Adventures in Money Making

My wife's currently pursuing her Master in Accouting with emphasis in Taxation. One of her professors is a pretty smart guy and usually spends 6 months of the year travelling abroad and generally enjoying himself. I'm assuming he makes a lot of money from his investments, book royalties and consulting gigs [apart from the salary he gets at college].

A few days ago he mentioned that he investing heavily in Australian dollars and that he thought the US Dollar was overvalued by 40%!!! I think 40% is a little steep. Maybe the local real estate is overvalued by 40% but the dollar can't be that high can it ???
I personally think the dollar will drop 20-25% over the next few years which is why I've been buying commodities and commodity stocks. But a 40% drop!! Why that could set me up for life! [just kidding, i'll make twice as much money in my investments, but inflation will still kill me]

Anyway, I just picked up Getting Rich Outside the Dollar by Christopher Weber & Leonard J Reiss. It was written quite a while ago, but the underlying concepts should be the same.

Todays news is Donald Trump fires his sidekick Carolyn Kepcher after more than 10 years!

Atleast she last a lot longer than most contestants and she also got a book deal out of it!! Maybe she should read the "Joys of not working" ;-)

Also, Warren Buffett married his long time "companion" Astrid Menks at the good old age of 76. I guess there wasn't any pre-nup since Buffett's already given up most of his wealth to charity!

I recently referred a co-worker to TDAmeritrade. I was supposed to get $50 and he was supposed to get 5 free trades. Well neither of us got squat so I had him call customer support. At first he didn't believe there was an such promotion so I had to tell him to look on their website's front page. In about 4 minutes he agreed and gave us both 10 free trades!

I think the promotion is still valid.

I got an email today from Amazon.com

* For the first time ever, Amazon.com will be featuring $5 bonus coupon codes on hundreds of magazine subscriptions.

* Customers will get a $5 code for each magazine title they purchase. So, the more they buy, the more $5 codes they will receive!

* This offer is only available to customers who purchase the magazines featured from September 1st through the 30th, 2006.

Get your biz and finance magazines now!

Through my meandering web-surfing habits I came across two very interesting books. They deal with not working. One of the authors was fired from his engineering jobs and says it was the best thing that ever happened to him. That was 25 years ago and he's never looked back.

Real Success Without a Real Job

The Joy of Not Working: A Book for the Retired, Unemployed and Overworked- 21st Century Edition

Talking about not having work, Radio Shak emailed 400 employees that they were being terminated!

Employees at the Fort Worth headquarters received an email Tuesday morning telling them they were being dismissed immediately. "The work-force reduction notification is currently in progress," the notice stated. "Unfortunately your position is one that has been eliminated."

And since we're talking about author Ernie Zelinski, might as well check out his other highly regarded book on retirement [actually its supposed to be about living!]
How to Retire Happy, Wild, and Free: Retirement Wisdom That You Won't Get from Your Financial Advisor .

Amazon launched an Affiliates Bookstore. I tried it out but its still a little buggy.

The interface isn't very flexible. You can only add 9 books[products] and if you want to swap one out with another one, you can't. Anyway its free, and thats hard to beat!

This is what a young analyst at EverBank had to say about hedge funds after hearing that 2 hedge funds were going to sponsor Tom Cruise's next movie.

"Hedge funds are the worst plague in capital markets. First they destroy the dynamics of Oil and Natural gas markets. Then it has been Gold and Silver. What's next?
No wonder hedge funds have not really made money for its investors. It is just a club of people acting out their fancies at the expense of naïve investors money who could use a dollop of common sense...."

If you haven't done so, you must read When Genius Failed : The Rise and Fall of Long-Term Capital Management which describes how nobel prize winning Math professors started a Hedge Fund and lost their shirts!

Here's another article from Kiplinger's,Goodbye Condo Mania saying that the South Western Florida Condo market is done.

Just as I thought, all this bad news about builders had the opposite affect. The stock i'm short on [via fixed-risk put positions] was up today even after everyone and their mother is claiming that the florida condo market is dead. WCI was up today for no apparent reason. Probaby a short squeeze since its a heavily shorted short.

Or maybe people are thinking that the single-digit PE levels make home building stocks a good buy. Thats just the market lulling them into a false sense of security. I'm going to maintain my short positions. I have 5 months on 1 contract and 17 on the other. Home sales slow down in the fall and winter so I'm pretty sure the stock will drop on pessimistic guidance. Plus, technically, there doesn't seem to be any resistance down to $10, which is a good sign.

Even Toll Brothers [TOL] was up today!! Just 2 days ago the CEO said
1. The market is the worst its been in 40 years for home builders
2. He doesn't know when its going to start to get better.
And the stock is up!

Please do not follow any of my recommendations. My stock investing record is extremely poor. Plus I haven't even been investing nor following the markets for the past 3 years. This is just for information so you guys can look back in 2 years and agree on how bad my stock selection was!

Ferrari just came out with its new 620 hp 599 GTB. It kind of looks like the Jaguar XKR. Only its probably around $195,000 more expensive and has 50% more horsepower.

I think in a year or two it'll be time to upgrade my '99 Accord V6 coupe. I was just looking at new 5-series BMW's and the cheapest 5 series for the 2006 models is about $43,095 plus tax. OUCH!

Hmmm....whats the pricing on used?? Apparently 50% off! Here's a 2001 model for only $16,995!. So its 2000 miles away. But for a $26,000 saving, I can afford to fly out there first class and drive it back!

And while I'm there, I can use the $26k as downpayments for 2 more houses in Indiana!!! Last year I bought 2 houses there for around $85k each from the bank as REOS. The insurance replacement value came back as $135k each. That doesn't mean they'll sell for that much, but atleast I didn't overpay for them!

I got a 30 year fixed on one and a 10 yr fixed on the other. Total downpayment was around $20k-$25k between the two. And they cashflow a little bit too.

I'd rather buy 2 more houses than pay retail for a new car.

Bought some stock in Pengrowth Energy Trust[PGH] today. Its a Canadian stock that pays out a strong 11.60% annual dividend on a monthly basis. The ex-dividend date is August 29th so I thought I'd get in before the cut-off date.

Since I think the US dollar is headed down in the long run, this is a good hedge against it while also getting a great dividend. There are a lot of canadian stocks that give out a good dividend. They're kind of like REITS in the US. If they promise to pay out most of their profits as dividends, they aren't subject to double taxation. They sometimes have the words "income fund" or "income trust" in their name.

Now, if I only had a million bucks, I'd be able to live off the dividends!

Here's an excellent video showing George Bush as a great debater 10 years ago and how he's gone senile. Its pretty good.
Bush is senile.

Bush and Blair's Love Duet.

Andy Dick's Spoof on Bush

And Paris Hilton's Music Video Stars Are Blind, is actually a lot better than I expected. She can actually sing!

Finally, after lots of bogus reports about a soft landing and their being no real estate bubble, several builders have acknowledged [or should I say confessed] that their may be a stronger than expected decline in housing demand.

"It would be difficult to characterize the position of home builders as other than in a hard landing," says Robert Toll, chief executive of luxury home builder Toll Brothers Inc., which reported yesterday that net income fell 19% in the third quarter ended July 31. "I've never seen a downturn in housing without a downturn in employment or... some macroeconomic nasty condition that took housing down along with other elements of the economy," he says. "This time, you've got low unemployment, you've got job creation, you've got a stable stock market and relatively low interest rates."

Last year, Toll Brothers reported that its quarterly profit had doubled, Mr. Toll boasted: "We've got the supply, and the market has got the demand. So it's a match made in heaven." Since then, Toll has cuts its guidance four times on the number of homes it expects to close on, and its share price has fallen by nearly 50%.

Even DR Horton is now bearish. The CEO, Donald Tomnitz said "Every time we've gone into a downturn in the home-building industry, they've always been longer and deeper than we've all imagined. So we're preparing for the worst, and we think this one will be longer and deeper than just the last six months."

I should've shorted these stock last year, just like I was thinking, but I never got around to it! But I did buy puts for WCI last week with expirations in January 07 and March 07. WCI is a Florida based builder that specializes in luxury high-rise condominium towers. Hopefully with all the negative sentiment we won't see a short-term spike in their stock prices.

Business 2.0 had an article about how profitable blogging has become.

There was another article about 6 months ago about how some bloggers were making around $75,000 to $150,000 per year. But now the stakes are significantly higher. They pulling in $750,000 to $1.5 million per year!!!!

When I finally do quit my job, I now know which money-making avenue I'll be pursuing. ;-)

Its pretty simple. You buy whatever stock they're buying when they're buying it!

Billionaires aren't usually in the habit of broadcasting what they buy and sell but they usually do buy in large noticeable quantities. The SEC has some stringent guidelines on disclosure of purchases and sales.

According to SuperCash: The New Hedge Fund Capitalism

If there's a billionaire you are interested in following, you can use various services to keep track of their filings, such as www.sec.gov and www.edgar-online.com. Specifically, you want to look for these types of filings:

* Form 4: This details if they are making a significant change to their holdings. If they own more than 5 percent of a company and they sell shares, they must file a Form 4 within 10 days.

* SC-13D: A 13D schedule needs to be filed whenever they hold more than 5 percent of a company or if they go from owning more than 5 percent to less than 5 percent. This form has to be filed within 10 days of the "acquisition event" that took the filer above the 5 percent ownership level in a company.

* 13F-HR: This is filed to list all of the holdings of an institution that needs to file within 45 days of the close of a quarter. For instance, Michael Dell is not an institution but he funnels all of his money through a family office called MSD Capital, which does have to file the 13F-HR filing.


Let's take a look at some of the investors I like to follow.

MARK CUBAN

Even successful dot-com cowboys diversify. Perhaps they know better than anyone the need to explore unpopular investment options. Cuban, perhaps most famous for his impeccable timing in selling his company, Broadcast.com, to Yahoo! and then selling his Yahoo! shares at the very peak when they were worth upwards of $3 billion, recently posted his stock positions, both long and short, on his blog, www.blogmaverick.com.

His long positions include Lion's Gate Entertainment (his comment: "The only indie film library available, willing to leverage new media for revenue"), Rentrak ("Only independent source advertisers can use for tracking Video on Demand and Online Video on Demand"), and domain name registrar Tucows ("Good management, low PE, sells to growing market segment"). His shorts include Imergent, which makes software to help people build e-commerce sites ("I don't like companies that sell products that consumers shouldn't buy. It catches up at some point") and Interoil, an oil and gas company ("Appears to have cash issues").

BILL GATES

Even billionaires occasionally need to diversify their portfolios, and Bill Gates' massive $40 billion investment in Microsoft is a case in point. Through his investment vehicle, Cascade Investments, Bill Gates buys the stocks of traditional brick and mortar companies. For instance, he owns 2.4 million shares of manufacturing, plastics, electric, health-care company Otter Tail. While the stock hasn't gone up much in recent years, it is currently paying a very steady 4.5 percent dividend and is trading at a low double-digit P/E, providing a decent cushion for Gates and his heirs.

Other stocks Gates owns include 5.1 million shares of Pan American Silver, one of the largest public silver mines; 441,000 shares of Four Seasons Hotels; and 18 million shares of trash collector Republic Services. The rest of Gates' holdings can be found in the SEC filings for Cascade Investments.

I just read The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor--and Why You Can Never Buy a Decent Used Car! by Tim Harford.

Its an incredibly good book that explains every economics [like whether coffee shops make a profit and how grocery stores gouge you]. However the author sticks to the basic micro-economic trends and tries to explain how some of them affect the global economy.

It doesn't have any graphs or equations and you don't need any math to understand it. Pretty well explained. But it is a little dry and isn't as entertaining as Freakonomics: A Rogue Economist Explores the Hidden Side of Everything. But from an investment or financial understanding perspective its a lot more useful.

I strongly recommend it for anyone interested in how a free-market economy should work.

The Miami Herald reports that

Washington has embraced an alternative to $3-a-gallon gasoline -- $4-a-gallon ethanol.

That's the cost of this federally mandated fuel additive, when you take everything into account. Ethanol, produced mostly from Midwestern corn, currently wholesales for more than $3 a gallon.

And that's the Midwest price -- ethanol costs even more on the coasts because it can't be sent through pipelines and thus is costlier to ship than gasoline. At these prices, adding even small amounts of ethanol to gas can boost pump prices by 20 cents per gallon or more.

In addition, the Department of Energy reports, ''ethanol has only about two-thirds the energy content of an equivalent volume of gasoline,'' so it substantially reduces fuel economy. In effect, using it is like switching to a larger vehicle. In many big cities, ethanol cannot be added to ordinary gas without the resulting mixture violating federal air-quality regulations. It has to be added to a costly base blend that compensates for ethanol's environmental shortcomings.

When you add up all the direct and indirect costs of using ethanol, it's the equivalent of $4-a-gallon gasoline -- and closer to $5 if you consider its lousy fuel economy.

Give the feds credit. It isn't easy to find something worse for consumers than $3 gas, but they managed to do it.

Of course, ethanol isn't really designed to help America's hard-pressed drivers, but to help special interests -- namely, Midwestern corn farmers and ethanol producers such as Archer Daniels Midland. For years, the domestic ethanol industry, aided by its supporters in Congress, has enjoyed massive tax breaks as well as protectionist tariffs that block cheaper imports. And now, thanks to last year's big energy bill, Americans are required by law to add four billion gallons of ethanol to the fuel supply this year. That number will rise to 7.5 billion gallons by 2012.

Substituting ethanol for gas is a terrible idea. It will just raise the price of corn and cause a food shortage in the long run.

I think a good short term play is buying options for next summers corn futures. Prices are bound to jump in the next 6-8 months.

Speaking of investing, one company I recently invested in Anglo-American [AAUK] is up nearly 10% in the 10 days I've owned it! Its made up for the losses I incurred in RNE. AAUK owns a large part of De Beers, the Diamond company. That should keep my wife happy. She gives me the evil eye everytime they play those anniversary ring ads plays on TV.

AAUK is a good hedge against the dollar and raising commodity prices. [or basically a hedge against inflation!]