “checkup” from the same financial advisors. Second opinions are always encouraged with medical issues and would seem to be fitting with finances as well. Mom and Dad may be great resources but may not always be right, especially about croutons.

David M. Green
President/CEO
(925) 335-3802

Credit Corner – Speed or Service?

In the old days of the mid to late 20th century, financial institutions would take up to a week to evaluate a loan application. Today’s technology with online applications and smartphones has shortened the wait time to mere seconds. Rocket Mortgage promotes, “Goodbye, Paperwork” and “Get Approved Fast.” Tap n Loan brags, “A Better Day is a Tap Away.” Speedy Cash says it all in their name.

But is faster always better? While it’s much more convenient to complete the loan application online, there are shortcomings in dealing with online-only institutions. First of all, there’s no place to go if the borrower has questions. There are no “brick and mortar” branches, and phone support is spotty at best. Secondly, these sites claim to do a comparison of other large banks’ and credit unions’ rates but routinely omit smaller local institutions. The net effect is the borrower not necessarily receiving the best possible interest rate on the loan. Thirdly, the online-only outfits do not typically offer a full array of products. Finally, according to NerdWallet, a personal finance website, notes that Quicken Loans, the parent company of Rocket Mortgage, only looks at credit scores and debt-to-income ratios instead of alternative credit data such as employment history, payment track record, and monthly cash flow.

The president of Quicken Loans said recently, “I think the branch loan officer is a dying profession.” Technology is very effective for application processing and integration with other data sources to provide a full picture of the borrower but for now cannot reason and evaluate the way a human loan officer can. The borrower does have the choice today of an automated decision based on a predetermined set of criteria or a human decision based on reasoning and creativity.

David M. Green
President/CEO
(925) 335-3802

Tips for Teens – Give up the Green for the Privilege to Stream

Image of Teen Boy at LaptopIt’s no secret that I’ve been against investing in streaming services for a while (like Spotify or Netflix) since they add up to be more expensive than buying the media that you stream from these services. Not to mention that once you cancel your subscription, you lose access to all the media you streamed, making your investment worthless. I was pretty strong on my position, that is, before I finally caved into my phone’s persistent plea to sign up for a trial of one of these streaming services, which I will refer to as Orange. It was without a doubt an addicting and joyful experience. But like all great things, it had to come to an end. The Orange trial ended exactly three months later, as did all my access to the songs I streamed.

I had three options after I lost access to Orange. I could have officially signed up for the service, paid for the individual songs themselves, found another way of legally streaming them (i.e. YouTube or Vevo), or found a way to download the songs without paying for them.

Some people might assume that illegally downloading music (or videos) may be no harm no foul, but it is a pretty big foul. The content creator, whether it be Taylor Swift or Medina, go unpaid for their work, discouraging the artist from creating more music. While it seems that one person might not hurt their wealth, you might not be the only one thinking that and eventually it adds up. Illegal downloads is essentially the same as shoplifting, and like shopping, your activity is being monitored. Stores will check to see why their inventory is disappearing and law enforcement also keeps an eye out for torrent sites, like Pirate Bay, and shuts them down. Furthermore, your IP address is permanently logged onto the torrent site, so if you did download something, the log will show it which could be used against you in court.

Streaming services and purchasing your own music might be expensive, and I’m not arguing that. However, the price is justified when you think about the right you are doing society by paying up to stream Shake it Off for hours on end.

Luis Dominguez
Student Social Media Intern
1st Nor Cal Credit Union

President’s Corner – Mr. Musk

“You have to spend money to make money.” We’ve all heard that well-worn phrase. To a business owner, that means investing funds for supplies, product, advertising, staff salaries, and other operating expenses. For entrepreneurs trying to get a business idea off the ground, spending money with no revenue is difficult without borrowing from friends, family, their financial institution, or if really lucky, a venture capitalist willing to take a risk.

Imagine the difficulty Elon Musk has trying to create an automobile company with new technology. Mr. Musk started off slowly by building a few cars at a time and selling them at a very high price which built up some cash reserves. Later on, the company went public, and more cash from stock issuances came in.

Then came the hard part. Stockholders are patient with new companies for a short time but then expect a reasonable return on their investment, either by a higher stock price or high dividend rate. Mr. Musk’s response was to transform Tesla from a niche product to a mass-market vehicle in less than two years. That requires a whole lot of new capital.

There are several ways for Tesla to bring in new money. They can offer more stock, float bonds, ask Mr. Musk to chip in some of his own funds, raise the price of their cars, or a combination of all of them. Each scenario carries its own level of financial risk. While the stock price continues to climb, it makes additional issuance more expensive and dilutes Mr. Musk’s stake in the company. Former Federal Reserve head Alan Greenspan feels we’re in a bond bubble ready to burst. Mr. Musk reducing his personal net worth is something the average consumer deals with daily. Finally, raising the price of the cars can put a damper on sales.

Tesla’s biggest problem at the moment may be Mr. Musk himself. Entrepreneurs by nature are always looking toward the next big thing. He still has an interest in creating commercially-viable space vehicles and colonizing Mars. Company founders are typically not good at managing people and systems. It may be time for Mr. Musk to clear the way for a professional manager to lead the transition of Tesla to a full-scale auto manufacturer.

The latest count is that approximately 450,000 individuals have paid a $1,000 deposit to purchase the mass-market Model 3. The company expects to reach a production rate of 5,000 cars per week by the end of this year and 10,000 per week by the end of 2018. Will consumers at the end of the line wait that long for their car? Given many consumers’ needs of wanting things immediately, this will no doubt be an interesting experiment in 21st century economics.

By the way, Plautus, the Roman playwright during the third century BC, was credited with the quote, “You have to spend money to make money.” He’s also known for creating the joke pattern used for “knock knock” jokes. From personal experience, anyone managing a business, especially one that markets to the public, needs a sense of humor.

David M. Green
President/CEO
(925) 335-3802

Animal Shelter Drive Success

During the months of May and June, we hosted a drive in our lobbies to collect donations for the Contra Costa County Animal Shelter. We collected blankets, beds, towels, food and much more, and ended up being able to do two drop-offs to the shelter!

On behalf of all the doggies and kitties currently in the shelter, we thank you for your support!

Photo of Animal Shelter Supply Dropoff