Bucks Blog: Everyone Should Use the Overnight Test

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Carl Richards

Carl Richards is a certified financial planner in Park City, Utah. His new book, “The Behavior Gap,” was published this week, and we’ll be running excerpts all week long. Meanwhile, his sketches are archived here on the Bucks blog.

A friend of mine recommends what he calls the Overnight Test. Ask yourself what you would do if someone came in and sold all of your investments overnight. The next morning you wake up and you’re left with 100 percent cash in your account.

Here’s the test: you can repurchase the same investments at no cost. Would you build the same portfolio? If not, what changes would you make? Why aren’t you making them now?

Patricia Wall/The New York Times

People have a tough time with this one. Maybe they’ve long since forgotten why they bought those investments in the first place (there must have been some reason, right?). It’s kind of like certain relationships: you grow apart, your lives take different directions and there’s nothing much left to talk about … but you keep hanging around with each other because change would require work.

In the case of investments, you can’t afford that kind of stagnation. You need investments that make sense given your current goals, which means you need to take a look at those goals, which means … work. This is why some people who take the Overnight Test just want to ask (Please!) for their old investments back. They may not admit it, but they just don’t want to do the work of coming up with new ones.

I understand. We’re busy. We have a lot on our minds. Who wants to add another item (in this case, “review investment portfolio”) to their to-do list? Unfortunately, this is one to-do that really needs to get done. I’m not talking about change for the sake of change. Buying and selling investments costs money. I’m saying you need to know what you own, and why you own it.

Excerpted from “The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Money,” published by Portfolio/Penguin. Copyright ? Carl Richards, 2012. Reprinted with permission.

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Pawnbrokers Prosper as Greece Struggles With Hard Times

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But the stores — pawnshops and gold dealers — are thriving as Greeks who are short of cash give up jewelry and other valuables to make ends meet and pay new taxes. The authorities reported a veritable explosion in the sector, with 90 percent of the nation’s 224 officially registered pawnshops having opened in the past year.

While these entrepreneurs insist that their services are legitimate, the Greek authorities contend that many of the shops are concealing a rapidly expanding illicit trade in gold, and that much of it is being smuggled out of the debt-racked country, confounding efforts to curb rampant tax evasion.

Similar trends have been reported in other countries that were hit by recession. In the United States and Britain, weakening economies and turmoil in credit markets have helped gold dealers thrive. A decade ago, the same happened in Argentina, after its economic meltdown.

In Greece, new outlets are springing up on streets where bankrupt stores have been boarded up. Competing with old-school pawnbrokers who work out of tiny stores on side streets, the new professionals lease central locations, taking advantage of falling rents. They advertise in newspapers and on television, and slip promotional leaflets under doors and on car windshields. Many also accept cars, yachts and real estate from Greeks no longer able to finance affluent lifestyles.

Many jewelers have joined in, putting placards in their windows reading “I buy gold.” And there are signs of foreign interest. One Italian jewelry wholesaler, which has opened several franchises in Greece, accepts gold teeth as well as jewelry in exchange for cash.

Although most traders are reluctant to talk, those who do say they are just seizing an opportunity created by hard times and the high price of gold, roughly $1,600 an ounce.

“Gold is strong — so there’s a lot of interest in selling,” said Yiannis Spiratos, manager of a pawnshop in central Athens. “We’re just serving that interest.”

He said that 8 in 10 customers sold their goods outright, rather than pawning them. “Some sell their jewelry because they never wear it; many say they need the money to pay the emergency tax,” he said, referring to a new tax on property owners.

Outside his shop, a smartly dressed middle-aged woman said she had just sold some earrings and her husband’s gold watch. “He couldn’t do it; he was too embarrassed,” said the woman, who gave her name only as Anna. She said she had made around $1,500 from the sale, after visiting four other shops for quotes.

With an increasing number of Greeks considering cashing in their jewelry or family heirlooms, the country’s consumer protection agency recently published guidelines to protect people from unscrupulous dealers. It warns against traders promising particularly high prices and advises consumers to weigh their jewelry at home or to have it assayed at a laboratory run by the national association of goldsmiths. The warning followed a government order for stricter inspections of gold dealers to ensure they are licensed and operating legally.

“The crisis is an opportunity for many, and that’s O.K. as long as it’s legal,” said Nikos Lekkas, the head of inspections at the Financial and Economic Crime Unit of the Ministry of Finance.

But although most gold dealers obtain the required operating license from the police, few keep a log of their transactions, as the law dictates. Inspections of pawnshops and gold dealers in Athens indicated that 80 percent were guilty of tax evasion, depriving the government of millions, and possibly billions, of euros in lost revenue, according to the financial crime unit.

Tax evasion remains one of the biggest drains on the Greek state, accounting for about $58 billion annually, or 13 percent of gross domestic product. That remains a sore point with the European Union and the International Monetary Fund, which have lent Greece billions of euros to avert a default that could be catastrophic for the euro zone.

Inspections by the financial crime unit suggest that some shops are fronts for illegitimate businesses shipping large quantities of gold out of the country illegally. In one recent raid, the police stopped a car near the western port of Patra that was carrying a half ton of silver bars, but no official documents.

The authorities traced the cargo to a pawnshop near Syntagma Square, in the heart of Athens. They said the shop had shipped, in a separate delivery, an eighth of a ton of gold bars to Germany, worth an estimated $8.72 million, again without documents. Investigators said they also traced six Cypriot and German offshore companies to pawnshops and gold dealers in Greece.

There are also signs that some pawnshops are receiving stolen goods, particularly jewelry, which is hard to trace because it is quickly sold or melted down in foundries.

Most pawnshops deny working with foundries. The foundries themselves — whose number tripled during the last year, with 10 now operating in the Athens area — were tight-lipped. Several denied that they worked with gold and none were listed as doing so in Greek directories.

Some financial experts say the trade is much like any other, some of it legal and some not, with the only difference being the higher value of gold.

“Since the beginning of time, people have melted down or sold their jewelry when the need arises,” said Babis Papadimitriou, an economics commentator. “This is what Greeks are doing now.”

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One on One: Scott Harrison, Chief Executive of Charity Water

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Photographs by charitywater.orgA clean drinking well in Rwanda, financed by donations to Charity Water.

Scott Harrison used to be a New York City club promoter, making a living from selling people $16 drinks and $300 bottles of vodka. Now he is the founder and chief executive of Charity Water, a nonprofit that focuses on the need for clean drinking water around the world.

Mr.Harrison, 36, says the group received early support from people in technology, and for its growth, has relied on methods borrowed from social media, and from the way start-ups operate. Here is an edited version of our conversation.

What is Charity Water?
It’s a nonprofit that brings clean and safe drinking water to people in need around the world.

Scott Harrison, founder and chief executive of Charity Water.

How did you end up starting a nonprofit?
I was dismayed that people my age weren’t donating to charity.?Younger people had a long list of reasons why they didn’t want to donate, including that they didn’t trust charities. They didn’t know where their donations were going.

You run the nonprofit?like a start-up and not like a charity. How did this happen?
Our early spurt of donations came from people in technology. For example,?Michael Birch, who?successfully?exited Bebo, was our initial bridge to?Silicon?Valley.?Through Michael we started spending more time in Silicon Valley and got to meet people like?Dennis Crowley?and?Jack Dorsey.

Why did people in Silicon Valley want to work with Charity Water, and not, say, The Red Cross?
I think Charity Water felt different to them. We were young, we were tackling an improbably important problem: trying to bring clean water to one billion people. Because we acted like a start-up, people who run start-ups could associate with us.

Do you attribute a lot of?Charity?Water’s success to the Web?
Yes. Absolutely. Because I came from a nontraditional background, I didn’t really know how fund-raising worked. To me, the most efficient way to raise money was online, so we adopted that as the main vehicle to reach people. Today over 75 percent of our donations for water projects come from the Web.

Has your focus on technology helped you grow?
Over the last four years we’ve grown by 400 percent while charitable giving in American has been going down, on an?aggregate, by as much as 10 percent over the past three years.

What else do you differently with the Web?
We are able to tie donation dollars with integrity to the water project they funded. We show people the impact their donations have had. For us that means photographing all the water wells and showing people online where their money went.

Have sites like Twitter and Facebook helped you expand and reach a larger audience?
Absolutely! Social media has played an integral role in our rapid growth and success. We use a very visual language in the way we talk to people about our goals. I like to say that “we show and we don’t tell.” Rather than tell you about a child walking for five hours a day to get drinking water, we’ll show you online.

How else do you use the Web?
With YouTube we created thank you videos for our donors. For example, if a donor baked for us to make money for Charity Water, our staff dressed up as bakers and made a video thanking them. If a donor, like Chris Sacca, biked across America, then our staff dressed up this way.

How did you end up starting Charity Water?
I was a club promoter for almost 10 years in New York. I got people wasted for a living. I sold them expensive drinks in expensive bottles at nightclubs. At 28 years old, after a decade of selfish and decadent living, I realized how miserable I was. I went to live in Liberia in West Africa with a group of humanitarians and surgeons, and I saw extreme poverty for the first time in my life. It ruined me. I spent almost two years as a volunteer there. Then, I came home and started Charity Water.

What have you learned that can help other nonprofits?
Simplicity is key. Be able to tell your story simply. I can’t tell you how many nonprofits I meet and after three minutes talking to them, I still have no idea what they do. Show. Don’t tell. And do it visually. Use the Web to tell people where their money has gone and let them see what it has done.

Has mobile helped you with donations?
No one has figured out mobile giving, yet. We’ve experimented with text campaigns with some degree of success, but we’re really looking for that big idea in mobile and giving.

Start-ups can sometimes be ostentatious with their money. Does it bother you when working with these companies?
I remember when I first came to New York from?Africa, my first day back someone bought me a sixteen-dollar cocktail at the Soho House and my paradigm had shifted. Sixteen dollars could have bought a bag of rice, feeding a family for a month in Liberia. I remember feeling angry and self-righteous?and indignant, but I knew that it would do no good. Who was I to judge? I look at the wealth and success in Silicon Valley as an?opportunity to transform lives around the world without judging people and I want to invite them into our story.

What impact has Charity Water had so far?
In just over five years, Charity Water has raised over $58 million from 250,000 generous donors around the world. We have also funded 4,280 water projects that will provide two million people with clean drinking water in 19 countries.

Start-ups see going public or an acquisition as success. What’s your goal?
We envision a day when every person on earth has clean and safe water to drink.

Charity Water plans to bring clean drinking water to one billion people around the world.

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Exxon Could Receive $555 Million in Cash from Venezuela

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The arbitration award decided by the International Court of Arbitration, which is based in Paris, was valued at $907.6 million. In addition to the cash Exxon stands to receive, the oil giant will be released from the payment of debts totaling about $352 million. The ruling was dated Dec. 23, but Exxon said it did not receive the decision until Friday.

The Venezuelan government and Exxon both sought to portray themselves as victors in the arbitration, which stemmed from the 2007 nationalization of a heavy crude oil production project in the Orinoco Belt, considered one of the world’s richest potential petroleum reserves.

Petróleos de Venezuela, the state-run oil company, released a statement on Monday saying that Exxon had sought a much larger compensation and that the arbitrator’s conclusion showed that the company’s claims were “exorbitant” and “completely exaggerated and beyond all logic.”

The state oil company said that its “successful defense” in the case meant that it was required to make only a $255 million payment to Exxon.

But the state oil company’s statement acknowledged that Exxon would also receive about $300 million in cash from bank accounts in the United States belonging to the state oil company; those accounts were frozen by a court ruling after the nationalization. Exxon said the frozen accounts contained $305 million.

The government statement said that Venezuela has always been willing to compensate private interests for the nationalization of assets as long as the compensation was “fair and reasonable.”

In a statement Monday, Exxon said that the arbitration affirmed the state oil company’s contractual liability in its agreements with Exxon over what was known as the Cerro Negro project.

“Contract sanctity and respect for the rule of law are core principles used to manage our business over the long term,” Exxon said.

The nationalization of the Exxon project and other oil projects involving multinational corporations was a major step in a campaign of expropriations by the government of Venezuela’s president, Hugo Chávez.

Exxon and Venezuela are involved in a second arbitration over the same project before the International Center for Settlement of Investment Disputes, part of the World Bank, which could increase the amount the company receives.

The country faces several other potential settlements with foreign companies over a spate of nationalizations that have taken place in recent years. One of those involves a project of the oil company Conoco Phillips, also in the Orinoco Belt.

The ruling appeared to lend weight to Venezuela’s argument that it should compensate companies for the amount they had invested, the so-called book value, rather than the market value that an asset would receive if it were put up for sale.

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Itineraries: Sorting Through Hotels’ Rewards Programs

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Hotel programs generally do not have blackout dates, do not charge travelers to book a reward stay and do not assess a fee if customers’ plans change and they need to rebook the room.

But hotel chains have more inventory than airlines because their occupancy rate is usually lower than an air carrier’s. Customers who redeem points for a free stay “aren’t usually taking a room away from a paying customer, the way an airline traveler redeeming a free seat might be,” said Brian Kelly, who manages a travel blog called The Points Guy.

Hotel rewards programs are not all alike, however. Some erase points if an account shows no activity in a year, while other programs’ points never expire.

Customers in the Hilton HHonors program, for example, need to fulfill annual qualification requirements or they may be downgraded to a lower rewards tier. The points remain active as long as the program member stays in a Hilton Worldwide hotel, or earns or redeems any HHonors points within a 12-month period. Otherwise, they expire. “We want to focus more on the people who are still engaged with us,” said Jeff Diskin, senior vice president for global customer marketing at Hilton Worldwide. “We are stratifying who we invest in.”

In the Starwood Preferred Guest program, which includes the W, Westin, Sheraton and St. Regis chains, customers at the basic level also have their accounts closed and points forfeited if they have no activity in their account in a year. E-mails to rewards program members suggest ways to keep the account open short of a hotel stay, like dining at a hotel in the chain or spending $12.50 to buy 1,000 Starpoints.

At the elite levels, the program is more forgiving, particularly for the highest tier, Platinum. “Each year a member is inactive, they are placed in a lower level so you can go years at the Platinum status without any activity before an account is closed,” said Chris Holdren, senior vice president for Starwood Preferred Guest.

Hyatt Hotels also closes accounts and erases points after 12 months. The Marriott Rewards policy says the company reserves the right to close accounts after two years of inactivity, but a spokeswoman, Laurie Goldstein, said, “So far, we have never done it.”

Michael McCall, the chairman of the marketing and law department at Ithaca College’s School of Business, pointed out that guests redeeming points for a free stay cost the hotel money, so promises of future free stays can take away from future profits.

Still, demoting customers who stay infrequently or canceling their points can be dicey, Mr. McCall said. “It saves money, but can engender ill will.”

Clay Voorhees, a marketing professor at the Eli Broad College of Business at Michigan State University, says hotels must focus on top customers because they are the most profitable. “Someone who only stays a few nights per year but just explodes money on conference facilities and meals is more valuable to the hotel than a value seeker who stays more often, but always at a discount,” he said.

Hotels are offering more choices to customers in redeeming their points. Frequent travelers who already spend many nights on the road may not value a free night in a hotel. They can choose instead to participate in hotel-sponsored events. The Fairmont offers a visit to a Zulu village in South Africa, where guests are accompanied by a photographer and served a traditional meal. At the W hotel in Hong Kong last October, Starwood Preferred Guest members could redeem points for a private concert with a pop star, Khalil Fong. Hilton and others allow members to buy merchandise, combine with airline miles or donate points to charity.

Those on the lower rungs of hotel rewards systems can inexpensively reset the expiration clock, Mr. Kelly, the blogger, said. He pointed to free mileage management services like Usingmiles.com and Awardwallet.com that will notify the user when points are due to expire. “Letting points expire is like putting money in a trash can,” he said.

Points never expire for members of the Priority Club, which is run by the InterContinental Hotels Group and includes Holiday Inn, InterContinental Hotels and Crowne Plaza. Don Berg, vice president for loyalty programs and partnerships at IHG, said his company’s program was created in 1983, and 50,000 original customers were still in the program, even though “there were periods of time along the way when we didn’t see some of them for a while.”

“Our research tells us the No. 1 feature of a rewards system is no point expiration,” Mr. Berg said. “It would be like looking at your checking account one day and seeing your money is all gone.”

Mr. Berg said there sometimes was a natural ebb and flow in travel habits. Customers cycle in and out of jobs that require heavy travel, he said, or may have circumstances like the birth of a baby or a family illness that dictate the amount of time they can spend away from home. “If you are sick, and we don’t see you for a year, we’re not going to cut you off,” he said.

There are a number of ways to compare hotel rewards programs other than how quickly points expire. Travelers can compare the number of points they receive for each dollar spent, as well as how many points they need to earn a free night at a luxury property. They can also see the point total to qualify for elite status, which offers benefits like free room upgrades and late checkout.

And then there are the hotels that eschew points-based reward systems. At the Kimpton hotel chain, seven stays earn customers a free room night. Staying at 10 different hotels earns two nights. “We wanted to encourage travelers to try different Kimpton hotels, perhaps in the same city,” said Niki Leondakis, president of Kimpton Hotels. “We also wanted our free stays to be uncomplicated, so customers don’t have to worry about acquiring different numbers of points for different stays or redeem different amounts of points to stay at different hotels.”

Mr. Kelly agreed that hotel rewards systems “can be complicated, confusing and annoying.” But, he added, “It’s worth investing time in figuring out how to earn and keep them.”

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France’s Treasury Chief Works to Guard Credit Rating

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Mr. Fernandez, the head of the Treasury within the Ministry of the Economy, Finance and Industry, has already been through a similar crisis-management exercise. That came in early August, when Standard & Poor’s cut the top credit rating of the United States government while most of the French elite was on vacation.

Within hours on a summer Saturday morning, Mr. Fernandez helped organize a series of emergency calls with his boss, Finance Minister Fran?ois Baroin, and others in Paris’s circle of policy makers, to prevent the American crisis from sending a financial tsunami across the Atlantic.

Later that day, Mr. Baroin appeared on French television to question the validity of the United States downgrade. President Sarkozy interrupted his vacation in a show of engagement. But behind the scenes, Mr. Fernandez did much of the heavy lifting.

It was not the first time in the two-year-long European crisis that Mr. Fernandez has quietly kept things moving. And it probably will not be the last.

As France and Germany take the lead in trying to hold the euro currency union together, Mr. Fernandez has emerged as one of Paris’s top power brokers — whether in promoting the French position on the banking sector’s participation in a Greek bailout, or the creation of a rescue fund for troubled countries, or the recent deal by most European Union governments to shore up the foundations of the euro zone.

So much confidence has been placed in Mr. Fernandez that the French news media have started calling him the “guardian of the triple-A.”

But Mr. Fernandez, at 44 a youthful technocrat whose soft blue eyes belie an inner sang-froid, chuckles about the moniker with an almost embarrassed air.

“I’m a civil servant,” he said demurely. “I do what I have to do.”

What he must do now could prove crucial to how well France weathers the country’s seemingly inevitable debt downgrade. Because the demotion has been widely telegraphed by the three major credit rating agencies, Mr. Fernandez and other officials do not expect the impact to be devastating.

Still, a lower credit rating will probably make it more expensive for France to service its debt, and more difficult for the Europewide rescue fund — of which France is a major backer — to operate. That, in turn, could renew tensions between France and Germany over how to manage the euro crisis.

For every photo op in which Mr. Sarkozy and Chancellor Angela Merkel of Germany trumpet a new step forward, Mr. Fernandez has spent countless hours behind the scenes with an influential man in the presidential cabinet, Xavier Musca, Mr. Sarkozy’s powerful chief of staff, and Berlin’s point man, J?rg Asmussen, to smooth and soothe the sometimes testy French-German relationship.

Mr. Fernandez also exchanges e-mails frequently with officials at the Treasury Department to keep up on developments across the Atlantic. And his ability to parse mind-numbing financial issues better than nearly any other French civil servant helped French leaders look smart during the Group of 20 meetings to which France played host in 2011.

Doing all this largely below the public radar is apparently the way Mr. Fernandez prefers to work. In a country where discretion is a highly prized commodity, his effectiveness comes from operating in the shadows.

“Ramon is the right man in the right place,” said Christine Lagarde, who worked with Mr. Fernandez until last summer, when she resigned as France’s finance minister to become the managing director of the International Monetary Fund.

“He is smart, experienced, a good negotiator, but also a critical part of a close-knit network of advisers to the leading political figures,” Ms. Lagarde said.

For Mr. Fernandez’s efforts, he was made a chevalier of the French Legion of Honor in December, in a ceremony under the gilded ceilings of the élysée Palace. Mr. Sarkozy cited Mr. Fernandez as a pillar in the management of France’s future.

Yet such moments are rare. Mr. Fernandez generally eschews the elitist trappings embraced by most other government dignitaries.

He rides a motor scooter to work, for example. The idea of being chauffeured around “gives me a headache,” he said. On the scooter, “you take some fresh air, and you are forced to focus on just one thing.”

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Building Storehouses for the Sun’s Energy, for Use After Dark

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That challenge seems to be creating an opening for a different form of power, solar thermal, which makes electricity by using the sun’s heat to boil water. The water can be used to heat salt that stores the energy until later, when the sun dips and households power up their appliances and air-conditioning at peak demand hours in the summer.

Two California companies are planning to deploy the storage technology: SolarReserve, which is building a plant in the Nevada desert scheduled to start up next year, and BrightSource, which plans three plants in California that would begin operating in 2016 and 2017. Together, the four projects will be capable of powering tens of thousand of households throughout a summer evening.

Whether the technology will be widely adopted remains to be seen, but companies like Google, Chevron and Good Energies are investing in it, and the utilities NV Energy and Southern California Edison have signed long-term contracts to buy power from these radically different new power plants.

One crucial role of the plants will be complementing solar panels, which produce electricity directly from sunlight. When the panels ramp down at dusk or on cloudy days, the plants will crank up, drawing on the stored thermal energy.

That job will become more important if photovoltaic panels, which have plunged in price lately, become even cheaper and sprout on millions of rooftops. As the grid starts depending more heavily on solar panels or wind turbines, it will need other energy sources that can step in quickly to balance the system — preferably ones classified as renewable.

Most utilities are trying to generate as many kilowatt-hours of renewable energy as they can to meet stiffer state requirements on incorporating more alternative energy, said Kevin B. Smith, the chief executive of SolarReserve.

“As we move forward, we’ll get more and more traction with the fact we can provide more capacity,” Mr. Smith said, referring to his company’s storage technology.

The Energy Department seems to agree: in September it gave SolarReserve a $737 million loan guarantee for its project in Nevada. The plant will generate 110 megawatts at peak and store enough heat to run for eight to 10 hours when the sun is not shining.

The public’s view on loan guarantees for solar projects has soured somewhat since the bankruptcy of Solyndra, a California company that received a $535 million loan guarantee to build a factory to make solar panels — only to see the market for the modules crash.

But the outlook has always been clearer for companies that make electricity, which, unlike solar modules, is generally presold by contract.

Technical details of the SolarReserve and BrightSource plants vary slightly, but both will use thousands of computer-operated poster-size mirrors aiming sunlight at a tower that absorbs it as heat.

SolarReserve absorbs the heat in molten salt, which can be used immediately to boil water, generating steam that turns a conventional turbine and generator. Hot salt can also be used to retain the heat for many hours for later use. BrightSource heats water that can be used immediately as steam or to heat salt for storage.

The plants rely on salt because it can store far more heat than water can. But once molten, it must be kept that way or it will freeze to a solid in part of the plant where it will be difficult to melt again. “You’ve made a commitment to those salt molecules,” said John Woolard, the chief executive of BrightSource.

The technology is not complicated, but the economics are.

The simplest, least expensive path for solar thermal is to turn the heat into electricity immediately. But the companies are a bit like the farmer who harvests the grain and stores it in a silo rather than shipping it straight to market on the expectation that prices will be higher later. They are betting that in revenue terms, the hour at which the energy is delivered will be more important than the amount generated.

The notion is that widespread adoption of solar panels — whether on rooftops or in giant arrays in the desert — will change the hours at which prices are highest.

Today, electricity prices usually peak in the late afternoon and evening on hot summer days. “Photovoltaic panels will do a pretty good job of chopping that peak” in the late afternoon, said Paul Denholm, a solar specialist at the National Renewable Energy Laboratory in Boulder, Colo.

In other words, the new price peak will be pushed to later in the day, to just before and after sunset, when solar photovoltaic production is small or nonexistent, he and other experts say.

This article has been revised to reflect the following correction:

Correction: January 2, 2012

An earlier version of this article gave an incorrect name for the chief executive of BrightSource. He is John Woolard, not Paul.

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