Many people may wonder: who is Carlos Slim Helu?

He was just crowned as the World Richest Man by Forbes. Slim, whose amassed his $53.5B fortune in Mexican telecom market, beat Bill Gates by half a billion dollars, or merely 1%, to come up at the top of the list.

Bill Gates comes at second with $53B and his old friend Warren Buffet was third with $47B in his pocket.

Here is the 10 richest of the richest on earth:

More than one news outlets (USA Today, WSJ, AP) reported that Bank of America will formally end its practice to charge overdraft fees that go as much as $35.

Starting from June 19 for new customers and starting from August for existing customers, BofA will:

1) Disallow overdraft at point of sale
2) When customer's ATM withdrawal will result in negative balance, BofA will ask customer permission on the $35 charge before they will get the money.
3) Customer can still opt in for overdraft protection.

BofA made the move following Federal Reserve regulation that forbid banks from charging such fees unless with customer permission. It is widely believed that many other banks will follow the lead of BofA, which issues 15% of the nation's debit card, and adopt similar policies. (Citi already ended overdraft fee.)

Like many others, I always keep at least a few hundred bucks in my checking account, so I never had to pay a dime on overdraft protection charge in my life. Actually, although this new change makes no difference to me on the surface, it might bring unintended consequences. As reported by Eileen Aj Connelly at Associated Press:

Wall Street Journal published a good article today discussed oppsing views of the market's prospects. What makes it interesting is the two heavyweight scholars that take drastically different sides: Robert Shiller as the bear and Jeremy Siegel as the bull.

Prof. Shiller, whose book "Irrational Exuberance" correctly predicted the .com bubble, and whose name is associated with the monthly housing price index, thinks the market is due for a correction:

Mr. Shiller has compiled market data back to 1881, measuring stock prices month by month relative to corporate profits. To avoid short-term profit distortions, he uses an average of profits over the previous 10 years. Over the long run, by his measure, stocks trade at an average of about 16 times annual corporate profits—that is, their price-to-earnings ratio, or P/E ratio, is about 16.

He has found that when this ratio has gotten above 20, as it is today, it has signaled that the market was expensive and sooner or later would hit a stretch of subpar returns.

The way Mr. Shiller sees it, the problem today isn't just that the current P/E is above 20. It is that since 1991 it has spent only seven months, in late 2008 and early 2009, below the average level of 16. At the start of 2000, it was above 40. No one can say how much longer the P/E can keep rising or when the past year's bull market might end, especially with the government providing heavy stimulus. But past trends, and the law of averages, suggest that at some point the P/E is likely to fall below 16, pulling stocks with it.

The Oracle's Annual Letter to Berkshire Shareholders is always a good read. Finally, I found some time during the weekend to go over the letter and the 2009 annual report. Owning 600 Class-B shares, I'm of course happy with the stock's performance and especially recent stock price spike. I've been owning Berkshire since 2005, and I am sure I will be happy shareholders for many more years.

Predictably, the annual letter started with the Berkshire Hathaway book value change with comparison to S&P 500 index, and certainly, the Oracle is taking pride in BRK's consistently market-beating performance:

"[W]e have never had any five-year period beginning with 1965-69 and ending with 2005-09 – and there have been 41 of these – during which our gain in book value did not exceed the S&P’s gain."

This time, thanks to the recent BNSF acquisition, Buffett went to length to re-introduce each of Berkshire's business segments. If you are a new shareholder, you might want to read the Owner's Manual as well.

The annual letter has been put under microscope by all financial journalists in the last weeks or so, so more repetition won't add much value. I will just quote some interesting paragraphs:

Here comes the monthly tally time again. Our financial life has been uneventful lately. We continue to save about $3,000 a month, and the rest of our fate is governed by the financial market. For this month, the market lifted all boats and my portfolio included, bringing our net worth number much closer to the million dollar figure.

I have moved away from the days when I kept streaming quotes on my desktop and spent hours and hours reading individual companies' annual reports. In the last two years, I'm adapting to a lifestyle where I predominantly only invest thru mutual funds (with Berkshire Hathaway as the only stock holding), and only look at my portfolio two or three times a month. (I do still read WSJ every morning to keep myself up-to-date of what's happening in the business world.) If anything, the financial turmoil in the last two years at least helped me to adapt to a much healthier lifestyle, even though it set me back for more than a year financially.

Without further ado, here is the month-end balance sheet:

When the credit card overhaul was signed into law last year, many predicts that the banking industry will find new ways to replenish billions of lost revenue. Since then, this is becoming more and more of a reality, and it finally happened to me, even though I have a pristine credit history and have a 780+ credit score.

To be specific, Citi just sent me a letter saying I need to pay for my credit:

"We're writing to let you know about an important change we're making to your account. Effective April 1, 2010, an annual fee of $60 is being added.

The reason we are making this change is to maintain the quality of our service amid the rising cost of doing business. However, because we value you as a customer, we wanted to give you an opportunity to have the annual fee credited back to your account.

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If I can only add less than $500 to our net worth tally every month, it will take us another five years to reach the 7-figure milestone. On the other hand, the tiny improvement in January is not exactly bad, considering the brutal market condition.

On the income side, we started the year with a positive note. Aside from our regular income, many long-term business relationships are again generating cash results, which helped our cash stockpiling. We continue to save about 40% of our regular income.

The result from the investment side is cloudy at best. After suffering some loss, we continued our flight to safety which gradually lowered our risk-taking positions. The employee stock option lost 30% of its value at the end of 2009, although we hedged some of the loss. We will have a portfolio report later with more details.

So, welcome to my net worth report for a while:

As reported by New York Times, Fidelity is lowering its online stock trading commission to $7.95 in response to Charles Schwab's earlier move of cutting commission to $8.95.

In addition, Fidelity is upping the ante by aggressively competing in ETF trading as well. In fact, it is now offering free trades on 25 iShare Exchange-Traded Funds (ETFs) managed by BlackRock.

Those ETFs available for commission-free trade represents a wide spectrum of asset classes:

Yes, the past decade of 2000s didn't treat investors well. If you invested in the DJIA, you lost 9% for the decade. A S&P 500 investor lost 24%. And a NASDAQ investor lost 44%, thanks to the fact that we started the decade at the height of the dot com bubble.

All the above figures are absolute, un-annualized returns. That is, your original 10,000 dollar investment will end up at approximately $9,100, $7,600, and $5,600 respectively.

But how about losing at an annualized rate of 37% a year for 10 years?

That's what Frontier MicroCap (FEFPX) has managed to treat its investors. If your crystal ball had guided you to the fund back in 2000, every $10,000 of your original investment have become, well, 98 cents.

I waked up this morning, and was surprised to find my net worth dropped by over 40 grand overnight. Yes, the broad market was down, but not to this magnitude! Are we back to the Lehman Brothers days?

Then I realized what happened. January 21 was the date when the B shares of Berkshire Hathaway underwent a split of 50-for-1. My 12 shares of the conglomerate led by the Sage of Omaha is now 600 shares, and my personal accounting software was not smart enough to pick that up.

Stock split is technically a net-zero event, but as USA Today concluded, the split of one of the most expensive stock on the market makes it a tad easy to invest with the Oracle:

Even at $3,500, the typical individual investor probably couldn't buy many B shares of Berkshire. After the split, shares of Berkshire will be more accessible to investors with only a few hundred dollars to invest, says David Ikenberry, professor of finance at the University of Illinois.

Not to be overdone on stock price, Warren Buffett still keeps the A shares of Berkshire Hathaway intact. The A shares are trading hands at $108,850 apiece. Only if I can afford to keep one such six-figure A share in a diversified portfolio!

Our legislators in D.C. are determined to challenge everyone's intellectual capacity in handling ever-growing tax code every year. What will 2010 bring?

TurboTax maker Intuit compiled a good list of the new tax code that will govern our tax life in 2010 (and future years). Among the changes, the most important one for savers will be the Roth IRA conversion change (emphasis is mine):

Roth IRA Conversions

Starting in 2010, individuals with any amount of modified Adjusted Gross Income are free to switch a traditional IRA to a Roth IRA. Conversions are fully taxable at your regular tax rate. For conversions in 2010, taxpayers can spread the tax due over two years. Half the tax will be due in 2011, and the remaining half will be payable in 2012. Removing the limit on conversions effectively eliminates the income limit on contributions to Roth IRAs. A taxpayer with income too high to use a Roth will be able to contribute to a traditional IRA (which does not have income limits for contributions) and immediately convert to a Roth.

(This is the third installment of the employee stock option (ESOP) discussion. Please refer to Part 1 and Part 2 for the context of the discussion.)

As we concluded in Part 2, if you are considering to exercise your employee stock option (ESOP) today, it is always a better idea to adopt a write-a-call strategy to fully extract the remaining time value of your ESOP grant. In our hypothetical example, one can improve gross proceeds by over 10%.

In Part 2, we didn't explore the after-tax impact. The tax impact is tweaking the balance significantly, for the better.

Several key parameters to keep in mind:

1) Employee Stock Options is usually taxed as ordinary income when the employee exercises the option and chooses to receive cash proceeds.

2) When you trade option in the open market, the resultant profit or loss are treated as capital gains/losses. That is, short-term capital gains are taxed at ordinary income tax rate, while long-term capital gains will receive preferential treatment up to 20%. Any tax gain can be used to offset capital loss carry-over from prior tax years.

In my case, the gap between these two taxing mechanism is truly wide. For me, the marginal tax rate on ordinary income is about 40%. But in the case of capital gains, I, like many investors who were burnt hard in 2008, has a huge capital loss carry-over to lean to. Therefore, my next $100,000 capital gains will be tax-free. Also, if you implement the write-a-call strategy by writing a LEAP option (which usually spans more than a year), it will be taxed at long-term capital gain rate even if you don't have a capital loss carry-over base.

Mutual fund rating firm Morningstar is announcing the recipients of the coveted "Fund Managers of the Year" award for 2009:

Domestic Stock
Bruce Berkowitz of Fairholme Fund (FAIRX)
2009 Return/Percentile Rank: 39.0%/9th

International Stock
The Team at American Funds EuroPacific Growth (AEPGX) (Stephen Bepler, Mark Denning, Robert W. Lovelace, Carl Kawaja, Sung Lee, Nicholas Grace, Jonathan Knowles, and Jesper Lyckeus)
2009 Return/Percentile Rank: 39.1%/15th

Fixed-Income
The Team at Loomis Sayles Bond (LSBRX) (Dan Fuss, Kathleen Gaffney, Matthew Eagan, Elaine Stokes)
2009 Return/Percentile Rank: 36.8%/14th

This is the 23rd year that Morningstar issued this award, but a smart investor shouldn't just dive into these fund immediately. After all, if you look across the history of this award, rarely was there a manager who won the Fund Manager of the Year title more than once.

Yesterday I shared that I'm working on the financial problem to maximize return on my soon-to-expire employee stock options. An outright sale is an easy path to choose, but does it make the most economic sense?

One thing to note about stock option: it does not only bear value when the strike price is lower than the market price (in the case of "call" options, which is the case for all employee stock options), it bears time value too. For example, for stock option of the same strike price, the further the expiration date, the more value the option is.

So, if one determine the market price is right but the employee stock option grant still has some shelf life, one can sell the stock option (instead of exercise the stock option) in the open market. Technically, it means to write (or "sell to open") a call stock option position with strike price and expiration date similar to one's employee stock option grant.

To illustrate this in an example, let's use the same data set in my last post:

Stock Option Strike Price: $26.4375
Quantity: 2,222
Expiration Date: February 12, 2011
Price of Underlying Stock: about $31

As we calculated in the last post, the gross proceeds before tax will be ($31 - $26.4375) x 2,222 = $10,138.

One can look at the option table and find the January 2011 $27.5 Call LEAP option is trading hands at $5.20. (Standardized options are trading at specific intervals, so we take $27.5 as a strike price proxy.)

To implement the strategy, one can write 22 contracts of such option. This transaction means one will receive 2,200 x $5.20 = $11,440 upfront for selling the right to someone else to buy 2,200 shares of the underlying stock at $27.50 from the seller before January 2011.

So what's the difference? Below is the table that shows how this strategy will work.

Here comes the first financial challenge for the new decade: employee stock option. My employer has ceased to grant employee stock option (ESOP) since 2005, but I still have some stock options left from the old days, the most recent batch will expire in February 2011. With the underlying stock hitting all-time highs since the global financial crisis, it's good time to decide what to do about it.

The basic parameters:

Stock Option Strike Price: $26.4375
Quantity: 2,222
Expiration Date: February 12, 2011
Price of Underlying Stock: about $31

The first option is of course to cash it out now. At the current price of $31, my gross proceeds will be ($31 - $26.4375) x 2,222 = $10,138.

10 grand is still a good chunk of change, except for the fact that I'll be imposed a marginal tax rate of 45% thanks to the local tax system. So my net proceeds will be $10,138 x (1 - 40%) = $6,083.

It's an awful long hiatus since I last updated my monthly net worth tracker. Admittedly, I fell prey of the psychological denial when the market crashed in 2008. For quite some time, I avoided reading my brokerage account statement and refused to watch CNBC.

So I hunkered down. I wasn't in a very good mood to spend time refreshing this blog. And with the first-ever massive layoff announced by my employer, I also put significant more time to my job -- luckily it has been secure all the time and still yielding handsome cash flow.

Like many others, it's a great relief to me to see the gradual market recovery since this spring. While my confidence hasn’t been fully recovered, it is probably good time to recognize I made mistakes and re-embrace the responsibility to manage our money forward.

Fortunately, during the long lapse, I still keep track of all financial matters in Microsoft Money. So it's good time to take a look at what happened in the last three years:

At the turn of the decade, SmartMoney provided a sampler of the past decade's winners and losers in the domestic equity market.

Some winners:

Goldman Sachs
Price per share on Dec. 31, 1999: $94.19
Price at Dec. 28 close: $163.76 | Net gain: 73.9%

Caterpillar
Price per share on Dec. 31, 1999: $25.53
Price at Dec. 28 close: $58.26 | Net gain: 148%

Google
Price per share on Aug. 19, 2004, its initial public offering: $85.00
Price at Dec. 28 close: $619.89 | Net gain: 521%

Another three days and we will be officially walking into the decade of 2010s!

There are a lot to write about the decade of 2000-2009 -- or the "Aughts", if this is the right way to call it. In the mood of the holiday season, let me quickly summarizing what the last decade means to me:

Family

At the onset of 2000, I was single and wasn't not in any kind of relationship. Then, I was fortunate enough to meet my wife in 2000 in the same company, and we got married after knowing each other for less than a year. Today, we will soon be celebrating our 9 year anniversary. I am so lucky to have a wife that is supporting and devoting. And after that many years, we still love and trust each other like day one. What a magic!

And even our son is approaching eight. He is a bright kid and doing well in school. Unlike me who was more grown up in the mountains of books, our son is outgoing and developing interests in Taekwondo and swimming. I wouldn't have imagined that a child's smile can bring so much fun to our life.

Do you know why some small businesses refuse to take credit cards, and do you know why credit card companies can afford giving away 1% cash-back or even more when you swipe your card? Yes, your card issuers will charge any business you pay by credit card. But by how much?

The short answer: it varies. According to TrueCostofCredit.com:

- A standard card from Visa or Mastercard with no reward feature charges about 2.3-2.4% for big ticket purchases like airfare and electronics, and 1.5-1.6% for groceries.

- Visa and Mastercard rewards cards usually mean 0.3% higher charge for the merchants.