We gonna ride this business model until it completely dies....

This coming weekend is the annual NFL Pro Bowl in Hawaii. Yeah, they still play it. I watch about 2 plays every 4 years.  Here's my problem with the Pro Bowl. Well, I got a few actually:
- The best players aren't there.  Years ago, the Pro Bowl was played the week after the Superbowl and included everyone chosen. Given the 2 weeks between the season and the Superbowl, the Pro Bowl was almost played in March. That's a lonnnnnnnnnnnng season.  Not to mention pretty anti-climactic after the Superbowl. So, someone had the bright idea to play it BEFORE the Superbowl.  Here's the problem, football is a contact sport. So the two teams in the Superbowl (the two BEST teams in the league) don't send anyone because the last thing a coach wants is his starting QB hurt in the Pro Bowl and missing the Superbowl. And you can't blame him one bit. So the Superbowl teams don't send anyone, and the alternates now get to go to the Pro Bowl.


- Nobody plays hard.  In 1998 Robert Edwards tore his knee up in THE ROOKIE FLAG FOOTBALL GAME ON THE BEACH at the Pro Bowl.  He was able to return a few years later, but you have to wonder how much shorter his career was due to that injury. If you watch the game now, linemen aren't really blocking, more likely they grab each other and stand up. And you can't blame them one bit.  Yes, there is a lot of prestige associated with going to the Pro Bowl, but it's still the Pro Bowl and if you are going to get hurt in a game, better it be during the season when it counts than in the Pro Bowl when it doesn't.

If you ask the organizers of the Pro Bowl, they'll point to the record rating that the game still gets. They will probably ask "why can't we have an All Star Game?  Every other sport has one."  I repeat, football is a contact sport.  Ratings aside, I think it's kinda boring.  I think it would liven things up to have a skills competition for the linemen ala "The Superstars", and the backs & receivers can go against the defensive backs in a passing competition.  When you minimize the potential for injury, players will embrace the game.
Now I think it's more a "just don't get hurt" game.

Who's to blame for 2008 and why banks still don't get it?

I watched 60 Minutes a while back and they talked about how even though Sarbanes Oxley was in effect in 2008, no CFOs have yet to be prosecuted for signing off on false or incorrect information. It's kinda like folks have been complaining for  years that you shouldn't play with matches in the house, you still do, your house mysteriously burns down, but no one's to blame.  The problem, as the President put it, is that unfortunately most of the deeds that were done on Wall Street were not illegal. That's scary.  You can tank a global economy and not have done anything illegal.

Because of what happened, ie, a ton of crap mortgages were written, many large banks have found themselves in the position of holding mortgage portfolios worth billions on paper, but worth used toilet paper in real life. The really  crazy thing is, and maybe it's an attempt to placate their shareholders, the banks are willing to slowly let these mortgages continue to drag down their balance sheets for years or decades to come.  Here's an example:

Homeowner X has a mortgage worth $200,000.  The house is only worth $125,000. Homeowner X, for whatever reason, cannot pay the $200k mortgage.  The bank doesn't offer to really work with Homeowner X, and as a result he or she is foreclosed. The bank loses the $200k mortgage and its associated cashflow, and now has a house they have to sell for something, anything, to get some of their money back.  Until the house sells, if this is a responsible bank, they have to keep the grass cut and keep vandals and squatters out of the property. And every month they get more and more of these properties.  Best case, they sell the house for $125k and write off $75k loss.Homeowner X, who would have been willing and able to pay a mortgage based on $125k has his credit beaten. And every month banks are taking a nibble of the turd sandwich they helped make.

Here's what the banks should do:
First communicate with their shareholders that they have X billions in suspected mortgages that will likely not be repaid in full.  The choice is either to keep nibbling at them for the next 20 years, or bite the bullet turd write them all down over the next 6-12  months.  Then they go to Homeowner X and renegotiate his principal to $125k. And Homeowner X cannot refinance the mortgage for 10 years.Yeah, it sucks, but that's life. In addition, they make the deal that if in the next 20 years he/she or their estate sells the house for more than $125k they split the additional revenue 50/50 with the bank.  It gives the homeowner an incentive to still try to get the best price possible in a sale and the bank still has the potential to recoup some of what they've forgiven.  But the real beauty is that the bank gets the crap off its books, while still having upside potential, and Homeowner X doesn't get a credit rating of 142.

The problem is the banks are trying to have their cake and eat it too.   So long as they drag this out, it will continue to be dragged out.

The Apple of my eye

Caveat, I'm a big Apple fan. They just announced a press event for October 4. The assumption is this is the new iPhone (oh please oh please oh please let it run on Sprint!). I digress.

I doubled down, buying more around the time that Steve Jobs announced he was retiring as CEO, at around $380/share.  Today it's $419.  That's over 10%. In a month. Why, because even without him, the company is very well run.  And I still think it's a good deal, Some things to consider:  It's the largest publicly held company in the world by market capitalization, and it doesn't have a monopoly in any segments. Including iPads as computers, it's only got about 12% of the market. But it has the vast bulk of the profits. Let me repeat that. Apple is making all the money. This year Apple captured two thirds of available mobile phone profits in Q2.

The analysts are putting prices like $500-$520/share on the stock. As I've said before, I don't believe in analysts for a few reasons, primarily, they are not inside the company, and don't have a real clue as to how the day to day operations are going, nor do they know what products might or might not be in the pipeline.  Morgan Stanley feels Apple should buy back some of it's shares, because it has too much money on hand. With all due respect to the probably very intelligent analysts at Morgan Stanley, that's the stupidest thing I ever heard.  We're going through a recession/depression/giant suck of an economy and they're saying someone has too much cash on hand?  Really?  Hm, I bet Circuit City, Blockbuster or Borders wished they had too much cash on hand. Sometimes people talk to keep the quiet from enveloping them. 

I've been a shareholder for over a decade. I've never gotten a dividend, and I'm cool with it. When I originally bought the stock around $4 I didn't expect one, nor do I now. I don't want one. I want them to keep that money in the bank, keep making great stuff and keep getting more valuable. My point is, this train ain't stopping no time soon....

Netflix - WTF?

On July 23, Netflix stock hit $298/share.Today it's at $130. The stock had tripled since 2010. Well, scratch that. What happened? A couple things... They had already vanquished Blockbuster, who was too stubborn to see streaming as a viable alternative to physical stores.  So they were BMOC in video.  From everyone I talk to, the biggest problem with their streaming service is lack of popular/current titles. That isn't totally their fault, the content creators don't want movies streaming too fast, it undercuts the DVD market.  So, in the middle of all this, they are in ugly negotiations with STARZ, one of their MAJOR content providers. They double down: raising the price on streaming to current customers, even though never raising their content from suck to less suck. There's a backlash, they pretty much ignore it. Then they triple down: separating the streaming and DVDs by mail into 2 separate business units, calling the DVDs by mail Quickster. Wow. Bet that took a long meeting to come up with. The price will be the same for the combined service (the new, higher price), but now you will have 2 debits on your monthly credit card bill versus one.  Anyway, the STARZ negotiations imploded, so the library will be going from suck to more suck. And as I understand it, that's the streaming and the DVD libraries.  So more suck 2012 costs more than suck 2011. Good move. The sad thing is, there's no one to take advantage of the missteps. Blockbuster, a shell of it's former self, isn't set up to do streaming or large volume DVDs by mail. But Coinstar and Amazon, not to mention that other company, Apple's iTunes are all out there

Bottom line, I don't think Netflix is going away, but they really need to get their act together. The stock is probably a buying opportunity right now because at $298 it was probably over rated, and at $130 it's probably under rated.

Occupy Transition: A New World Order

This is also posted today on my job transition blog...

Cue the Death Star music....


I think the NBA could not have picked a worse time to go on strike.  Those in the top 1% income bracket, arguing with those in the top .001% income bracket over how to split the money they get from the other 99%.  That is our fault. Don't get me wrong, I love the NBA, it's fantastic. But really.


Bank of America backed down from $5/mo debit card use fees because people started withdrawing their funds.  Banks are now raising their fees as well, and requiring minimum balances to get free checking or accumulate interest.  The funny part of this is that the banks are in effect penalizing you because you aren't giving them enough money to invest. They are still investing it, though.  And paying you one or two percent interest on that money while they invest it at much, much higher rates.  They look at your savings account as free money.  The banks can invest it, but if they mess up and lose it, the government will step in and pay you back what they lost. Want an idea what their spread is? Ask your bank what their interest rates are on auto loans. Subtract from that what they're paying you in interest on your savings. That's what they're making on your money.  And since many people keep most of their money in a checking account that gets no interest, that's an even wider spread.  This is just the tip of the iceberg.  The Occupy demonstrations have spread around the world. Why?  Because Occupy Wall Street is a venue, not a movement.  It's people giving voice to their anger. Anger? Over what?  In a nutshell, the same people who cratered the global economy, wiping out 401k's by the tonnage, walked away with nary a scratch. The US taxpayers paid to make them whole and now they're taking huge bonuses again.

But they have opened people's eyes.  We are now realizing that credit card companies and banks don't lend to people who need money, they lend to people who can repay the money.  Many people have found themselves without jobs, and need to use credit cards to pay for monthly living expenses. That's when reality hits and they find out that as their credit is slowly destroyed, so is their ability to borrow to keep a roof over their heads. Or, as their credit score drops faster than RIMs stock price, these same companies who enticed them with offers of low interest rates, no annual fees, etc., are raising these same interest rates.  Kinda like not getting water from a stone, so you raise the required amount of water you want the stone to produce.  If it's not making water now - oh, nevermind.What's in your wallet?  A bag of hurt.

The problem is that in the 80s and 90s we as a society stopped saving (correction, the other 99% of us did). We spent every dime we made "enjoying the good life" and when that wasn't enough, we got credit offers from our "friends who just wanted us to keep on enjoying."  Sure, they offered very low introductory or final rates, but as soon as we missed a few payments, or went over our credit limit, all bets are off. They sometimes even raised your rates because you were late paying someone else.  That's right, a totally unrelated, unconnected company.  Kinda like your cable gets shut off, so the utility company, who is being paid on time, shuts off your heat. I guess that's solidarity.

Why were we encouraged to spend ourselves almost into oblivion?  Welcome to capitalism. Capitalism requires people to spend money, not save. To keep a capitalist society rolling along, people have to keep buying stuff. That makes companies rich, they hire more people who can spend even more money.  After 9-11 we were encouraged to go out and spend to forget the beat down we just got. Every Black Friday we rush out like lemmings at 3 AM because we absolutely have to have that thing, whether it's a 60" plasma TV or new furniture or whatever. Every car commercial I see show the lease price. When I was growing up, the only people who leased cars were business owners and companies.  The biggest draws were 1) it wasn't their money, and 2) they could write it off as an expense on their taxes. Now leasing is the norm. Why? because it allows people to get into vehicles they probably couldn't afford paying for directly. See a trend?



The same people on Wall Street who "the other 99%" are mad at for getting multi-million dollar bonuses are the ones we happily give money to in the form of credit card interest payment and brokerage fees.  We fed this monster, we have to starve it.  We have to find a happy balance between spending and saving. But we also have to become more financially savvy in general. While it might be good for Wall Street if we constantly spend, borrow and spend, it might not be good for the Joneses. Among the many lessons learned in the crash of 2008 is that the experts on Wall Street may not be as financially intelligent as they may have led people to believe.  How else would IAG, Leman Brothers and others be wiped out? The answer is that individual greed was more important than practices that were in the interest of the firms themselves. In effect, a company with 10,000 employees had 10,001 agendas.  And we were the fodder.

If your company offers a 401k with matching, it's a great opportunity to accumulate retirement savings. But you have to consider that your money and you have to take as active a stance as possible in it.  For my own reasons, I'm against mutual funds (I can lose my own money for free, why pay someone to do so?)

But you can't stop there. Learn how to invest. Newsflash: It's not rocket science. If the brainiacs on Wall Street showed us anything, it's that it doesn't take a genius to wreck an economy, so it sure won't take one to invest your $20.  That's a joke, but don't miss the seriousness of it. It's your money, learn to invest it.  As for your credit cards, pay them off and cut them up. Not as some symbolic gesture. Remember, when you needed them, they weren't there. Be selfish. Instead of saving 5%, shoot for 30%. Sure, you may not get there in a month, but keep striving for it.
Don't live within your means, live under them. Well under them.  You might think I'm being extreme, but know that if Ebenezer Scrooge got laid off, dude probably didn't miss any meals.  Be selfish. It's not your job to keep the economy going. It will run over you if you falter.

I have a theory. When they retired, the people who survived the Great Depression (#1) were probably well off. They saw what happens when you don't look out for yourself financially. When they got back to work, they probably saved every penny they could.  They never forgot what it was like. Fast forward 80 years and we have forgotten. This giant suck of an economy is the wake up call. Wake up.

The Apple of my eye & Netflix - Huh?

Caveat, I'm a big Apple fan. They just announced a press event for October 4.

The assumption is this is the new iPhone (oh please oh please oh please let it run on Sprint!). I digress.

I doubled down, buying more around the time that Steve Jobs announced he was retiring as

CEO, at around $380/share.  Today it's $419.  That's over 10%. In a month. Why, because even

without him, the company is very well run.  And I still think it's a good deal, Some things to consider:  It's the largest publicly held company in the world by market capitalization, and it doesn't have a monopoly in any segments. Including iPads as computers, it's only got about 12% of the market. But it has the vast bulk of the profits. Let me repeat that. Apple is making all the money. This year

Apple captured two thirds of available mobile phone profits in Q2.The analysts are putting prices like $500-$520/share on the stock. As I've said before, I don't believe in analysts for a few reasons, primarily, they are not inside the company, and don't have a real clue as to how the day to day operations are going, nor do they know what products might or might not be in the pipeline.  Morgan Stanley feels Apple should buy back some of it's shares, because it has too much money on hand. With all due respect to the probably very intelligent analysts at Morgan

Stanley, that's the stupidest thing I ever heard.  We're going through a recession/depression/giant suck of an economy and they're saying someone has too much cash on hand?  Really?  Hm, I bet Circuit City, Blockbuster or Borders wished they had too much cash on hand. Sometimes people talk to keep the quiet from enveloping them. I've been a shareholder for over a decade. I've never gotten a dividend, and I'm cool with it. When I originally bought the stock around $4 I didn't expect one, nor do I now. I don't want one. I want them to keep that money in the bank, keep making great stuff and keep getting more valuable. My point is, this train ain't stopping no time soon....

Netflix - Huh?

On July 23, 2011 Netflix stock hit $298/share.Today it's at $130. The stock had tripled since 2010. Well, scratch that. What happened? A couple things... They had already vanquished Blockbuster, who was too stubborn to see streaming as a viable alternative to physical stores.  So they were BMOC in video.  From everyone I talk to, the biggest problem with their streaming service is lack of popular/current titles. That isn't totally their fault, the content creators don't want movies streaming too fast, it undercuts the DVD market.  So, in the middle of all this, they are in ugly negotiations with STARZ, one of their MAJOR content providers. They double down: raising the price on streaming to current customers, even though never raising their content from suck to less suck. There's a backlash, they pretty much ignore it. Then they triple down: separating the streaming and DVDs by mail into 2 separate business units, calling the DVDs by mail Quickster. Wow. Bet that took a long meeting to come up with. The price will be the same for the combined service (the new, higher price), but now you will have 2 debits on your monthly credit card bill versus one.  Anyway, the STARZ negotiations imploded, so the library will be going from suck to more suck. And as I understand it, that's the streaming and the DVD libraries.  So more suck 2012 costs more than suck 2011. Good move. The sad thing is, there's no one to take advantage of the missteps. Blockbuster, a shell of it's former self, isn't set up to do streaming or large volume DVDs by mail. But Coinstar and Amazon, not to mention that other company, Apple's iTunes are all out there

Bottom line, I don't think Netflix is going away, but they really need to get off their act together. The stock is probably a buying opportunity right now because at $298 it was probably over rated, and at $130 it's probably under rated.

Inside Info On Why Walmart Will Eventually Fail

Before you call the authorities because I have "insider" info, I got mine the old fashioned way: I went inside a Walmart.  Let me back up. The first time I went into a Walmart was maybe 10 years ago. I was blown away.  It started with the "greeter" as you walked in, and went uphill from there.  In the last decade, I've seen the place decline.  The greeters and stores aren't as inviting, they seem to be employing some screwed up version of Just In Time Staffing, maybe based on dollars per hour wrung up or some such. Whatever they're using, it's an epic fail in my book. We have an unemployment rate around 10%, Walmart's making money, yet 99% of the time I'm at my local Walmart. no more than 12-15 of the 24 cash registers are open.  And the lines are crazy sometimes.  If it's after 11 PM or in the wee hours of the morning,  then we're talking 1 register is open.  If you go to Walmart after 11, be prepared to stand in line for 30-45 minutes.  They close the self serve lines whenever the person watching them has to go home.  My point is, and this is not just my opinion, people tolerate Walmart because they usually have the best prices. But there is going to come a point when we are going to stop tolerating it for the sake of saving a few dollars.  And yes, it is a bad omen when your customers "tolerate" you.

To be fair, I looked at Walmart's stock performance.  It hit $69/share in December 1999, and hasn't been back there since.  For the last year, the stock has been in the range of $49-57/share.  Walmart is famous for squeezing  pushing their supplies to cut costs so they can pass the savings on, but if you make enemies, you should also make friends. Walmart has annoyed it's suppliers and its customers. And it hasn't done jack for shareholders in a while. I don't own it, and ain't buying any anytime soon.

Run for the hills

A month ago, I was considering getting out of the market totally because I just had the feeling this debt ceiling mess was going to clean some clocks. Stupid me. I stayed in, and got spanked the last week. I think I'm getting out tomorrow morning. Why? Because I think the markets are at the beginning of a very slow and  a very long beat down.  I don't have any evidence, any insider info, but I think tomorrow is going to make today's 500+ point drop in the Dow look like foreplay. And if not tomorrow, next week, next month, the next 6 months are going to be ugly. I'm sitting this one out again. And when the dust settles, I'm jumping back in. Stay tuned....

Good luck....

Where did all the money go?

It's been a moment or 3 since I've written. My bad.   Anyway, I was listening to a podcast and someone asked a question, where did all the "value" go that disappeared in the stock market crash of 2008?  The truth is, it wasn't real in the first place. Let me give you an example, if you have a car you want to sell, a rare, vintage 1937 whatever. There are only 4 known in existence. It might be worth a tidy sum, say $100,000. It's worth that because that's what someone is willing to pay you for it.  You haven't sold it, that's just the going rate. That money doesn't exist in your pocket until you actually sell the car. (it's kinda like saying Mark Zuckerberg is worth x billion dollars because someone says that Facebook, a privately held company, is worth y billion dollars.)

Say one day someone finds a stash of 14 more of the exact same 1937 vintage vehicles, in a warehouse in East Bubblebutt, NJ.  Suddenly yours isn't so rare anymore. Suddenly the market of people willing to give you $100,000 for yours starts to shrink, as does the "value" of yours. Within 2-3 months, the "going price" for yours is only $60,000, because the original value was based on the rarity of it.  You lost $40,000. Or did you?  Did you physically have $40,000 4 months ago that you don't have now? No. So how did you lose it? That's what happened in the stock market. And happens everyday. The value of a stock is based on what you can get someone to give you to own it. All the daily market fluctuations are the changes in what people are willing to pay to own stock X. When they decide they don't want to own it that bad, the value decreases. It's like being the only girl at an all-boy school. Then 300 new girls enroll. Yeah, exactly.

So, where did all the money go?  Poof....

Like I been saying....

This article takes a lot of space to say what I've been saying for a while: The stock market is not logical. Therefore, don't try to apply logic.

Fannie & Freddie

About 2 weeks late, but I finally bought Fannie Mae and Freddie Mac. As I've mentioned, they were both on my watch list when they were in the $.30/share range. I bought at $.86/share and $.90/share because I still feel like they are going to hit $30-50/share.  To repeat, the reason I'm interested in them is because they were $30/share 2 years ago before the meltdown, and backed by the government. They are STILL BACKED BY THE GOVERNMENT. 'nuff said.

Missed Opportunity

Friday sucked. I got my butt kicked good by the market, and I realized that Freddie Mac and Fannie Mae both had doubled from about $.30/share to $.60/share over the last few weeks. Unfortunately, I don't have free cash flow to take advantage of them. I covered investing for non-investors in my podcast over the weekend.  Felt good to talk about something positive.

Anyway, tasting the can of whup @$$ that was Friday and not panicking made me feel good. Today the market was up a bit, not nearly as bad as it was down Friday, but up is still up.  I feel like I just need to sit tight and I should be back where I was within a few weeks. Maybe even days. There's some serious upheaval in Egypt right now, and as is the norm, flatulence anywhere in the world is enough reason for all the investment pundits to predict that there will be a massive stink in the US market. Weeee....

Flush the old rules down the toilet...

Remember the old days, when conventional wisdom said put away 6 months of expenses for a rainy day? Yeah, I know, it seems so quaint now. I know people who have been out of work longer than six months. Much longer. Like the 6 month mark flew by so fast their heads are spinning.  Here's the new conventional wisdom for those who are temporarily in job transition:

1. Save. Don't stop at 5% of your salary, save as much as you can. I'm not saying you should live as a miser or a hermit in a cave, although that's not the worst idea in the world. Don't listen to the economists tell you that you must spend to get the economy moving again. Screw the economy, it screwed you.  Get your financial house in order. Don't listen to the commercials tell you "It's time to move about the country." It's time to look after you and your family. Don't try to put 6 months of expenses away, shoot for 6 years.

2. Learn to invest your savings in investments that you feel comfortable with. Not savings, investments. Why? Because banks are giving you 1-2% return on your savings account while making 10 to 20 times that on your money.  My investment of choice is the stock market. But that's me. You choose whatever you want, but take the time to understand it. Don't invest in willy or nilly. Again, understand it, but only invest what you can feel comfortable losing.  Read this blog, go to the library, Google the heck out of your browser, but learn what you need to learn. It's not rocket science. Only rocket science is rocket science.

3.  Coupons. Use them. They are free money and the publishers of them count on you not using them. It's like if Superbowl tickets were going $3,000 each, but some agent was selling them for $2,000 because he knows no one is going to take advantage of it, he can continue to offer them at that price.  And brag about it.  The manufacturers know that probably >95% of people will ignore them, so they can offer really great deals. Take them up on it.

4. Wants vs needs. That 42" LCD looks awesome when they cut off your Comcast NFL package, doesn't it? My point is, as you go through life, look at those things that you need, versus those things that you want.  Stop keeping up with the Joneses. They probably lost their jobs too. And their LCDs. And their furniture. And their cars. Want to keep up with the Joneses? Go down to the unemployment office, they're probably their in line.

What is the Correct Stock Price?

How is a stock's price determined?  I looked at SmartMoney.com's price evaluator and here's the definition: "Our Price Check Calculator can help you estimate a fair price to pay for a stock based on three main things: the company's earnings, the rate at which those earnings are projected to grow and the stock's volatility."  So, it's determined using earnings, projected earnings growth rate, volatility. I also looked at MoneyChimp and they had a formula I got lost in.  I went to Wikipedia and found this for the P/E ratio, just part of what goes into determining a stock's price:

I went through all that for a reason. The pieces of each formula are reported quarterly. So if either of these is the "correct" formula for determining stock prices, why do stocks fluctuate by the minute? For example, if the formula was A x B + C/(DxE) = T, if A thru E don't change, then T should not change, right? What if T constantly fluctuates? That would mean the formula must be wrong.  I think the very smart people that came up with these formulas were trying to get close to actual price of a stock, using all known current information, and they explain their misses as buying opportunities (the stock is priced lower than the formula determines) or buying at a premium (the stock is priced higher than the formula determines).

Here's a very loose example. Say I decide I want a way to predict/estimate how heavy passenger vehicles are that come down a certain road. I assume a certain load per vehicle based on the tire size and multiply by 4.  Later, when I check my results against the actual, I find that sometimes my results are too high, sometimes too low.  So I decide that the formula is right, the tires are over or underinflated.  The problem is not with my formula, reality is wrong.  Yeah, that makes all the sense in the world. But that's the equivalent of what's being said when the experts say a stock is over priced or under priced based on the assets of the company, projected sales, etc.  The price of the stock reflects what someone is willing to pay for it at that moment. Period.

Speaking of charts, I put the following chart together comparing the prices of all my holdings since the beginning of the year. I haven't held each of them that long, but I wanted to see in general which way my portfolio was heading.  What this tells me is that, with few exceptions, my portfolio, and probably the market in general has been headed up most of the year. I think we're probably about to have a good run for maybe the next year or two.  Fortunately I'm in the game.

3 Cheers for Netflix

As mentioned, I bought this stock a few weeks ago when Blockbuster filed for bankruptcy - and only for that reason. Netflix (NFLX) rose 13% today. Not this week. TODAY!  All I can say is wow. Didn't see that coming, but happy I was standing in front of the train when it did.  Coincidently, their website went down today too.  What caused the gain?  They had 3rd quarter earnings rise 26%. Still, that's crazy. But I'm glad to be on that side of crazy.  Still keeping my eye on Fannie Mae and Freddie Mac. They're up to $.40/share each, but I don't think they're going to stay there long. I see $.30/share in their futures.  When/if they get back down there, I'll consider buying them again.  Why? Because they are still backed by the government and they recently sold at $60/share.  As The Terminator said, they'll be back....

Just call me butter...

'cause I'm on a roll. Seriously, my portfolio's doing great at the moment. I have to seriously look at taking some profits off the table. 


I came across this USAToday article today about the risk and reward of investing in a stock, specifically Apple.  With all do respect to the author, I just don't think all of this is necessary.  They talk about the compounded rate of return, "Apple's trading history back to 1984, we see the company generated an average annual compound rate of return of 31.7%".  That's all well and good, but right above that the article says "Shares of the company are up 49% this year,".  That to me is more important than what they were doing back in 1984. I've been a follower of Apple since about 1990.  They were a totally different company in 1990 and 1984. Steve Jobs was there, then he left, now he's back. I don't see the value in tracking what they did the last 25 years.  Let me move on.


The article says "To get that much better return, you had to take a lot of risk. You accepted risk — standard deviation — of 69 percentage points. So, by investing in Apple, you took on 341% more risk to get a 213% higher return."  I don't even know what they're talking about. "Measure the stock's discounted cash flow." Again, huh? Apple had a butt kicking quarter - again - and they've got about $40 billion in the bank. Next.


"Compare the stock's current valuation to its historical range. BetterInvesting's Stock Selection Guide can help. If the company can increase earnings more than 18.1% a year the next five years, as analysts expect, that would put the stock in the "buy" range. " Um, they just rolled out a new Macbook Air, they have Mac OS X Lion coming out next summer, the iPhone may be rolling over to a new provider in the states come Christmas, the iPad is running out of stores... Need I say more?


Finally, the article says " An old adage on Wall Street is that the crowd is usually wrong. But Apple continues to disprove just about every tenet of investing, as the crowd has been continuously right on this one." Sooo, all the stuff you wrote in the article is bullpucky?  Again, I think the only people who are worried about measuring risk, compound rate of return and increased earnings over the next 5 years are "the experts". My portfolio is up 49% since last year and over 100% the last 2 months. And I have no clue what the 25 year chart looks like for anything I own.  'nuff said

Blockbuster Busted...

Last week Blockbuster, after months (maybe years) of speculation, filed for bankruptcy protection. I had a buddy who managed a local branch and years ago he told me they'd spent some money to get into online streaming of movies, but after a year, decided to get out.  Basically, they didn't have a clue. So I bought the combustion engine to their horse and buggy: Netflix (NFLX). I think I used to own this stock a few years ago when it was about $40/share but I got out. It's now $155/share and I'm kicking myself. No worries, it's showing up on lots of other devises like XBox and iPad, so I think it's got some more legs in it.

Still keeping an eye on Fannie Mae and Freddie Mac, and they're still selling for $.29 and $.30 a share.  Anyway, I'm doing pretty well. My prediction that the market would hit 10,000 before 11,000 was waaaayyy off.  My big winner today is Starbucks, it's up 4% because some analysts suddenly have "more confidence" in the company.  Last month they said they were raising prices.

Here's my current holdings and returns as of close today:

AAPL	178.72%
AET	1.67%
AGP	50.94%
AIG	12.10%
AXP	186.36%
BP	7.29%
COF	2.89%
DIS	34.65%
EBAY	16.12%
F	223.65%
JBLU	12.91%
LF	3.95%
LVLT	-30.94%
MA	33.89%
NFLX	0.35%
PG	-5.67%
SBUX	35.70%
SIRI	17.39%
TJX	-0.22%
TM	-8.81%
XRX	65.24%

They really don't know what they're talking about!

When I started this blog, part of the reason was because I was doing is because after the financial meltdown  it confirmed to me that making my own decisions was the best way to do. Sure,  I may miss out on some great runs, but I also haven't lost several BILLION dollars.  The question that keeps coming up is how did they lose so much money? Simple, THEY DIDN'T KNOW WHAT THEY ARE DOING!

First, here's the Cliff Notes version of what happened when the whole financial world went crazy:

1. People were being given fixed and adjustable rate mortgages they absolutely could not afford (yours truly included). In some cases, the person getting the mortgage didn't have to verify that they even had a job.  They figured they could always sell the house at a higher price and make money. Remember all those house flipping shows on A&E on Saturday mornings?
2. Because so much money was so easily available, housing prices kept increasing. This is what was known as the housing bubble. (um, bubbles pop..)
3. These mortgages were grouped together and sold to investors as a big block of A-rated assets. Why?  Because the rating agencies and the financial institutions selling them did not actually look at the individual mortgages that were making up the blocks. They kinda sorta took each other's word that it was all good.  They then borrowed money, using these "assets" as collateral.
4. It's more complicated, but some people looked into the blocks and realized what a mucking fess they were. They then made bets against the assets, realizing they were eventually going to blow up. It got so crazy that some fund managers were having blocks put together that were as bad as they could make them, sell them to their clients, then bet against the same block they told their clients were rock solid. These were all still getting A-ratings.
5. Eventually, when the adjustable mortgages reset to their final rate the mortgage payments shot up, much higher than the mortgagee could afford. And the fixed rate mortgagees couldn't sell the house they shouldn't have bought anyway, nor could they afford the payments. As a result, a few new things happened:

• Housing prices stopped rising because there were no new people to get ridiculous mortgages.  For more info, take a look at Tulipmania.
• Mortgagees started defaulting like crazy because they couldn't afford the payments.
• Because the mortgages started defaulting, the blocks of mortgages lost value.  Remember these blocks were used as collateral for loans. If suddenly you don't have collateral, your loan can get called in. If you don't have the money to replace the lost value, screwed is an understatement. By the time the mortgages were defaulting and taking the investors with them, Wall Street had been buying each other's crappy crap crap, so when one went over the cliff, they were all handcuffed together and they all went.

That's the truly Cliff Noted version of the mess.  For a more detailed and entertaining summary, read Michael Lewis's The Big Short: Inside The Doomsday Machine.  I recently heard Mr. Lewis in an interview on NPRs Wait Wait Don't Tell Me game show. The one thing he reiterated is that Wall Street still doesn't have a clue. (Read his book Liar's Poker for a more in depth discussion of Wall Street's cluelessness.)

I guess the long overdue point I'm making is, why would anyone blindly trust their future to an industry that does not have anywhere near your best interest at heart and take their fees up front whether they actually make you money or not?  Trust me, investing in stocks and bonds is not rocket science  So long as they make you believe 1) it's too hard to do on your own and 2) they know what they're talking about, they have you.

Before I get beat up, I have no ax to grind with financial advisors or investment bankers. I just think that those "experts" on Wall Street that almost destroyed the economy of the planet are probably as collectively stupid as they appear.

As for me, my portfolio has been on a roll as of late.   My return has doubled in the last month. Still looking at Fanny Mae and Freddie Mac, they're still under $.30 a share so I'm still watching it.

The Recovery

Since my last post, I've done pretty well, actually more than doubled my gains. Still, I'm bearing on "the market" even if "my market" is doing great. Today the market stands about 10,700. I still think it will hit 10,000 before 11,000. Why? I just see this market as still pretty skiddish. I got rid of Freddie Mac (FMCC.OB) & Fannie Mae (FNMA.OB) and they are still tanking. I still plan to jump back into them when they look like they're going to recover.


 A few months back, the markets went buck nutty because of the collapse of the Greek economy. While I still don't know why my stocks got hit because of it, there is a very good NPR podcast called Planet Money that explains exactly what mess Greece got itself into.


The problem I will have soon if this market keeps going like it is, is when do I get out?  Here's my holdings and current gains & losses.

AAPL	163.44%
AET	-0.13%
AGP	34.75%
AIG	-1.74%
AXP	219.72%
BP	0.39%
COF	-0.23%
DIS	35.97%
EBAY	16.08%
F	194.85%
JBLU	2.44%
LF	-5.06%
LVLT	-19.69%
MA	30.99%
PG	-6.61%
SBUX	30.60%
SIRI	1.74%
TJX	-4.53%
TM	-6.46%
XRX	53.03%

I'm approaching my alltime high in dollars  and will start paring down soon. Stay tuned...

Bye Bye Banks

I got out of some of my banks and a telecom today, Citigroup (C), Bank of America (BAC) and Research In Motion (RIMM). They were killing my returns. I think the banks will rise at some point, but I think they will continue to fall until at least 1Q11 (first quarter 2011). As for RIMM, unless they got an answer to the iPhone, they're toast in the long term. And it's getting warm...

And looking at my holdings, I'll be pulling out of more stuff tomorrow. The "market" is hovering around 10,000. It dropped 140 points today, the big loser was Frontier Financial (FTBK.PK), losing 25% today on absolutely no good or bad news. I think the Dow will hit 9,000 before 11,000. Why? Because it is having a heck of a time holding itself above 10,000 and the economy is still stalled. Businesses aren't hiring (trust me, I know). The market has tried to lift itself for the past 6 months, but it can't sustain it. Therefore, I think 10,000 is an artificial level and it will slowly drift down over the next 4-6 months. Given that, I think some of my good holdings might have to be cut. Ironically, I'm only down 8% in AIG (AIG), the one who started this mess.

Run For the Hills!

Another bad day in StockMarketVille. The Dow lost 133 points, due to a huge drop in home sales, ie, "..nobody bought houses last month, I better sell all my stocks!". My big loser was Web Media Brands (WEBM), who lost 10% yesterday, they announced financials a week ago - apparently it took everyone a week to read them. They did announce a smartphone games summit yesterday. I guess nobody wants to go. No, I don't see a correlation between smartphones and home sales either.

As we get toward the end of the year, I think mutual fund managers will start trying to clean up their holdings so when they report out in December they don't have all that crap they been losing money on all year on their books. That and the housing news will make for an ugly time ahead, at least until the mid term elections in November. In my logic, that will put downward pressure across the board. I see the downside a higher likelihood than the upside, at least for a few months. I'm not going to sell everything, but I'm going to take a good hard look at RIM, Yahoo and a few of the bank stocks I'm holding and been getting my butt kicked on. I'm not making any predictions on what I think these companies will do, but I don't see their stocks going anywhere positive for a while. I think/hope today will make a bit of a recovery since the market has been dropping for a few days. But I don't think it will last, so I'm going to actually try to time the market this time. OK, let's be honest, we all do that but don't call it that.