Fannie & Freddie: This is not rocket science!

It was around May 9 that I first said I was looking at Fannie Mae (FNMA) and Freddie Mac (FMCC).  They were both under $1/share.  In about 3 weeks they've tripled, including +25% today, on top of a +40% day last week.  I'm not bragging, it was pretty much luck on my part, but my point is, for you folks that have "financial advisors", how many gave you a head's up on this one?  Exactly. No one could have predicted this. I only looked because it went from about $.30 to $.74 in a day.

Picking stocks is not rocket science. I've had bad days, but today so far is really one of my best ever. My point is, and always has been, this is not rocket science! Any advisor that makes you think you can't pull a good stock pick out of your derrière just like they do is lying to you!

I am not a certified financial analyst, stock broker or anything like that. I have a full time job so I don't have the time to spend 40 hours a week analyzing stock tables. I don't have any insider information on any stocks I look at.  And I'm not the smartest person I know, maybe not even the smartest in my family. Yet I was able to pick these two. Things that make you go hm.....

Last thing, I don't think their ride is finished. I don't think it's too late to get in on it.  Just my opinion....

Poor People Save. Rich People Invest.

One thing you rarely hear discussed at job networking events, but everyone is thinking about, is money. It's the scariest part of being in job transition. If you don't have an income coming in, all you want to do is replace it.

Growing up, we were told to work hard, save our money and we would will be fine when you retire.  That's not going to work out for most of us anymore. Not just those who have lost jobs, but also the new kids just starting out. It's nice to think that you can spend 5-10 years being "irresponsible" after college because you know when maturity kicks in your are going to be killing it on the saving side. Unless right before you "grow up" you get laid off. BAM. Yeah, it happens, and it's still happening.

BLAH BLAH BLAH

My point is this: unless you can look at your savings balance and be sure you have enough money to last you 30-40 years at your current lifestyle and taking into account and unforeseen health issues, you need to save more.

FORGET SAVING

You know how rich people got rich? Not by putting their money in a bank and getting 1-2% interest.  Like the title says: Poor people save. Rich people invest.  Once we accept that premise, we can move on.  But you have to accept that. You have to wrap your mind around the fact that just putting your money in the bank will probably not allow you to retire to a lifestyle"in the manner to which you have become accustomed. If that's not high on the importance scale, fine. Just don't be surprised when you're getting the gold watch if it's not looking pretty.  Like the Boy Scouts say, the secret is to be prepared. From day one you have to prepare for that unexpected moment when the fertilizer hits the ventilator. Because at some point it most likely will. And it will be at the worst possible moment.

By definition, whatever you choose to invest in will have some risk attached, be it real estate, stocks, bonds, derivatives, MLM, tea, a small business, education, the lottery... Whatever you choose to invest in, educate yourself on it, make sure the risk level is acceptable as is the potential return, that you can do it long term, that's it's legal, doesn't look too good to be true (Bernie Maddoff's victims thought they had found the goose that laid the golden egg. Had they - or anyone - took a realistic look at what returns he was getting they would have quickly realized that something wasn't right. I'm not saying they were stupid, but good news blinds smart people. Remember Circuit City?  They were making money and ignoring the problems in their system - because they were making money.  Totally off topic, that's exactly why I won't buy Walmart stock, no matter how well it does. In my opinion, they got issues. Sure, they're making money, but when they hit the wall I think they will, it's going to be a massacre.  I digress.)

The bottom line, your chances of retiring comfortable by saving, unless you are extremely disciplined and deny yourself all your life, aren't that great.  Change the game....

One more reason to do your own investing....

I came across this article, the title says it all: Hedge Fund Partner Earns $33.5 Million For a Year While Losing Almost 10% of Fund Money.  It's like paying a babysitter to be home with your kids, but not necessarily to watch your kids. Just be there if the cops come by.

If you've been reading these for a while, you know how I feel about fund managers.  While I think they provide a valuable service, I think the pricing model is simply the stupidest thing from an investor standpoint I've ever seen.  Fund managers get paid by how much money they manage, not how well they manage that money.  It seems like such a small number, 1/10 of one percent, but when they have several hundred million or billion dollars under management, that adds up quickly.  The problem, or trick as the fund managers know it, is that people are generally lazy. Sorry to put it out there like that, but it's true. People will give a fund manager x dollars to manage. At the end of the year, the fund manager will send out a portfolio, showing what he/she is invested in at that point. There's the rub.  If all the stocks in the portfolio increased by a minimum of 4% last year, you would expect your portion of the fund to increase in value by at least 4%.  But nobody does that math. If they did, they'd probably realize that their portion may even have decreased? How is that? Maybe the fund manager was invested in crap all year and sold it off a week before they had to report it to you. Again, when they report, it's based on what they are investing in at that time.

I'm not going to spend the next hour venting against fund managers. If you are in a mutual fund, when you get your annual report, ask the following questions and do the following math:

1. How have the stocks in the fund done over the past 12 months?  Have they increased? How much? Whichever stock increased by the lowest amount, that's your baseline. Assuming you didn't do any withdrawals, your balance should have increased at least that percentage.  And don't let them tell you anything about needing to know the mix. The lowest increase is your baseline.

2. What are the fees? Usually represented as a percent of a percent of the funds managed, multiply this by the total fund value (not just yours, everybody's). You can probably find this in the marketing materials. This is a rough estimate of what they made off you.

Bottom line, fund managers should come with a money back guarantee.  

FNMA Be Rockin It, Rockin It, Yes They Are Rockin It

If you're paying attention, today (so far) is a good day for my BFFs Fannie Mae (FNMA) and Freddie Mac (FMCC). They are both up over 10% today, that's after a similar increase last week. All I can see for what's driving it is this article on Freddie rolling out a delinquent borrower program early. Whatever it is, I got a feeling this is about to get good. As I mentioned previously, they were both $90 stocks a decade ago. They won't get there overnight, but it looks like they're headed in that direction big time. I may get some more..

In technical terms, these two stocks have a higher beta than the rest of my portfolio. In laymen's terms, that means market moves impact them more aggressively than others: when the market goes up a little, they go up a lot, when the market goes down a little, well, you get it.

That is the challenge of investing: accepting a beta you're comfortable with.

In my smaller portfolio, Advanced Micro Devices (AMD) is up 18% in about 2 weeks. Sweet.  LDK Solar is up 5%, even though it's down 4% today.  I'd forgotten I'd bought WebMediaBrands (WEBM) some time ago, at $7.  It's now $1.70. Yeah, losing my shirt and some draws on that one. Luckily, the investment wasn't ridiculously big (even before the fall) so it doesn't make much sense to sell now, just to take such a small amount out. Better to let it ride and see if I can recoup some of it in the future.  In ArQule (ARQL) I'm pretty much even right now.

The market is getting interesting...

Today for a brief moment Fannie Mae (FNMA) and Freddie Mac (FMCC) were both up about 11%, this on top of the 20% they both rose earlier in the week. They're trading in the $.90/share range, this past week they posted some crazy, multibillion dollar profits so I think they're about to do some serious long term gaining. I may pick up some more. And interest rates are creeping up too.

Looking at one portfolio, everything (except Facebook) is up at least 14%.  Facebook is down 4% and in serious danger of getting deleted.  As for the others I bought this past week, AMD is up 8% already, but ArQle (ARQL) and LDK (LDK) are both down about 4% and 7% respectively.  Yes, they are about to go on the chopping block.

From time to time I do read what others think. Saw this article and will be keeping my eye on Citigroup (C)now. Why? because they're up about 50% over the past 6 months.  The Dow hit an all time high this week. I think we have at least 3-4 years of nothing crazy, so it's time to really start pulling some levers....

Just because you are a CEO, doesn't mean you have a clue.

Over the past 7 years there's no better example of "we didn't see that brick wall directly in our path" than Blackberry, aka Research In Motion.  A few months ago, their current CEO (not to be confused with the previous CO-CEOs, neither of which saw said brick wall in their path) Thorsten Heins said “The user interface on the iPhone, with all due respect for what this invention was all about, is now five years old.” The irony of this is that he's the CEO of Blackberry. Those of you old enough will remember the term "crackberry". For those of you not old enough to remember, before there was the iPhone, Android or Angry Birds, people were sleeping with their Blackberry phones just for email access.

But before you think I'm off my rocker, or too Apple-sensitive, here's a response article that pretty much says the same thing.

My point is just because someone has a title doesn't mean they know what they're talking about, or that they are not trying to blow smoke up your butt.  I only care from the standpoint of investing. Full disclosure, I bought some RIMM stock a few months ago, and almost immediately got waxed like a new Bentley.  Not bitter because I cut my losses, had I known this guy was in charge I'd never have bought it.

The Final Five

Nothing sucks like time.  I looked at all the stocks I'd researched last week one last time.  Here are the 5 I chose and why:

Authentidate Holding Corp (ADAT) - up 6% today. Look like they're stabilizing the last 5 days.

Alcatel Lucent (ALU)  - at first glance, today's $1.33 looks like their ceiling, but they did hit $1.38 a few days ago.

ArQule, Inc (ARQL) - Been spiking in the mornings, but the spikes are getting higher.

Advanced Micro Devices (AMD) - missed the boat big time, this one is up 28% in a week. Nope, not a typo. Had I jumped in last week.....

LDK Solar (LDK) - this one is spiking a bit, but the general trend seems to be positive.


Caveats up the wazoo: I am not a trained, certified or licensed broker, stock analyst or financial advisor. At the time of this writing I have no financial interest in any of these companies, nor do I have any insider information. I make no guarantees on which way any of these will go. Invest at your own risk.  The point I want to make is that picking stocks that go up is not rocket science.