May 05, 2008

I bought at 34.50 in late March, at the bottom. Only 50 shares. I wish I had bought 2000 shares.

Posted by megabeth at 04:47 PM | Comments (0)

 
April 17, 2008

I am making a little money. I bought SPN at 34.50 a month ago. I did not put much into it because I am afraid of buying a single stock and then losing a bunch of money. But not sure why I should have that fear, since my "index" funds/ETFs have practically lost 20% also. So much for "diversifying" risk. Anyhow, it doesn't make up for everything I've lost in the past several years, which far trumps what I've won. Investing is not for the little people.

Case in point: I put $4000 in an S&P 500 index fund in 2000, and eight years later it is worth $5400. Thus, the 'buy and hold' strategy is as much of a load of crap as timing the market or day trading. What is the best thing to do? I don't know. I think the U.S. government has set us up for years and years of heartbreak. When the market recovers, I may be shifting a lot of my holdings to risk free.

Posted by megabeth at 09:20 AM | Comments (2)

 
March 21, 2008

Good article about investing during a recession. It is very hard not to follow investor sentiment and I am trying to do exactly the opposite. There is a lot of cash waiting on the sidelines and I think that sometime in the upcoming 6 to 9 months, the market will experience an upturn. What I am unclear on is what sectors will benefit the most. The financial sector could be where the biggest winnings will occur, but I am too risk-averse to venture there.

Posted by megabeth at 11:57 AM | Comments (0)

 
March 20, 2008

In Germany, gas prices are over $8/gallon.

When I went to college in New Orleans, it was there I learned that a population-dense infrastructure lowers the cost of living. I routinely used public transit, taxicabs, bicycling and walking to get around about a 5 to 6 square mile radius. I carried groceries home from the store in a backpack. I rode the bus to job interviews. At the time, this was not called "environmentalism". It was called: "being poor".

For a few years after college, I lived about 10-12 miles from work. This was too far because traffic on the major route downtown is bad during rush hour. I chose to shift my hours and left home at 6:45 am, which is fine sometimes, but rather inflexible. As a result I bought a house about half the distance from work (5-6 miles depending on route - if I bike it, I have to avoid major thoroughfares which extends it to 7 miles) and I still think it is too far. This opinion of mine was probably birthed in New Orleans. Some people think that a 30 mile commute is no big deal.

There are a lot of people blaming Bush for the quickly rising gas prices. The recent run-up from $100 to $115 a barrel was pure speculation. You can blame the cause of increased investor interest in commodities in general on the Bush administration (or the Fed) for creating an environment in which stocks are unpopular, thus investors fled to other types on investment. But I think that urban planning plays some part in economic sentiment. Granted, prices of goods are going to increase due to higher transportation costs. If an urban area is properly planned, then commuting costs become less of an issue.

In Birmingham, there seems to be an equal level of demand for older homes that are convenient to the city center (10-20 minute commute) and newer homes in the far outskirts of the metro area (45 to 60 minute commute). As gas prices increase, I'll be interested to see if demand shifts. If I had to commute more than 20 minutes one way (which is already way too long), I'd rather be hung upside down and beaten. Life is too short to spend it in a car.

Posted by megabeth at 04:26 PM | Comments (0)

 
March 17, 2008

I will admit: I do like watching disasters unfold. I haven't seen one this bad since the 2001 market bubble.

Posted by megabeth at 12:54 PM | Comments (0)

 
March 11, 2008

Today's market events show why the entire world thinks they are dependent on the U.S. economy. There have been some arguments that the foreign markets are not necessarily dependent on the U.S., but facts aside, they believe that they are. One bit of positive news from the Fed results in over 10% increases in China, Malaysia and Taiwan today.

I have been wanting to buy some new ETFs as I sold my India fund shares when it went $3 below my initial purchase price. I still made money on it because I received two years' worth of hefty dividend payouts (and paid 10% less taxes on the gains). Still, the absolute fear of losing any more money, after being burned on past trades, keep me from taking any action. When your emotions get in the way, you cannot invest successfully. I am too pissed off about (a) losing money and (b) missed opportunities to be good at this. I'm about to buy a dad-gum S&P 500 index fund and forget about this silly hobby.

Posted by megabeth at 03:50 PM | Comments (0)

 
February 26, 2008

This "Ah-ha" moment just hit me. I have a small % of my IRA invested in intermediate term bonds. But the mutual fund's expense ratio is 0.8%. And bonds usually bring in returns of 0.5 to 4% annually. So why bother if at least 25% of your returns are going back to fund management?

The alternative is an intermediate bond ETF. I'm looking at Vanguard's BIV because its expense ratio is 0.11%.

Posted by megabeth at 03:43 PM | Comments (0)

 
January 30, 2008

I continue to feel disturbed about the economic situation of many American citizens. This blog post offers some good visual to explain the rise in household debt during the past twenty or so years. In particular, household debt is increasing at a much faster rate than household income, while household spending is increasing at a slightly faster rate than household income. This shows that the effects of debt can be quite expensive.

The Federal Reserve has tracked household debt as a percentage of income since the late eighties. What this chart shows is that households are increasingly carrying more debt. It's interesting that renters tend to carry significantly more total debt than home owners.

The reason why many of us think we're not carrying much debt is because we compare ourselves to the Joneses'. If we're all stuck in a big hole of debt together, it doesn't look so bad.

It looks like an individual may receive a refund of $600-$1200 due to the bipartisan economic stimulus package. I don't think this stimulus package is going to fix any problems over the long term. However, since the American way is to spend more than you earn, I suggest that you take your six hundred dollars and put it down on a $40,000 Lexus. Don't just buy a TV. That isn't enough to stimulate the economy. Everyone else is doing it! You should be one of the cool people!

Posted by megabeth at 12:36 PM | Comments (1)

 
December 14, 2007

I'm doing a year-end portfolio review of my retirement investments this week. Since international stocks have been on a nice run for the past few years, my portfolio is heavily overweighted in international equities.

If you look at the typical asset allocation for aggressive style investing that is recommended by brokerage firms and advisors, they usually recommend 40-50% in U.S. large caps and only 15-20% in international stocks. Historically, this allocation may have worked well, but I believe it should be changed to reflect overseas growth. Due to the devaluation of the U.S. dollar and the growth of foreign markets, I predict continued growth in the international sector. And the U.S. may not regain market dominance for the long term, barring a meltdown in an influential overseas market such as China.

For investors with more than 20 years to retirement, I would drop the U.S. large cap allocation to 30% and raise international to 30-40%, depending on one's stomach for volatility. But that's just my two cents. SmartMoney Magazine, however, agrees with this strategy.

Posted by megabeth at 12:33 PM | Comments (0)

 
November 26, 2007

I am going to talk about a couple of stocks on my watch list that I wasn't stupid enough to buy (but never fear, I was stupid enough to buy some others that are now down 15-20%). Hey, come to think of it, whenever I put a lot of money in the market, the next thing that happens: market tanks. It may take a year or two for that to happen, but since I am a buy and hold investor, I will lose sooner or later. Sense that something is up? Why, yes. The little guy is getting screwed.

I'm about 75% positive at this point that index investing with dollar cost averaging is the only correct way to invest. I am still young and I will recover from my losses (again - see 2001 for the first time), and will use this wisdom for the rest of my life.

Citigroup

Citigroup's CEO Prince resigned on Nov 4 following announcements of massive (as in $8 billion this quarter) losses due to the subprime mortgage fallout. The company plans to lay off 45,000 workers. The chart shows the share price behavior during the last three months. I see a turnaround in Citigroup's future. It may take several years, but if you have the stomach for it, a buying opportunity will present itself in the next 6 months to one year. I won't be buying it because I am tired of losing money, and if I did buy it, the share price would immediately sink to $5. If you buy it, however, the share price will double in two years.

Emageon

Emageon is a local Birmingham company that provides imaging systems to hospitals and other medical facilities. The product sounds pretty good, but potential customers don't seem to be buying it. A decision like that costs mega-bucks and is made once in a blue moon. So, Emageon had a hard time with earnings about a year ago and their stock value was halved (from 16 to 8). And a month ago, they had another not-so-good earnings report and their stock price was halved (from 8 to 4). Since then, the share price continues to decline. In 2001, a company like this would have had a share price of $250 and a P/E ratio of 8000. However, it appears that the market has sufficiently learned a lesson from the 2001 tech bubble burst. Also, this is a lesson that the product CAN be good, but if it doesn't make money, then investors do not want to buy the company's stock. Who knows when the bleeding will stop? I wouldn't be brave enough to buy this one. I might make some of the stupidest investing decisions known to mankind, but I can at least give myself credit for having one logical, boolean brain cell.

Posted by megabeth at 03:07 PM | Comments (5)

 
November 21, 2007

One British pound can now be exchanged for two U.S. dollars. That's great for the British. They can visit the U.S. and live high on the hog, buying everything for cheap. That's not so good for us. I remember visiting the Czech Republic and Hungary, and thinking how wonderful it was that I could get a massage for five bucks or a complete meal at a restaurant for three. We thought it was fun to leave a 100% tip for the waiter. And the people? They were poor. Where does that leave Americans? Something isn't right here. Economic predictions, however, are generally positive. I don't understand how the dollar can be so devalued, yet we are not in a severe economic depression. Does it have something to do with other currencies (particularly Asian) being pegged to the dollar? I don't know. I have been studying the economy diligently for the past few months, but it is so hard to understand.

Posted by megabeth at 08:54 AM | Comments (5)

 
November 05, 2007

I am stupid.

The only nugget (ha) of goodness I can glean from my mistake (other than not losing money) is that I have learned an unforgettable lesson about patience.

Posted by megabeth at 02:46 PM | Comments (0)

 
October 31, 2007

I'm no Greenspan, but it seems to me that the stock market has been a little too happy lately. For example, every stock on my watch list has appreciated significantly in value, including the banks that were hammered by the subprime mortgage fallout. Greenspan said recently that the Chinese stock market is in a state of 'irrational exuberance' (cue the days before the Internet bubble burst in 2000). If there is a fallout in Asian markets, then there will be some effect to everything, I think. This past month, the level of foreign investment in U.S. stocks has tanked.

Last fall, the same exuberance seemed to be occurring in the markets, and there was a gradual correction that led to a bottoming out in the late spring, then things started picking up again slowly.

I secretly hope for an overall market correction because I want to buy on a dip. Patience is not one of my virtues, so it is hard to sit here and wait.

Most pundits think that the housing situation won't recover until 2010. In the news today: the number of houses on the market is currently at a 9-year high. So it's in most people's best interest not to sell a house unless you are going bankrupt, transferring to another city, or dead. Wanting to move to another part of town or wanting an additional bathroom doesn't seem like justification for taking a $20-30K cut, but what do I know. I'm conservative.

Posted by megabeth at 09:23 AM | Comments (0)

 
September 12, 2007

From now on, if I put up a post about buying a certain security, then you should go out immediately and sell it short or buy a put option on it. Vice versa: if I tell you that I am selling something, then go out immediately and buy it or buy a call option.

This spring I bought some shares in the Gold ETF (GLD) and it proceeded, immediately, to go down in value. Damn, I am good. Then a few weeks ago, after the market recovered from the dip, I sold my GLD shares for the same price I bought them: a wash sale. IMMEDIATELY the price of GLD shot upwards $5 a share. I am so good at this, I should do it for a living. The extra sting? I get to do the paperwork on my tax forms for a sale in which I made nothing, and can't claim a loss either.

The timing was impeccable.

I should become a mattress investor.

Posted by megabeth at 09:37 AM | Comments (2)

 
September 06, 2007

I take issue with the federal government wanting to bail out homeowners who can't meet their mortgage payments. Five years ago, when I bought a house, I had the option of financing with an adjustable rate mortgage. I could have purchased a nicer, bigger house if I had used an ARM at 5%. Instead, I made the responsible choice with a fixed 30-year mortgage rate on a house that I could afford (at an already low fixed rate of 6%). As a first-time home buyer, it was not difficult to understand that the ARM would not be a good situation in the event that I kept the house more than 5 or 7 years. And not knowing my earnings or the housing market in the future, I thought it would be prudent to protect myself from the uncertainty.

However, those people who chose to buy houses and increased their debt-to-income ratio to something on the brink of unmanageable are entitled to being saved by the government. I've read several BusinessWeek articles about the subprime fiasco, and several homeowners interviewed said they "weren't aware" of the consequences of an adjustable-rate or interest-only mortgage. This is one of the most important financial decisions you will make in your lifetime. How could you fail to educate yourself on the details of the loan? It is not anyone's responsibility other than one's own to be informed.

There are some proponents of new government regulations regarding the issuance of subprime mortgages. As much as additional regulation sucks, I think this is probably needed, since neither side of the equation (mortgage companies, mortgagees) can be responsible for themselves. The government has to come in and hold everyone's hand like little babies who still need someone to tell them what to do. Many mortgagers will allow a homebuyer's debt-to-income ratio to be upwards of 40 to 50%. This doesn't mean it is a good decision, just because a salesperson told you that you can do it.

I agree with the author of this article. I made some investing mistakes during the 2000 stock market bubble. Can I get my reimbursement check from Uncle Sam?

Posted by megabeth at 10:06 AM | Comments (5)

 
July 19, 2007

The price of natural gas per Mcf was around $3.00 in 1986. Yesterday, the price of natural gas per MMBtu (1.03 Mcfs) was $6.22.

If you had invested $3 in 1986 and it was worth around $6 today, you would be disappointed in your choice.

The S&P 500 Index was around 250 in 1986. Today it closed at 1553.

It looks like (1) energy is not as expensive as you think it is, and (2) the strategy of index investing ain't all that bad.

Posted by megabeth at 03:20 PM | Comments (0)

 
April 25, 2007

I want to have a greater awareness of my spending habits so I created a monthly expense worksheet in Excel. I also wanted to get some practice using functions in Excel. Here it is if you want to use it.

Posted by megabeth at 10:26 AM | Comments (0)

 
January 24, 2007

I've been wanting to invest in another closed-end ETF since my first venture has been doing so well. I just received some information about a new IPO for a closed-end fund that looks pretty good. The goal is a 10.25% to 10.75% annual dividend payout rate, paid on a monthly basis and the second goal is capital appreciation. Gains from the first are taxed at 15% and gains from the second are taxed at one's income tax rate. To get in on the IPO I have to pay the 4.5% front end load, but after the recovery of initial cost, this investing option is much better than what I am getting in my savings account (gains are being taxed at my income tax rate). There's also the additional risk that one accepts by playing the market, but I feel a bit of confidence about this fund because dividend-paying companies are usually stable, and any particular failure will be diversified through the fund's many holdings.

At this point with the inverted yield curve (short term rates higher than long term), closed-end dividend-paying ETFs seem to be the best alternative for taxable accounts with a mid-term investment outlook of at least three years. Bonds, at least those with higher credit ratings, are not paying more than the standard risk-free rate one can get in a short-term CD.

Maybe I'm selling myself short, but if I could get an average 10% annual rate of return for the rest of my life, I'd be quite happy.

Posted by megabeth at 01:27 PM | Comments (0)

 
January 07, 2007

This week the Wall Street Journal published an article about Home Depot CEO Bob Nardelli's resignation. With a $210 million exit package, why would Mr. Nardelli feel compelled to do a good job? Mr. Nardelli's total compensation package for the year 2005 was $22.8 million. Is that not enough? Do ya think someone might be just a LITTLE greedy?

Math for the little people: If an average middle class corporate employee makes $75,000 in compensation a year (and that's a bit low considering that benefits can bring the compensation package up to $90-100K), his/her exit package would be, in Home Depot terms, $690,000. M'kay. If that were the amount of my exit package, I would break EVERY COMPANY RULE IN THE BOOK and ask my manager to fire me on a daily basis. I would get down on my KNEES, buy her flowers with note cards that say, "Please fire me", come to work rip-roaring drunk, and watch porn on my company workstation.

I am rather angry about this because of the pain and suffering I and my coworkers have endured because of Sarbanes Oxley, when it is clearly evident that the corruption lies in the upper echelons of company management. I said in an earlier rant about SOX that why in a holy hell would a person making $75K a year do something to jeopardize their position? If I were fired from my job, I couldn't just sit around on the beach having a cabana boy bring me margaritas all day. But Nardelli can.

The only way possible, at this point in time, to correct greedy CEOs is not to buy stock in companies that offer exorbitant exit packages to CEOs.

Here is a list from the WSJ of some of those companies other than Home Depot:

Henry McKinnell, Pfizer, $200 MM
Tom Freston, Viacom, $59 MM
Phillip Purcell, Morgan Stanley, $62 MM
Carly Fiorina, HP, $21 MM
Jill Barad, Mattel, $50 MM
Michael Ovitz, Walt Disney, $140 MM

In the meanwhile I am going to write a shareholder proposal for my employer that requests a $750K exit package per employee.

Posted by megabeth at 08:46 AM | Comments (1)

 
December 11, 2006

Today is the last day of the mock portfolio investing game. I started investing on October 9, 2006. How did I do? Let's see.

The Sharpe Ratio of my portfolio is 4.81. The ratio is a measure of the risk-adjusted return of an investment, and values over 3.0 are considered to be good. The higher, the better.

The graph of returns:

Total value as of market close on December 8, 2006: $105,814.37

Amount leveraged: 48% (this is very high, and probably stupid if it were real money)

Return of portfolio during investing period: 5.8%
Return of S&P 500 during investing period: 4.2%

Big winners: iShares MCSI Spain Index, The India Fund, iShares Latin America 40**
Big loser: Amazon
Most volatility (hang on!): Gilead Sciences, Google

So, if the goal were to beat the S&P 500 Index, then I met that goal by beating the index by 1.6%. However, let's say, hypothetically, that expenses for managing the fund are 1.4%, which is the average fee ratio for actively managed mutual funds. That leaves the account with a gain of only 0.2%.

There's a pretty strong argument for index-style investing.

Posted by megabeth at 09:42 AM | Comments (2)

 
November 28, 2006

The sky is falling!

I guess that Wal-Mart's same store sales is now a new leading economic indicator.

Over Thanksgiving their same store sales dropped 0.1% (a tenth of one percent) and the stock market reacted with a huge sell-off.

I don't see the big deal as perhaps shoppers decided to go elsewhere to shop... at my local Wal-Mart, one would want to avoid the store on Black Friday to avoid being shot.

I believe this is a minor correction and that the market is going to continue to do well for the next few months. It's a good time to buy anything other than precious metals.

(p.s. My short call on Google was correct.)

Posted by megabeth at 10:00 AM | Comments (3)