interest rates

How does the live-within-your-means movement apply to the current recession?

Dave Farquhar Saving money , , , , , ,

Joseph brought up some good points in the comments for the previous entry, and I don’t think a short response does them justice. He wants to know what the personal finance experts have to say about the current economic crisis.

Suze Orman actually went on TV a few weeks ago and called it an opportunity of a lifetime. I’ll explain.Joseph says this feels different from other recessions. I think it’s because it is. It’s more like 1929. The major difference is what people were investing in.

The biggest problem in 1929 (besides the crash) was that Herbert Hoover didn’t realize until it was too late that we had a big problem on our hands. That’s not the case this time. Although Bush and McCain were denying it for a long time, both readily admit now that we have a problem.

The cause of our problems today is twofold. One, we should have had a recession in 2000-2001 and we didn’t have much of one. The Fed lowered interest rates to stave off recession, and the result was something of a boom. Both political parties blame the other for this, but basically, under their encouragement, everyone and his uncle was willing to loan people way more money than they could realistically pay back. (Republicans liked this because it was deregulation; Democrats liked it because minorities who previously couldn’t get loans suddenly could get them in spades.) Then, when too many people failed to pay those loans, the banks ran out of money, so now we have banks failing.

I remember seeing Suze Orman come on TV on Sunday morning years ago and warn this was coming. The reason was simple: Too many people were in over their heads in debt, and eventually it was going to catch up with us. She even had the timeframe about right.

It didn’t take a prophet to see it. We started having problems when large numbers of adjustable rate mortgages started resetting. One month, people could make their payments on everything. The next month, their mortgage skyrocketed and there wasn’t enough money left to buy a day’s supply of Ramen noodles, let alone make car and credit card payments.

Soaring gas and food prices didn’t help either, of course. Then again, that’s all interconnected too. Back in 2001, Ford and GM started offering 0% financing, and their primary products were big gas guzzlers. Increased consumption raised fuel prices, which in turn raised the price of everything.

But for those who are able to pay their bills and keep their jobs, the opportunity of a lifetime is nigh.

Stock prices are down. Nobody knows if they’ve hit bottom yet or not. But they came back after 1929, and they’ll come back after this crisis too.

My grandfather was a wealthy man. He started his medical practice sometime during the Depression. He died in 1980, long before I could have a meaningful conversation with him about money. I can only speculate how he made his money, because the living relative who might have firsthand knowledge isn’t especially honest or reliable. I believe he bought stock in the 1930s at depressed prices sometime after he graduated from medical school. While those investments certainly didn’t pay off immediately, by the time the ’50s and ’60s rolled around, he still owned that stock, which he’d bought at Depression prices. At those prices, he might as well have stolen the stock.

I believe the same opportunity exists today. This isn’t the time to cash out your 401(k) accounts–it’s time to max out your yearly contributions, if you can afford to.

A similar situation is beginning to exist in real estate. If William Nickerson (the original make-a-fortune-in-real-estate guy) was still alive, he’d be having a field day. Nickerson made at least $5 million in his lifetime by buying distressed properties and turning them around. Before this crisis is over, there’s going to be a lot of distressed property that needs fixing up.

The bottom line is that the people who have no debt, or who have a reasonable amount of debt under control don’t have anything to be afraid of right now as long as they’re able to stay employed. They have numerous opportunities, in fact.

For one, they’re in an ideal position to convert pre-tax retirement plans into Roth IRAs, which are tax exempt on the back end. You take a tax hit when doing that, but this is the time to take that hit–prices are down.

Two, they can buy stocks and/or real estate at depressed prices, hold on to those assets, and in 20 years they’ll be rich. Once again, let’s go back to 1929. The Dow Jones Industrial Average peaked that year at around 380. If you take the worst case scenario, buying at the peak and then crashing, it took 25 years (1954) for the DJIA to get back above 380. But once it did, it stayed above that level for good.

But aside from that extreme scenario, it’s very difficult to find any 10-year period where stocks didn’t make money.

About a year ago, the DJIA was near 14,000. Today it’s below 9,000 and threatening the low 8,000s. There’s no historical precedent for it to drop lower and stay lower, and there’s no historical precedent for it to stay stuck at any level either. There’s every historical precedent for it to reach 14,000 again, and it’s much more likely for it to do it in less than 7 years than for it to take 25 years like 1929. Between now and then, individual companies will go under, but that’s why you don’t invest solely in one company. Buying an index fund that tracks the S&P 500, for example, spreads your risk over 500 large companies. If General Motors evaporates, you lose a little. But if GM gets its act together and the stock soars, you share in the gain.

Finally, when it comes to real estate, all those people who had bad mortgages have to live somewhere. It’s a terrible market to sell, but if you’re inclined to buy properties and rent them out, the environment is ideal for that and will be for a very long time. People who have enough saved up to pay cash can pretty much monopolize this game for a while, since loans are hard to come by.

There’s a positive for the country as a whole too. Did you get sick of the rest of the world buying up our companies because their economies were booming while ours stagnated? Now everyone’s in the same boat as us, so we’ve probably seen the end (at least for a while) of ruthless international conglomerates buying U.S. companies and then slashing everything that moves.

Overall, I do think this bust is a net positive for society, and not just for the reason I just mentioned. I read not long ago that many people under 40 consider the American Dream a birthright, not something that takes work and ambition. Society as a whole has been using borrowed money to artificially raise lifestyles up into the next-higher income tax bracket. Today’s crisis may put an end to that, and ultimately, that’s good for everyone, although it will be painful in the short term.

What order should you pay off your debt?

Dave Farquhar Saving money , , , ,

The eternal debate, once someone starts on the road to paying off (or at least reducing) debt is short, simple and sounds innocent enough: Which one first?

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Don’t fall for get-rich-quick schemes: Check out the claims before you sign

Dave Farquhar Saving money , ,

The pitch sounded too good to be true. While most bank accounts in the United States are paying a piddly 4% interest, and rates are more likely to go down than up, there’s another country whose economy is booming, is one of the safest places in the world for your money, and routinely pays 9, 10, or even 14 percent interest on three-month CDs.

I clicked the banner ad. I read what the guy had to say. But I didn’t sign on the dotted line. Here’s why.First, there’s no shame in checking out what the guy has to say. Maybe he does know something nobody else knows. That’s fine. What’s wrong is signing up without checking out the claims in more detail.

In this case, the sales pitch was for 3-month CDs in Iceland. Icelandic banks offer tantalizing interest rates, but there’s a catch.

The salesman said the reason is because Iceland’s economy is booming. Do some more research, however, and you’ll find the real reason for the outlandish interest rates is because the Icelandic Krona isn’t a very stable currency. They offer these tremendous interest rates in hopes that foreign investors will pump their currency into the Icelandic economy.

I did some more digging, and the value of the Krona versus the dollar varies wildly. In the same year, it can be as high as 80 Kronas to the dollar, and as low as 50. Doing a little math, if your timing is perfect and you buy low and sell high, your $10,000 investment could be worth more than $17,000. You make about $900 off your interest, and $6,000 off market timing. But if you time it badly, your $10,000 investment could drop to $6,800 in value, in spite of the high interest rate.

This is what my dad used to call a "Las Vegas investment." If it wasn’t inherently risky, they wouldn’t be paying these kinds of interest rates. And it’s pretty clear to me why everyone isn’t doing it.

But here’s another problem: The U.S. banks that sell Icelandic CDs charge you a 1% fee on the front and back ends. So they charge to convert your dollars into Kronas, and then when you pull your money, they charge you again to convert back to US dollars. In effect, that 9% CD immediately becomes a 7 percent CD.

The other problem is there’s a $10,000 minimum. You should never tie up more money than you’re willing to lose in a risky short-term investment, and for the average person, 10 grand is a lot of money.

If you’re looking for a safe place to store money for a short period of time and get a good interest rate, a lot of banks and credit unions have started offering so-called "extreme checking" accounts to attract new customers. These accounts often pay in the neighborhood of 5.5 to 6 percent, have a small minimum and a $25,000 maximum, and usually have a few other requirements you have to meet, such as making a certain number of transactions per month with your debit card. But otherwise it just acts like a plain old checking account that lets you add and withdraw funds at will. The rate isn’t that much lower than what you can get in Iceland once you pay the conversion fees, and you have easy access to the money in case of emergencies, and best of all, there won’t be any unpleasant surprises in three months if the exchange rate isn’t favorable.

Unless you can afford to tie up $10,000 until some random, future date when the dollar happens to be low against the Krona and your CD is eligible to be cashed in, I can think of a lot of better ways to invest. If you’re looking for a long-term investment, this is a good time to buy stock index funds because stock prices are in the toilet right now. The long-term returns will be good, and you don’t have to be nearly as precise about your timing. For a short-term investment, a high-interest checking account looks better to me. You don’t need as much money and there’s much less commitment.

Why I never kept up with the Joneses

Dave Farquhar Saving money , , , , , , ,

I had a bit of a financial epiphany over the weekend.

I have a well-deserved reputation for being a tightwad. Part of it is in my blood; I’m largely of Scottish descent, and Scots just tend to act that way. But I think part of it is what I observed growing up.My wife and I were sitting at my mom’s kitchen table, and for whatever reason, we were talking about my teenage years. In 1988, we moved to a new subdivision in Fenton, Mo. Fenton is a boomtown today, thanks in part to urban sprawl and also because of its first-rate school district, but in 1988 it was still largely an industrial town. Lots of people worked there, and not many wanted to live there. But in the late 1980s, the McMansions started sprouting up like weeds, and lots of families started moving there, ours included.

We talked about our neighbors, and something immediately occurred to me. Most of them were in their early 30s. They were the same age I am now. Not only were they my age, but they drove new cars, and most of them had at least two kids. Meanwhile they were trying to make payments on houses that cost $125-$150,000 at the time. According to inflation, they should cost a quarter million today. Not only that, though, in 1988, interest rates were a lot higher–10 percent wasn’t uncommon according to my quickie research.

Dad could afford that lifestyle–barely. He was a doctor and had been practicing medicine for 15 years. But even we made sacrifices in order to afford to live in that house.

The problem is, I shouldn’t say "even." Most of our neighbors had nicer furniture than we did. Some of them drove fancier cars. And their kids had bigger, costlier toys.

The absurdity hit me. I wouldn’t even try to compete with the lifestyle of a 45-year-old doctor. Not at 33. I make enough that a bank probably would let me have a mortgage of a quarter mil. I could lease cars that don’t depreciate quickly in order to keep my monthly payments down. But there wouldn’t be much of anything left at the end of the month, and I could probably forget about retiring any earlier than 73 (which is what Social Security is saying my retirement age should be). Just because I could make the payments doesn’t mean I should.

I wondered why so many of them got together every weekend and drank themselves senseless. And I don’t think I consciously ever realized I was living in a neighborhood full of people living way over their means–even the family next door, headed by a young dentist trying to establish his practice with five kids and a wife who insisted they needed a Jaguar.

Suddenly, sitting there at the table, telling old stories, I realized why that woman was such a psycho. She couldn’t pay her bills.

And that was also probably why another neighbor wouldn’t go anywhere without a thermos full of wine, and why another young couple who lived nearby smoked pot every Saturday night.

They had everything any reasonable person could dream of having at 32, but if anything at all ever went wrong–a layoff, an extended illness, or a serious injury–they would be in serious danger of losing it.

For whatever reason, I never measured my lifestyle against them. My first few jobs didn’t make me a lot of money, but they let me do pretty much anything I wanted. I had a nicer apartment than Dad had at a comparable age. I could go out to eat any time I wanted. I could buy a new computer every year if I wanted to, as long as I didn’t go overboard on it, and for a few years I did. I drove small cars, but there were always at least two or three cars in the parking lot that weren’t as nice as mine, so I was content to drive my 1992 Dodge Spirit. When it died, I got a 2000 Dodge Neon. It wasn’t a status symbol, but it had power locks and windows, which were two things Dad’s 1981 Chrysler LeBaron didn’t have. It had a nicer radio too. And that LeBaron was supposed to be a luxury car.

My lifestyle was far ahead of where Dad’s had been at my age. And not only that, I had money left over at the end of every month.

There were two things I wasn’t happy about. At the time, I didn’t have a steady girlfriend. And my apartment rent was going up by about $50 a year but the management company wasn’t taking care of the place. When stuff broke, they fixed it halfheartedly, and I didn’t want to pay $575 a month to live in a slum.

When my rent hit $575, I told them I wasn’t going to pay it. They offered me a seven-month lease at about $550. Conveniently, I had enough in the bank for a down payment on a house, and I figured I could afford to pay a couple hundred more every month for a mortgage. I just didn’t want to throw that kind of money away on rent.

So I bought a house. There was a neighborhood about a mile away that reminded me a lot of the neighborhoods I grew up in. I found a house about the size of the house we lived in before we moved to St. Louis. It cost more than I had planned, but it was big enough that I could get married and have a family there and not have to move again. I hate moving. Plus, it was (and still is) in a good school district, all the schools are close by, and anything I could need was close. I didn’t know it right away, but in an emergency, the nearest grocery store AND the nearest car repair place are both walking distance.

For an extra $100 a month, it just made sense. I bought the house. And every night, I filled up that Dodge Neon with everything that would fit, drove to the house, and unpacked. Several friends with vans or pickup trucks helped me move the stuff that wouldn’t fit in my tiny car.

Even though my 1-bedroom apartment was stuffed to the gills, it wasn’t nearly enough to fill a 3-bedroom house with a living room, family room, a study, and a basement. But it didn’t take long for that problem to solve itself. Several people offered me some nice furniture. They were hand-me-downs, but there wasn’t anything really wrong with any of it. Before I knew it, the house was full.

A couple of years later, the right girl came along too. At first she wanted me to get nicer stuff. The problem was, even though I’d gotten promoted to a server administrator at work, they were still paying me my old desktop support salary. The house had wiped out my savings, and I couldn’t really take on another monthly payment on anything. We fought about it a little. I showed her how little was left at the end of every month, and I argued that everything in the house was nicer than anything my parents had at my age. For that matter, most of it was nicer than the stuff they had when I was a kid.

She relented. I don’t know how happy she was about it then. But she didn’t complain.

A few months after we got engaged, I lost my job. I was mad about it. I was convinced I would lose everything I’d worked for. I guess for a minute I thought I was like those neighbors.

But because I’d lived within my means, I survived and soon I ended up with a job with a competitive salary for the first time in my professional career.

Something else came out of it too. The day we got married, neither of us had a job. We started a small business out of necessity. Our final paychecks made the mortgage payments during that summer, and we used our wedding gift money to get the business going. Soon it was bringing in enough to make our utility payments and buy groceries. When I got a full-time job, she took the business over and I helped out at night and on weekends. It allowed her to not have to work outside the home. There are probably things she could do that would make more money, but she doesn’t have a lot of stress, and she enjoys the flexibility.

The odd thing is, we’ve been able to upgrade our lifestyle on the cheap. For example, there are three light fixtures we’ve been wanting to replace for a long time. This weekend I found two light fixtures at a yard sale for a buck apiece. My sister rolled her eyes when I told the story, but these fixtures don’t fit the yard sale stereotype. A sticker on them says they were made in February 2005. Home Depot still sells the same fixture (or something extremely similar) for about $30. That’s not terribly expensive, but $1 is a lot less than $30. The third fixture we need to replace is smaller. We can get something that will look fine with them, and look much better than what we have, for under $20. The result will be a significant upgrade in how the kitchen and living room look, at well under 1/3 the price.

That $60 savings may not sound like a lot, but we’re constantly finding ways to save a few bucks here and there like that. We’re never the first to have anything, but it seems like we always end up getting whatever it is we want or need, and meanwhile we’re socking money away and whittling down on that house payment.

Judged against the standards of my neighbors in 1988, one could argue I’m a failure. I drive a five-year-old car and most of the time I use a six-year-old computer, and the four shirts I bought in 1998 to comply with my then-employer’s dress code are still in my rotation today.

But let’s look at things another way. Not only do my wife and I have nicer stuff than my parents had when Dad was 32, we also have an easier time finding money for necessities like groceries. She can shop at the health-food stores even though they’re more expensive. As long as nothing unexpected happens, we’ll own everything outright and have absolutely no debt–no student loans, no car payments, no mortgage–well before I turn 40. I stress over some things, but money isn’t one of them.

In my early 20s, I watched some of my friends from high school rack up massive credit card debt. At least it seemed like massive debt at the time. I knew then I didn’t want to be like them, at least not in that regard. Now I know that the average American family has $9,900 in credit card debt. That’s about what one of those friends owed, and about twice what another one owed.

I know who I want to be like. I want to be like my wife’s parents. They paid off all their debt sometime in their late 30s or early 40s. Today, when my mother in law sees something she wants, she doesn’t think about it. She can just buy it. Not only that, she’s retired, and she’s nowhere near 73.

I’m not saying I want to buy anything and everything I see on a whim. But not having to think much at all about money seems really nice.

And I guess on some level I’ve known that for almost 20 years, since I was in my early teens.

Pay off a mortgage in five years

Dave Farquhar Saving money , , , , , ,

Thanks to some circumstances where somebody knew somebody who knew somebody, I found myself tonight at a seminar where John Cummuta was speaking. He’s the guy who you may have heard on the radio hawking a system called Transforming Your Debt into Wealth. From him, I learned how to pay off a mortgage in five years.

Hopefully I won’t get into too much trouble by presenting the simplified version of his plan.The secret of credit is that creditors will not extend you more credit than you can conceivably pay off in a fairly short length of time (like, less than a decade). The secret is to make that work for you, rather than for them.

His system is simple enough that you can plug it into an Excel worksheet. Mine has three equations in it. Here’s what you do.

Take 10 percent of your monthly income and use it to pay down debt. Pick the debt you can pay off the fastest. Forget interest. Pay the minimum monthly payment on all of your debts except the one you can pay the fastest. Add that 10 percent of your monthly income to the debt you’re working on. So if it’s a credit card balance with a minimum payment of $22, and you make $2,000 a month, you pay $222 towards that credit card.

Then, when that credit card balance is paid off, you take the debt you can pay off second, add its minimum monthly payment to that $222. Keep cascading the payments until you’ve paid everything off.

Using that formula, I can have my car paid off in a year and two months, and my house paid off in five years and two months after that.

The more money you can plow into paying off debts, the faster it goes.

He said the interest rates are pretty much irrelevant because you are paying the debts off so quickly. So it doesn’t make sense to refinance or consolidate debts or anything like that because you won’t recoup the closing costs.

The formula is a bit crude because it doesn’t take into effect the minimum monthly payments you are making, nor the accumulated interest on the on which debts you’re making minimal progress. But he said those numbers pretty much end up in a wash. Following this crude formula, you’ll be within a couple of months or two.

Also, he suggested putting off investments until you have your debt eliminated. The exception is 401(K) or similar plans where employers match your contributions. The logic is that the compound interest on your debts will almost always be larger than the compound interest your investments can earn.

However, he did not say you should empty your bank accounts to pay debt. If you have enough money in the bank to be able to take half of it and pay your smallest debt, go ahead and do it, but otherwise leave your existing bank accounts and investments alone, suspend contributing to them (or do the minimum), and then, when you have the debt paid off, you can afford to contribute to them very aggressively. Remember, at the end of the plan, you no longer have those monthly house and car payments to make.

Someone who makes $40,000 a year and works 40 years will make $1.6 million over the course of that career. The idea is to pay as little of it as possible in interest, so that money is working for you instead of your creditors.

It seems to me that debt ought to be like college. It ought to be something we do for a few years in order to get something we need, but after a few years, it’s over. And if we have to make a few sacrifices along the way, just like we did for college, we ought to do them.

Update: It worked. Thanks to finding better paying jobs and applying that, we were able to pay the mortgage off ahead of schedule.

I’m in debt

Dave Farquhar Personal , , , , ,

It’s official. I’m a debtholder.
And a homeowner.

And after the brouhaha around my downpayment, I understand why my mom’s whole side of the family hates banks. It’s my money! Not yours! Gimme!

So here’s what I learned:

1. Banks don’t talk to each other. That’s fraternizing with the enemy.

2. In this age of computer automation, it can–and will–still take days for a check to clear. Give your brain-dead financial institution a week to sort it out. Don’t count on them getting into the 20th century before your closing date. (Yes, I am aware that it’s now the 21st century.)

3. Try to keep your money in the same institution as your family members, just in case they need to quickly loan you what you put in limbo by writing a check (ha ha!). You know that computer system it refuses to use to quickly transfer money to and from other banks? It will use it to at least check account balances and verify that the money you say is there really is there.

4. Keep as little of your money as possible in banks. My stockbroker/money manager/whatever-you-want-to-call-him gets money to me faster than my banks do. And he beats the tar out of the interest rates a bank pays.

5. You say it’s your money? Possession’s 9/10 of the law, pal.

But anyway, that’s over. I signed my name a few dozen times and around 8 pm I got a key. I drove over. I had a few things with me.

My mom wanted to know what the first thing I’d bring in was. Well, I figure you’ve got two hands. So, since I’m the greatest writer who ever lived, I brought a bronzed copy of my book, Optimizing Windows, and the Nov. 1991 issue of Compute, which contained the first published article I got paid for.

Actually, several of my friends are under orders to shoot to kill if I ever do anything like that. And, for the record, the greatest writer who ever lived was F. Scott Fitzgerald.

So what’d I really bring in?

In one hand I brought in a pewter cross I received on March 18, 1999, the day my membership became official at my current church. (But its main significance is it’s the only wall-hanging cross I have.) I hung it above the fireplace. In the other hand, I brought a framed copy of my dad’s senior picture. I set that on the mantle.

Then I brought in some old stuff. I brought in the sign that hung outside my grandfather’s office (“Dr. Ralph C. Farquhar Jr., Osteopath”), and I brought in a box. The contents of the box:

An apothecary that had belonged to my grandfather
A medical instrument that had belonged to my grandfather (whatever that thing’s called that he uses to look in your ears)
My great-grandfather’s microscope
Dad’s camera (a Minolta) and a couple of Kodak lenses
Dad’s wallet
A can of Farquhar’s Texas-Style BBQ Seasoning

I arranged those on the mantle as well. They look good there.

Unfortunately, since my dad was a radiologist, it’s hard to find anything that symbolizes what he did for a living. But soon I’ll be getting the OMT table that had belonged to Dr. Ralph and then to my dad. OMT is an osteopathic practice similar to what chiropractors do. Dad used to give OMT treatments to his friends after work in our basement. So the OMT table is going in the basement. Then, this house will be home.

04/20/2001

Dave Farquhar General , , , , , , , , ,

Games. Anyone who knows me well knows that, in my mind, there are three computer games worth owning: Railroad Tycoon II, Civilization II, and whatever the year’s hot statistical baseball simulation might be (but I’m always disappointed with the lack of a financial aspect–gimme a lineup of Ty Cobb, Rod Carew, George Brett, Ted Williams, Jimmie Foxx, Shoeless Joe Jackson, Nomar Garciaparra, and Mickey Cochrane, along with a pitching rotation of Walter Johnson, Lefty Grove, Cy Young, and Denny McLain, and I’ll slaughter you no matter who you’ve got–though my payroll would probably be upwards of $200 million just for those core 13 guys).

But if I were stranded on a desert island with a computer and could only have one game…? I’d take Civ 2.

Well, Sid Meier’s working on Civilization III now, and expecting a late-2001 or early-2002 release. And I found a great Civ site at www.civfanatics.com , with info on the upcoming Civ 3, along with info on the rest of the series, including strategies, loadable scenarios, patches, and other good stuff.

Hardware. Now that I suddenly don’t owe four figures to the government like I suspected I might, the irrational part of me has been saying to go buy some new computer gear. The rational part of me is reminding me that the markets are down, interest rates are down, interest rates are going to be cut again, and thus it’s probably a good time to sink some money into the market, preferably unsexy, proven blue-chips like General Electric, Coca-Cola and Anheuser-Busch. No matter what the economy does, people aren’t going to stop buying light bulbs, soda and beer, right? And I don’t care about dividends or short-term gains. I’m reading up about nutrition with the goal of increasing my life expectancy into three digits. I’m in this for the long, long haul.

But computer hardware is a lot more fun than stock certificates. And no one wants to read about me buying GE stock, right? So, let’s talk hardware.

First off, some people say you shouldn’t swap out motherboards because you should never take down a working system. Build a new system, then part out the system you’re replacing. I understand the logic behind that. That means starting off with a case and power supply. Time to buy for the long haul. For the long haul, there are two names in power supplies: PC Power and Cooling, and Enermax. Where to go, where to go? I hit PriceWatch and searched on Enermax. Bingo, I found Directron.com , which stocks both brands, along with a good selection of cases and allows you to swap out the stock power supply with whatever you want. Sounds great, but you generally only get about a $12 credit when you do that. Bummer. I went to resellerratings.com, looked up Enermax, and found a rating of 6 on 42 reports. That’s comparable to companies like Dirt Cheap Drives and Mwave, both of whom have given me excellent service over the years and get my business without hesitation.

What else have they got? Well, if you want to build a stealth black system, black cases, floppy, CD/DVD/CDRW drives and keyboards, for one. Nice.

Unfortunately, they don’t seem to offer PCP&C’s cases. They do offer the ultimate l33t case, the Lian Li line. Cost of entry: $159 and up, no power supply included. The ultimate l33t solution would be a Lian Li case and an Enermax power supply. But would I really want to spend $200 on just a housing and power…? They also offer cases from Palo Alto, who makes cases for Dell and Micron. Working in a Micron shop, I’m very familiar with the Palo Altos, and they look good and won’t slice you up, though sometimes you have to disassemble them more than you might like. Cost of entry: about $70, including a 235W power supply, which you’ll want to swap out for something better. They also offer InWin and Antec cases, both of whom I’ve had good luck with. Reading further on their site, they claim only to stock cases their technicians have been able to work with easily and without injury.

And unfortunately, their commitment to quality doesn’t necessarily seem to extend to motherboards. I found the accursed PC Chips amongst their offerings. Boo hiss!

On the good side, if you want a PC on the cheap, here’s the secret formula: At Directon, grab an Enermax MicroATX case for $29, a Seagate 20 GB HD for $89, a socket 370 PC Power & Cooling fan for $19, a vial of heatsink compound for $1, and a Celeron-433 for $69 (highway robbery, but watch what I do next), then head over to Tekram and grab a closeout S-381M Intel 810-based motherboard for $34. Then head over to Crucial and pick up whatever size memory module you want (a 64-megger goes for $35, while a 128er goes for $60). Boom. You’ve got a real computer for well under $350, even accounting for shipping and a reasonable floppy, CD-ROM, keyboard and mouse. Or salvage them from an older PC. Get it and spend the money you save on a really nice monitor. For most of the things you do, you need a nice monitor more than you need clock cycles.

You could save a few bucks by picking up an old PPGA Celeron at your favorite Web closeout store, or on eBay, but the extra shipping will probably chew up all the savings. The going rate for a PPGA Celeron, regardless of speed, seems to be right around $60. You’ll pay $10 to ship it, while adding a CPU to an order that already includes a case and other stuff won’t add much to the shipping cost. One thing that did impress me about Directron is they don’t seem to be profiting off shipping, so they get honesty points. I’d rather pay $5 more up front and pay less shipping, because at least the dealer’s being honest.

I didn’t come to any conclusions and my credit card stayed in my wallet, but maybe I’m a little further down the road now.

And I guess it’s time for me to go to work.