Podcast hosts Sandy Block and Ryan Ermey team up with Kiplinger's staff writer Brendan Pedersen to discuss how to prevent and recover from the most common forms of identity theft. The pair also break down some old school investing truisms.
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A full transcript follows:
Ryan Ermey: Even if you haven't fallen victim to identity theft, it may be time to ask yourself how secure does your information feel? Brendan Pedersen joins the show to discuss spotting, preventing and recovering from ID theft in our main segment. On today's show, I review whether the old sayings you've heard about the market are actually true and Sandy and I talk food and beverage savings in the new edition of Deal or No Deal. That's all ahead on this episode of Your Money's Worth. Stick around.
Ryan Ermey: Welcome to Your Money's Worth. I'm Kiplinger staff writer Ryan Ermey, joined by senior editor Sandy Block. Sandy, before we get down to business here, we have a correction to make from our last podcast and obviously we take being factually accurate on this podcast very, very seriously.
Sandy Block: That's right.
Ryan Ermey: So we heard from our friends at Schwab and unfortunately I mischaracterized the Schwab US dividend equity ETF's expense ratio. It is in fact 0.06% and not 0.07%
Sandy Block: A good deal.
Ryan Ermey: So you know, if you were someone who thought this $10,000 investment in this ETF is going to cost me $7, and that's too rich for my blood, you may be very, very pleased to know that it in fact costs six.
Sandy Block: That's right. Later on in this podcast we'll tell you what you can do with that extra dollar.
Ryan Ermey: Well you know, I will tell you one of my favorite bar deals in Washington, D.C., I was aggrieved when it went from $6 to $7 for a shot of beer and a hotdog. So I can understand why the people paying $7 instead of six for the Schwab ETF, once again on a $10,000 investment, would be upset.
Ryan Ermey: But that brings us right into a conversation about investing. It's a Ryan opening segment, an investing segment. So here we go. It's based on something that I wrote earlier in the magazine about market truisms and actually we talked about it a little bit on the podcast back in January or February.
Sandy Block: Superbowl.
Ryan Ermey: The Superbowl indicator. We'll get back to that in a second, but the one that might be on investors' minds now, and especially ones who have been following the market for a long time and know about some of this old-school stuff, is "sell in May and go away."
Sandy Block: Right.
Ryan Ermey: That's one that you hear and the rationale behind it is that the stock market tends to post its weakest returns from May through October and its strongest from November through April. Our friends at the Stock Trader's Almanac keep track of this data and it turns out it's true. Since 1945, the May through October has been the worst six month period for the S&P 500, averaging a return of just 1.4%. In the other months, the average is 6.6%. The almanac advocates for this sort of rotational portfolio, or at least shows the results of a portfolio were you to rotate in and out of stocks for these six month periods. Someone could feasibly do that although the problem is you're going to run into transaction fees, you're going to run into tax issues if you're selling out of your entire portfolio every year. It's something that is a truism because it's true, but it may not make sense for most investors.
Ryan Ermey: But I did want to talk about a couple more of these. So the Superbowl indicator we did talk about, and it's the idea that the stock market tends to perform better when an NFC team wins as opposed to an AFC team. Do you remember who won the Superbowl this year? NFC or AFC?
Sandy Block: I don't remember.
Ryan Ermey: Well, it is-
Sandy Block: I know that the Eagles lost last year.
Ryan Ermey: How dare you? The Eagles won. The Eagles won in-
Sandy Block: Okay. The Eagles won last year and were not there this year, okay.
Ryan Ermey: They were not there this year, you don't have to rub it in. But yes, the Patriots-
Sandy Block: The Patriots, that's right.
Ryan Ermey: ... won this past Superbowl.
Sandy Block: Hate the-
Ryan Ermey: They play in the AFC. So that would generally tend to presage a poorer year for the stock market than an NFC team winning. That doesn't-
Sandy Block: But we decided this is bogus, right?
Ryan Ermey: Well it is bogus. When the Eagles did win, that they play for the NFC and it was kind of a ho-hum year for the stock markets. Obviously folks, corporate earnings are generally what drives returns, not football teams. Another one that really seems to be completely off-base is the hemline theory. Have you heard this one?
Sandy Block: I have heard this one and I have a counter to that, but why don't you explain what it means and I'll say why I have a problem with it.
Ryan Ermey: It was coined by an economist back in the '20s. The theory suggests that women wear shorter skirt styles during periods of economic prosperity and positive market returns. There's been a number of theories posited about this, but the general idea is that when money's good, you want to show off and back in the day you wanted to show off your silk stockings with a short skirt. People were just a little bit more carefree. The roaring '20s was the big example of this. Mini skirts in the '80s were a big example of this. Then obviously when the economy goes downhill, women's styles become more modest.
Sandy Block: The problem I have with this, if this held true if you walked out on the street right now, we've got below 4% unemployment, there should be women walking around with very short skirts on and you're not seeing that right now.
Ryan Ermey: Yeah. In fact, I mean this is cursory, but I looked at what New York Fashion week was showing, and plenty of long skirts are-
Sandy Block: It's all over the place. The fashion no longer ... I just don't think that fashion is that predictable anymore. You can find long skirts, short skirts, medium skirts, right in my closet let alone out on the street. I think this stems from two very robust economic periods, the '20s and the '60s when skirts really were short because that was sort of a rebellious thing to do. But I think right now anything goes.
Ryan Ermey: Agreed. So the last two, once again, do have a basis in statistical fact. We're not sure you should necessarily make shifts in your portfolio based on any of these, but it's worth noting that these two actually have some basis in statistics. One of them is, "as goes January, so goes the year." This has been true since 1946. A positive return in January in the S&P 500 has resulted in an 11.6% average gain over the next 11 months, while January losses have resulted in only a 1.3% average gain. I'm sure as everyone remembers, after we took a huge dive at the end of December of 2018, or at the end of 2018 rather, in December, we had a big January this year. In fact, it was one of the best Januaries since World War II, a 7.9% gain for the month.
Sandy Block: So that would suggest don't sell in May and go away, right? Because if this one holds up then you'd want to stay in there for the rest of the year?
Ryan Ermey: It would suggest that stocks should be on a general upward trajectory from this past February through the end of the year. Also boating well for the market is the presidential cycle. The rational behind this one is every president wants to stimulate the economy, they want to avoid recession, in the-
Sandy Block: And get re-elected.
Ryan Ermey: Yeah, exactly. So in the third year of the presidential cycle, this is when it's in the president's best interest for the economy to be good so that everyone in the, say 18 months leading up to the election, remembers "Oh yeah, I mean, this is great." This is where we are. We're in that third year of the presidential cycle. That would suggest good market returns as well. So obviously, all of these things are to be taken with a grain of salt. Some of them, like the length of skirts or the winners of a football game, these things don't become part of the popular consciousness unless there is some historical back-tested truth to them. But honestly, those are completely worth ignoring. But it is fun to take a look at the ways that markets behave in patterns over time. There you have it folks. A fun, market heavy segment to kick off the show.
Ryan Ermey: When we come back, Brendan Pedersen gives you tips and tricks to combat ID theft. Don't go anywhere.
Ryan Ermey: All right, we are back. We're here with Brendan Pedersen who is a reporter at Kiplinger's Personal Finance and who worked on the special report on identity theft that ran in the May issue of Kiplinger's magazine, on news stands now. It's something that we wanted to explore a little bit more on the podcast. So Brendan, thank you so much for coming on.
Brendan Pedersen: Thanks for having me.
Ryan Ermey: So ID theft is obviously a huge problem and it's something that people are concerned about. Although, I don't think I've seen as many headlines about breaches recently as I've seen in the past. What gives with that?
Brendan Pedersen: Sure, yeah. We haven't had any catastrophic breaches lately.
Ryan Ermey: That's good news.
Brendan Pedersen: Really, the last big, big one was the Equifax breach in 2017 which garnered a lot of headlines, exposed a lot of data and was a really, really big deal. Since then we haven't had as many huge data breaches, but the breaches that we've had have been a little bit worse for consumers and the data has been more sensitive.
Ryan Ermey: Is the idea that ID thieves are getting smarter about targeting? Are they not going for these humongous breaches anymore? Is it more like small, sneak attack kind of vibe?
Brendan Pedersen: Yeah. Experts typically say that thieves are getting better at this. They're targeting the bits of data that are most effective at either stealing your identity or opening accounts in your name and the like. That's information like your passport number, your home addresses, date of birth, even customer card paying information. Things that make it very easy to open things in your name.
Sandy Block: I think most people are aware of instances where someone has gotten your credit card number and gone on a fabulous trip or something. But what are some of the other types of ID theft that people may not be so aware of?
Brendan Pedersen: Sure, yeah. What you're talking about is credit and debit card theft, that's pretty straightforward. It boils down to the numbers on the plastic and using that to go on that shopping spree. More generally, the most common form of identity theft is credit theft. It's using your credit information to open up any number of accounts.
Sandy Block: Isn't that harder to detect? Because if somebody steals my credit card and runs up a bunch of purchases, I'm going to hear about it. But if somebody uses my information to create a new credit card account, isn't that a little harder to detect?
Brendan Pedersen: In theory, yes. Most consumers aren't checking their credit reports more than once a year, if that. But there are a lot of services today that are connected to credit cards and other identity monitoring services that will scour your reports for you and let you know if there is unusual activity with regards to those accounts. I know Discover does that.
Ryan Ermey: What are some of the other kinds of ID theft that you guys talked about in the special report?
Brendan Pedersen: Sure, yeah. Even though tax season is behind us, one form of identity theft that can be a massive pain, is tax ID theft. Using your personal information to get someone else's tax refund.
Sandy Block: Yeah. The reason, as I understand it that's a real problem is that you file your tax return and it bounces back or you find out that you can't get a refund because somebody has already claimed it. Even though I think the IRS will eventually pay you, my understanding is it can take many months to get your money. So this could cost people a lot of money.
Brendan Pedersen: Yeah, that's right. It can be a real pain to rectify anyways. Typically what happens once you've contacted the IRS and sort out that no, you're not trying to get a second refund, you will be assigned a PIN number that you then use to file your taxes for the remainder of time.
Sandy Block: Right. Forever, yeah.
Brendan Pedersen: Forever, instead of relying on your Social Security number.
Ryan Ermey: And then the other one that you, I think having perused the story myself, is medical ID theft.
Brendan Pedersen: Right. Medical ID theft is a monster form of identity theft. Not in terms of frequency, it's not nearly as prevalent as your general credit identity theft, but it is a real pain to unpack and deal with once it's happened to you. I spoke to a gentleman from Austin, Tex., who got a call from the billing department of his local hospital asking him to pony up $7,000 for a back surgery that he did not get. It was actually fairly easy to resolve in his case because he had been on a plane that day that the surgery had happened.
Ryan Ermey: Now I've felt like I needed back surgery after I've been on a plane.
Sandy Block: Yeah.
Brendan Pedersen: Right.
Sandy Block: Isn't it ... Where I see that being a huge problem is that in my understanding is hospitals are often pretty quick to turnover unpaid bills to debt collectors. You could end up getting calls in the middle of night from people saying, "You know, you got to pay up for this back surgery, pal," and have to deal with that as well.
Brendan Pedersen: Yeah. The guy that I talked to in Texas was actually pretty lucky because the hospital communicated with him before the debt went to the collectors, right? If you start getting calls from debt collectors, it is a completely different process to solve that debt. Really there's no succinct way to describe that advice. Your best bet is looking at the resources that you have underneath the Fair Debt Collections Act and the Fair Credit Reporting Act.
Ryan Ermey: Zooming out a little bit, what are some steps that people can take to avoid the common forms of identity theft? Obviously having secure passwords is a huge one, right?
Brendan Pedersen: Passwords is a huge one and everyone knows. Everyone knows that you're supposed to have a good password. Passwords are supposed to be these intricate, designed keys that open up all these different vaults in your house that are all very important. Most people know that and really don't care.
Ryan Ermey: They're tough to remember.
Brendan Pedersen: You're absolutely right. It has been for many years the most common password in the world is 123456, the numbers in order. The second most popular password in the world is the word "password." We know this because of just going through the breaches that come every year. Researchers have compiled the most popular passwords found in data breaches.
Ryan Ermey: Right.
Brendan Pedersen: There's an easy work around, and that is using a password manager. This is a software that's often free that you can use to collect all your passwords under a single, hefty master password that you-
Sandy Block: That is not "password."
Brendan Pedersen: That's not "password." There should be a lot of strict requirements that go into it, like lots of different caps, special symbols, a certain length. That's a password that should be utterly unique and hard to guess.
Sandy Block: Hard to break, yeah.
Brendan Pedersen: But all your other passwords that are sort of stored inside the password manager will be randomized by the password manager, that's random numbers, characters, letters. But the password manager keeps track and fills out various forms in your browser or cellphone, yeah.
Sandy Block: So the only one that you have to keep track of is the...
Brendan Pedersen: The master password, yeah. That's something a lot of experts recommend, making passwords that aren't necessarily intuitive to another person but may be intuitive to you. For example, I've often used passwords that are similar, rhymed words that are all spelled differently.
Ryan Ermey: Oh, I see.
Brendan Pedersen: Now I have to think of an example that-
Sandy Block: Don't give up your passwords, Brendan. It's not worth it.
Brendan Pedersen: Right. I have to think of an example that aren't my own. For example, fame, maim, and ordain? Those are all words that are spelled differently but rhyme. If you have a nice number in the midst there, with a nice caps or symbol, that's a good one to take with you. And write it down on a piece of paper somewhere, lock it very far away, don't digitalize it at all, and just remember it.
Ryan Ermey: I used words and numbers that rhyme. Like, "I'm in heaven 77," or whatever.
Sandy Block: Oh, okay.
Brendan Pedersen: That's not bad.
Ryan Ermey: Yeah, but now I'm going to have to change it. No, I'm just-
Sandy Block: Right, but not anymore.
Ryan Ermey: So credit freezes are another thing that we've talked about on this podcast before, and that's another way that people can keep themselves safer from these kinds of things, right?
Brendan Pedersen: Yeah, credit freezes are really big. Ever since the Equifax breach in 2017, or at least legislatively as of 2018, it's now free to freeze your credit according to Congress, or on the authority of Congress. That's really great because if your credit is frozen it becomes a lot harder for an ID thief, even with all of your personal information including Social Security number and all that fun stuff, it's a lot harder to open up those accounts in your name. It's not unheard of for it to happen, but those are usually flukes or maybe someone's frozen their credit in two of the three bureaus but forgot TransUnion, something like that.
Sandy Block: So Brendan, say someone wants to take all of your advice but it's too late. They've already had their identity stolen. What's out there? What can you do to recover yourself?
Brendan Pedersen: Yeah. I mean, the one thing we always start with at Kiplinger are those .gov websites. We like the resources that are offered at ftc.gov and identitytheft.gov. Those are sources that are published by the Federal Trade Commission about identity theft and those will walk you step by step through what you should do for a variety of forms of identity theft. They don't generalize it. If you want to know about credit card theft or just credit account theft or even medical identity theft, it's all there and they will pair you off with a bunch of different places.
Brendan Pedersen: We at Kiplinger's also like the Identity Theft Resource Center which is a bit more people forward. They will set you up with real people either over the phone or via instant messaging, who will talk you through the issues that you're having and set you up with expert advice.
Brendan Pedersen: Then one last resource, the World Privacy forum is another great place. They're on the cutting edge of medical identity theft and for other forms of theft that are less legislative solutions. There aren't a lot of recourses for victims of medical identity theft. They'll kind of walk you through the ins and outs of HIPAA and Fair Debt Collection and all that fun stuff.
Ryan Ermey: The last thing I wanted to ask you about because I remember it was you and Miriam Cross and Lisa Gerstner reporting this story, and I know that you guys had sort of a nightmare tracking people down for the story because people really don't want to put their name out there as a victim of these kinds of scams. But it turns out that that's actually probably pretty smart of them to not talk to you.
Brendan Pedersen: Yeah. That's a great point. We did this story in 2015 when we went through identity theft. When we did it this year in 2019, our editor Mark Solheim told us that he wanted real people. So we went out and we were scouring all our sources, different parts of the internet, and it was really, really tough. The big reason for that is because, well, victims of identity theft don't really want to talk about their experience because it's embarrassing.
Ryan Ermey: Sure, of course.
Brendan Pedersen: No one wants to have that on a billboard somewhere.
Sandy Block: Right.
Brendan Pedersen: But at the same time, what victims either know implicitly or from experience is that when you are a victim of identity theft once, you are much more likely to experience it again because it's a lot easier. If your information is floating around on the dark web, it becomes much more likely for people, on the cheap, to pick up that information and try to hack another account or open another account in your name, this, that or the other.
Sandy Block: So you're saying, don't go on Facebook and say, "I've been a victim of identity theft," right?
Brendan Pedersen: 100%. It is really important to not broadcast the ins and outs of your particular theft. That goes for medical identity theft, that goes for credit cards, debit cards, the whole enchilada. Keep it to yourself. It's often best to stay anonymous as you're looking for help. No matter how well-intending a person that you encounter might seem, don't give them your address, don't give them your Social Security number. Just keep it to yourself.
Ryan Ermey: All right. Lots of great advice here and in our special report which, once again, you can find in the May issue. We'll have it up in the show notes as soon as it goes up online. And Brendan, thank you so much for coming on.
Brendan Pedersen: Thanks for having me guys.
Ryan Ermey: Coming up, should you get a subscription for coffee? What about produce? Sandy and I weigh in, next.
Ryan Ermey: All right, before Sandy and I go, we wanted to do a food and beverage themed edition of Deal or No Deal. Mine is beverage themed. It's that Burger King has rolled out a new subscription service for $5 a month you get one small, hot coffee a day. Now, mathematically this is a deal if you go and get a few cups. In fact, if you go and get your 30 cups in a row, which is available to you, you'll end up paying about 17 cents a cup for a coffee, which isn't bad.
Sandy Block: Except that...
Ryan Ermey: When I say it's not bad, I don't mean the coffee's not bad. I can't vouch for the quality of the coffee. The deal isn't bad. You do have to first of all, download the app and you get the deal through the apPedersen You download the BK app, you go to the offers tab, you can get the deal. It only entitles you to one small, hot coffee a day. So no ice coffees-
Sandy Block: No refills.
Ryan Ermey: No fraps, no refills, no caramel whatever...
Sandy Block: Yeah, because it is Burger King, yeah.
Ryan Ermey: Yeah. So is this a good deal? Well, if you are an enthusiastic and frequent drinker of Burger King coffee, it's a great, great deal. Although even then, it's like a two pound thing of Folgers makes like 300 cups of coffee or something and costs you $20.
Sandy Block: Right. Yeah, I mean obviously if you want to spend less on coffee, make your coffee at home. My tip on this is I do buy a lot of coffee, but I bring my own cup and at the very least you'll get a 10-20% discount. What I've found in visiting very many coffee places is no one really knows how much to charge you when you bring your own cup so very often they charge you the absolute less. One time, in a McDonald's or something like that, I brought my own cup and because there was no key for that, they gave it to me for free. You can't beat that.
Ryan Ermey: You just bamboozled the sales people. I mean, the only other thing I wanted to bring up about this is that Burger King is one of many, many companies that are trying to roll out subscription models. It's very, very popular. To me, what that means is that people like myself, are going to be building up more subscriptions that they don't use, or forget about.
Sandy Block: That's what they're counting on.
Ryan Ermey: Yeah, they want you to sign up for the 5 bucks a month and then the first month maybe you go get 10 cups of coffee or whatever so you get your money's worth but six months down the line you forget about it because it's 95 degrees out and you can only get a thimble full of piping hot Burger King coffee and then you might forget about it.
Ryan Ermey: There are plenty of tools on the internet that help you identify subscriptions that you're maybe no longer using and help you cancel them. One that I'm kind of excited about is Trim. That's part of their free service, or at least purportedly. I haven't tried it yet but I am going to try it hopefully for an upcoming issue of the magazine because they have a paid service through which they will negotiate bills for you, like your Comcast bill and things like that which in fact, even if I don't get assigned it, I'm still going to try it-
Sandy Block: Yeah, you should.
Ryan Ermey: Because of my ongoing war with Comcast. But yeah, so that's the deal. I'll report back to see if Trim's service works. We'll see if they pick up my Movie Pass subscription that I haven't been using. But other than that folks, like I said, if you are a huge Burger King coffee enthusiast-
Sandy Block: And you pass it every day.
Ryan Ermey: Go get your 17 cents a cup coffee.
Sandy Block: So my deal is also subscription, but I think it's one that is worth looking at and it is this latest trend of ugly produce subscription services. The idea behind these, the most well known ones are Hungry Harvest, Imperfect Produce and Market Misfits, they're modeled after CSAs which I have used before where you contract with a farm to provide you with a box of fruit or vegetables once a week.
Ryan Ermey: What does CSA stand for?
Sandy Block: Community Supported Agriculture and I have done this. The nice thing about CSAs is that you actually know the farmer, you get good stuff. The downside to it is that you don't really get to choose what you get, it's all seasonal. You could end up with a lot of bok choy and not quite sure what to do.
Ryan Ermey: Yeah, rhubarb.
Sandy Block: Yeah, something that you're ... and this has happened to me before. Well, these subscriptions basically, their push is they're saying that they're helping to reduce food waste. We know that food waste is a huge problem.
Ryan Ermey: It is.
Sandy Block: And what they claim to be doing is buying ugly, bumpy produce from farms and selling it to you at a discount, and the prices are actually pretty reasonable. What I liked about looking at the services is particularly if you're single or there's just two of you, you can get a weekly ... some lettuce and various types of produce and vegetables for as little as 20 bucks. Since this is all online, I think a lot of CSAs you give them the money upfront and then you got to eat that bok choy all summer. Since this is online you can sign up and you can suspend it, you can cancel it, so it's pretty efficient. The selection looks really good, like I said. Prices are reasonable, anywhere from 20 to 40 depending on how much produce you get.
Sandy Block: Now there is some controversy about whether this really does reduce food waste because I've read a few articles and they said farmers are like restaurants, they don't waste. When you've worked in a restaurant, you know, if they've got leftovers, that's brunch, right?
Ryan Ermey: Sure.
Sandy Block: And farmers, they're not tossing all this stuff out. They give it to the cows, they juice it, sometimes they donate it to food banks. I'm not sure that the promise of reducing agriculture waste is valid but it might reduce your own personal waste which is really where a lot of waste comes from, that people buy food that they can't use. Because they do allow you to buy smaller amounts than I think a lot of traditional CSAs do, and they give you dozens of choices. It's not just whatever the farmer grew.
Ryan Ermey: Right, you have some flexibility.
Sandy Block: You have some flexibility. You could do all fruit, you could do all vegetables, some will throw in some eggs. So there's a lot ... I would just give these a look. We'll put the links in the show notes. But I think if you're interested in upping your nutritional game you want to contribute to your own less waste. I think they're worth a look.
Ryan Ermey: Well, and it is a deal, right?
Sandy Block: Oh yeah.
Ryan Ermey: I mean, even though you're not necessarily saving the world, as these companies maybe purport that their customers are doing, you're still getting a deal.
Sandy Block: You're getting a deal, yeah.
Ryan Ermey: You're still paying less for a head of lettuce than you might be paying for a CSA or at the supermarket.
Sandy Block: Yeah. I looked at some of the prices and actually they're very competitive even just going to the store. So now again, you get a lot of choices. You can do all organic if that's your thing. Some offer to get the food from local farmers, others are just getting them from big ag. Like I said, it's a good way to improve your diet and I think that if you do this correctly it could be a good way to save on money too.
Ryan Ermey: Alright. I'll give it a shot.
Ryan Ermey: That's it for this episode of Your Money's Worth. For show notes and more great Kiplinger content on the topics we discussed on today's show, visit kiplinger.com/links/podcasts. You can stay connected with us on Twitter, Facebook or by emailing us at firstname.lastname@example.org. If you like the show, please remember to rate, review and subscribe to Your Money's Worth wherever you get your podcasts. Thanks for listening.
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