Adventures in Money Making

San Diego just blocked Walmart's plans for a new Super Store arguing that that Wal-Mart puts smaller competitors out of business, pays workers poorly, and contributes to traffic congestion and pollution.

Of course the council failed to state that social engineering isn't their job and that the people who currently work at Walmart seem very happy with their jobs and have never protested their pay or anything else. Nor the fact that Walmart's lower prices put competitors out of business but help low-income families buy more stuff and actually increase their standard of living. Of course no one wants low income families shopping in their neighborhoods so the easiest solution is to ban the superstore itself.

Another bad idea is the forced raise of the minimum wage. Mom and pop stores who are trying to stay afloat in California due the increase in real estate prices [& therefore taxes on triple-net leases when the properties are sold], increase in electricity & heating costs and the slow down in the housing market are hurt the most. [50% of new jobs created in the state since 2000 were real estate related. As the house market slides, the jobs will disappear as will the income of the people still in the business]. As a result they will be less likely to hire new employees or maybe even cut down on the hours of existing employees. At the same time, prices will have to be increased to make up for the increase in the wages. So the poor employees will see no real benefit in the wage hike while feeling the brunt of the increase in prices.

But atleast we're still better than France, where the employer can't fire anyone even if the business files for bankrupcy!!!!

Labels: Economy

I spend a several hours every week reading different newsletters on a variety of investment, business and marketing topics. Here's an interesting piece on the value of branding.

If what people feel and remember about your business is positive and translates into more loyalty and sales, you've just made your business more valuable. Here is an example which opened my eyes even wider to the importance of branding.

On a news television show I watched recently, a test was performed on children and their breakfast choices. The first test involved placing a banana and a cupcake in front of the child and asking which they preferred to eat. In the test, they placed stickers of popular cartoon characters such as "Shrek" and "Spongebob" on the banana and left the cupcake plain. Almost all the kids chose the banana for what they would prefer to eat for breakfast.

In a second test, they placed a rock (yes, I said rock) with stickers on it and a plain banana in front of the child. Almost all of the children said they would prefer to eat the rock for breakfast!

How many of you subconciously buy stuff solely based on the branding? Clothes, food products, electronics and maybe even investments are made on our perceived value of the item and not on its actual merits or even our needs.

Why is my wife willing to spend more for jackets just because they have a tag on the inside which says its from some high-end clothing store? Or for sweatpants which have sparkly BCGC studs across the rear?

Labels: personal finance

I started buying real estate in Salt Lake City in the fall of 2004. So far I've done pretty well on those investments. Here's a link for the appreciation in the last quarter.

http://extras.sltrib.com/homeprices/Index.asp?County=Salt%20Lake

Historically, SLC has done well when CA did poorly and poorly when CA did well. Looks like a similar situation is playing out this time, although this time the housing slump might be different from previous slumps.

Labels: Real Estate

Had a meeting today with a group who finds investments. Pretty interesting. Not in a way where you feel you found a good deal, but interesting in the way that you learn something about someone that amazes you.

They basically had some very sketchy deals in several parts of the country and in various different price ranges.[ranging from $75,000 to $28 million]. The deals were
either pre-construction or commercial/land deals. They didn't really have any numbers on any of the deals[except pricing]. They just wanted $25,000 to $3 million assignment fees on most of them.

What amazed me was that though they didn't really understand market cycles or how investing worked, they definitely thought that they were doing the investors a great favor and were demanding pretty steep assignment fees upfront. Most of the deals were marginal at best and some were just terrible. And they were offering me an equivalent amount in "commissions at closing" to pimp them to my investor group.

While there are many agents, who specialize in investments and dealing with investors and provide excellent services, you also need to be wary of investment pimps who will say anything to push a product so long as they get paid they're upfront finders fee, or assignment fee. Dont' get taken in by their "research".

Always do your own Due Diligence!

Labels: Investing, Real Estate

Today I changed the funds selection in my previous employer's 401k. I was investing about 30% in Global funds, 15% in financial funds, 30% in world wide health, 10% tech, and the remaining 15% in small, mid and large cap funds. I moved the 15% in financial over to global funds.

In my current job, where I've boosted the 401k through a high contribution[currently 30% of income which I'll change from the 1st of Jan] I changed it to 60% global and international funds, 10% value income funds and the rest a mix of small, mid & large-cap funds.

Its not that I don't have much faith in the US economy[which I don't], but rather that I feel even if foreign stocks will do slightly better. I do feel that the US dollar will drop another 20-30% over the next few years which will boost the returns on global funds.

If I had to choose US companies, I'd stick to multi-nationals like Unilever, P&G and Walmart which have a large amount of foreign income and pay out dividends. Can't see myself investing in stocks that don't pay out dividends. I tried that once in 2000 and lost my shirt!

Labels: personal finance

USA Today has a good story about a young 29 year old with $165,000 of student loans.

She got a degree in Chiropractic health and makes $44,000 a year. Not surprizingly she can't afford to eat out or feel she's making any headway reducing her debt. She also isn't saving for retirement nor does she have health insurance. She does however feel saving for her future kids education is important.

Hmmm....don't you think you'd try and see if getting $165,000 in debt was worth it if you could only get a $44,000 job? Assuming a she pays 5% interest on her student loans and ignoring her other credit card debt and car loans, she'd pay about $687/mo interest on her student loan. Her monthly pre-tax income is $3700 so she pays a whopping 18.5% of her income towards the interest on her student loan!

Why would someone pay more than 1 times the potential annual salary is amazing. I have a friend who's going to Harvard Business School. Luckily she has a business and the contacts she's made in her first semester should more than pay for the education. But even if that hadn't been the case, spending $150,000 atleast makes financial sense since many HBS grads make that in the first year.

Kind of like the kids who go to Ivy league schools to get philosophy and liberal arts degrees and then wind up with $120,000 student loans and $26,000 jobs!!! Its ok if your daddy is rich and can afford to send you there. But if you're going to be paying off the loan yourself, you better make sure it doesn't take you 30 years.

Labels: personal finance

Every year Dennis Gartman publishes his "Rules of Trading." Here they are.

DENNIS GARTMAN'S NOT-SO-SIMPLE RULES OF TRADING

1. Never, Ever, Ever, Under Any Circumstance, Add to a Losing Position... not ever, not never! Adding to losing positions is trading's carcinogen; it is trading's driving while intoxicated. It will lead to ruin. Count on it!

2. Trade Like a Wizened Mercenary Soldier: We must fight on the winning side, not on the side we may believe to be correct economically.

3. Mental Capital Trumps Real Capital: Capital comes in two types, mental and real, and the former is far more valuable than the latter. Holding losing positions costs measurable real capital, but it costs immeasurable mental capital.

4. This Is Not a Business of Buying Low and Selling High; it is, however, a business of buying high and selling higher. Strength tends to beget strength, and weakness, weakness.

5. In Bull Markets One Can Only Be Long or Neutral, and in bear markets, one can only be short or neutral. This may seem self-evident; few understand it however, and fewer still embrace it.

6. "Markets Can Remain Illogical Far Longer Than You or I Can Remain Solvent." These are Keynes' words, and illogic does often reign, despite what the academics would have us believe.

7. Buy Markets That Show the Greatest Strength; Sell Markets That Show the Greatest Weakness: Metaphorically, when bearish we need to throw rocks into the wettest paper sacks, for they break most easily. When bullish we need to sail the strongest winds, for they carry the farthest.

8. Think Like a Fundamentalist; Trade Like a Simple Technician: The fundamentals may drive a market and we need to understand them, but if the chart is not bullish, why be bullish? Be bullish when the technicals and fundamentals, as you understand them, run in tandem.

9. Trading Runs in Cycles, Some Good, Most Bad: Trade large and aggressively when trading well; trade small and ever smaller when trading poorly. In "good times," even errors turn to profits; in "bad times," the most well-researched trade will go awry. This is the nature of trading; accept it and move on.

10. Keep Your Technical Systems Simple: Complicated systems breed confusion; simplicity breeds elegance. The great traders we've known have the simplest methods of trading. There is a correlation here!

11. In Trading/Investing, An Understanding of Mass Psychology Is Often More Important Than an Understanding of Economics: Simply put, "When they are cryin', you should be buyin'! And when they are yellin', you should be sellin'!"

12. Bear Market Corrections Are More Violent and Far Swifter Than Bull Market Corrections: Why they are is still a mystery to us, but they are; we accept it as fact and we move on.

13. There Is Never Just One Cockroach: The lesson of bad news on most stocks is that more shall follow... usually hard upon and always with detrimental effect upon price, until such time as panic prevails and the weakest hands finally exit their positions.

14. Be Patient with Winning Trades; Be Enormously Impatient with Losing Trades: The older we get, the more small losses we take each year... and our profits grow accordingly.

15. Do More of That Which Is Working and Less of That Which Is Not: This works in life as well as trading. Do the things that have been proven of merit. Add to winning trades; cut back or eliminate losing ones. If there is a "secret" to trading (and of life), this is it.

16. All Rules Are Meant To Be Broken.... but only very, very infrequently. Genius comes in knowing how truly infrequently one can do so and still prosper.

Labels: Investing, trading

Amazon.com is currently offering $5 off future purchases on most Magazine Subscriptions.

Save money on your subscriptions and they make great christmas gifts too!

Labels: Coupons

Today was black friday and atleast in San Diego it seemed like everyone was out shopping like its going out of style. The local best buy had great deals on TVs. I buddy picked up 2! One 32" LCD HDTV for $475[$400 discount] & another Plasma 47" HDTV for $1000[$700 discount]. Of course they only had about a dozen of these that sold out immediately but luckily we had friends camping out at various stores so with a few well placed phone calls we were able to get in on the action! He tried to pursuade me to get one too, but I'm really happy with my 19" regular TV! However I did buy a very nice laptop from Costco for under a $1000. The good thing about Costco is that if you aren't satisfied you can return your purchase at any time. Apparently people have been abusing the system so for laptops the cutoff is 6 months.

Anyway, today was a particularly bad day for the dollar. It was down against most major currencies including the Euro, Yen, Swiss Franc, Aussie & NZ Dollar and Indian Rupee. Just in time to make my vacation to south east asia just a tad more expensive!

Like I've been harping on before, I think the easiest way to get out of the multi-trillion dollar debt is for the Feds to inflate the value out of the dollar. This will provide the necessary "soft" landing for real estate. And by soft I mean a 20-40% price drop on the coasts, as opposed to a 50-60% drop. I belive its a trend that will continue for the next year or so. This will likely result in commodity inflation while the economy experiences deflation in terms of manufactured products, squeezing margins, profitability and wages. Not a good sign. [of course, this is just my opinion and could be wrong]

Gold was also uptoday to $637 and Silver is up to nearly $13.50. Finally my gold & silver coins are coming back up in value. I bought a lot of old goin coins & a few new ones for almost the bullion price. I think my average price is around $668/oz. Not bad considering a few of them are roughly 100 years ago and 2 of them are in the 200 year range! My belief is that once gold starts its upward trend again, coins will again become collectibles and will outpace the intrinsic value of the metal content.

Labels: Currency, Economy, Gold/Silver

A few weeks ago, I cursed the Canadian Finance Minister for causing my CanRoys to drop significantly overnight. I may have been premature in cursing him.

I originally bought them for the dividends that they were paying out, mostly in the 8-12% range, with the occasional one paying out 13-14%. However, the severe drop in prices caused their yields to jump proportionately to 12-17%. One of the companies I bought became a 19% yield! Even if Flaherty's taxation of dividends became true, it would still be 4 years away and by then you would've gotten nearly 80% of your money back. Last week money started flowing back in Canroys. I picked up a little more on margin. The one I picked up, AAV currently gives a 17% yield. So even if I have to pay 9-10% margin interest I'm still ahead by 7%. Plus if Oil & Gas prices continue to rise which I think they will I'll see some capital appreciation.

There are a few Master Lease Partnerships in the US that are like Mutual Funds of Energy Stocks. They only pay 6% dividends however the divis are considered return of principle and thus are not taxed!!! Pretty sweet deal if you ask me.

Labels: alternate investments, Oil and Gas

I own a few shares in a company called Freeport-McMoRan Copper & Gold Inc. (FCX). Monday they announced a bid to buy copper producer Phelps Dodge Corp. (PD) for $25.9 Billion. [yeah thats Billion]. Interestingly enough, as part of the bid FCX will pay $500 million if it backs out while PD will pay $750 million if it bails.

As if that wasn't exciting enough, yesterday an analyst floated a rumor that BHP Billiton Ltd. (BHP) would shortly announce a bid for FCX!!! Apparently the market liked that idea because prices for FCX and BHP did well. I also own shares of BHP. BHP is involved with oil, gas, copper, silver, zinc, lead, uranium, and copper by-products, including gold, aluminum, coking coal, iron ore, manganese, diamonds and fertilizers.

If you're wondering why I own stock in BHP & FCX its because I think we're going to see high inflation in commodity prices and a devaluation of the dollar. [search this blog for "inflation"]. Also read this post on "Hot Commodities".

Here's a good post on what the PD acquisition means at The Strategic Investor.

On another note, my dozen shares of PetroChina (PTR) have been doing pretty well. They're up 10% in the month that I've owned them.

Labels: Commodities, Stocks

I recently lost my beloved Canon Powershot SD300 camera. I decided it was time for an upgrade so I started researching the different options available. As obsessive as I am about doing the research I went far beyond what I originally intended to do and ended up trying to figure out the top of the line camera in the non-professional consumer space.

I found out that the Nikon D80 10.2MP Digital SLR Camera Kit with 18-135mm AF-S DX Zoom-Nikkor Lens which retails for about $1300 and its close competitor the Canon XTi 10.1 Megapixel Slr Camera with 2.5" LCD With Ef-s 17-85MM Zoom Lens which retails for around $1220 were the best picks for under $1500.

I would have to chose the Nikon D80 over the Canon XTi because of 3 reasons:
1. The Canon doesn't fit well in my hands. If my hands were slightly smaller like my wife's it would've fit well, but it just feels like its going to slip out.
2. The battery life on the Canon is about half as long as the Nikon. Plus the battery life indicator shows full, half and quarter as opposed to the somewhat more accurate meter on the Nikon.
3. No spot metering. [I'd probably never use it anyway]

Anyway, after doing all this research I got excited and decided I'd buy one. I found a few sites that offered phenomenal deals on both cameras. It seemed like I could get either kit for roughly $800 at sites like ExpressCameras.com. It sounded too good to be true. I did some research and I found its a scam. According to several review sites, customers were charged extra for batteries, straps, lens covers,etc which normally come standard. Not only that but there was heavy pressure to upsell onto much more expensive equipment. Also, quite a few people got wrong kits and had to dispute it through their credit card companies. That didn't really sound like something I'd enjoy going through to save a few bucks.

Anyway it put me off buying the damn camera so instead I just bought the Canon Powershot SD450 Camera. I figured that it made more sense since I had an extra battery and charger already! Plus I saved on a $1,000!

I just finished reading Hot Commodities by Jim Rogers. Its a very easy to read book and the author does a great job explaining why everyone should invest in commodities. A lot people mistakenly believe that commodities are very risky and that investors usually lose their shirts.

Jim Rogers shows this isn't the case and that commodities and stocks just follow different cycles. Infact in many cases, commodities have similar returns to the S&P500 but with lower risk. He explains what causes commodity prices to rise & fall, how a few different commodities have behaved in the past and how they are likely to behave in the future. If you don't have any commodities or commodity related stock in your portfolio I strongly recommend you pick up the book.

This book is not a primer on how to go about investing in commodities. Thats the topic of another book. I also recommend The Oil Factor as a related book which also has good investment ideas. [Incidentally, Jack Schwager's Complete Guide to Mastering the Markets also comes highly recommended but at $799.00 its a bit pricey!]

If you get both books, don't forget to take advantage of the Get $20 off $50 when you use Google Checkout! promotion.

Labels: Book Review

Google has a promotion right now. They're offering $10 off a $30 purchase or $20 off a $50 purchase at Buy.com if you use Google Checkout.

The Google Checkout is a very simple process. Its similar to Paypal in that it stores your credit card info, however its a much simpler process and takes only 2-3 minutes.

I used it today to pick up two books:
Mastering The Trade by John Carter &
Winning the Day Trading Game by Thomas Busby

The total price for both was about $72 and I got $20 off which represents a 27% discount!

Labels: Coupons

Here's an interesting excerpt from an MSN money article this month.

One fund that didn't notice was Permanent Portfolio (PRPFX).

Welcome to a home for your serious money -- the money you can't afford to lose. Launched in 1982 as an antidote to that most dreaded of economic conditions, stagflation, Permanent Portfolio has lost money in only three years, mostly recently 1994.

It sailed through the post-2000 tech-crash turmoil like it didn't happen, racking up double-digit gains in three of the past five years. This year, as of Nov. 1, it's ahead 11.4%.

If you could afford a numbered account in a Swiss bank -- and because of six- or seven-digit minimums, you probably couldn't -- this is how your money would be managed. The approach is absolutely immune to fashion.

"We're 20% gold, 5% in silver, 10% in Swiss-denominated assets, like government bonds, 15% in U.S. and foreign real estate and natural resources, 15% in U.S. growth stocks and 35% in U.S. Treasurys and high-growth corporate bonds," says manager Michael Cuggino.

His turnover ratio last year was 1%, implying an average holding period for his securities of 100 years. The name "permanent" was not lightly chosen.

Here's the entire article.

Labels: Investing

Doesn't it seem that there's been a resurgence of Private Equity buyouts of familiar public companies???

Readers Digest just agreed to be acquired for $1.6 Billion. 2005 was infact a banner year for corporate buyouts with targets like Hertz, Toys R Us, Neiman Marcus, La Quinta and Dunkin' Brands, the owner of Dunkin' Donuts. The targets keep getting bigger as more pension funds, institutions and wealthy individuals hand money to private-equity firms. I think even grocery chain Albertson's was bought by a team of investors for about $9.5 billion.

Some of the bigger Private Equity Funds are well known names like KKR, Apax, Blackstone and Carlyle Group. Here's what Wikipedia has to say about KKR

KKR helped develop and popularize the acquisition concept known as the leveraged buyout (LBO) by creating a series of limited partnerships to acquire various corporations, which they deemed to be underperforming. In most cases, KKR (often with management) financed up to twenty five percent of the acquisition price with its own capital and borrowed the remainder through bank loans and by issuing high-yield bonds, while having a more favorable approach towards the latter. KKR would often ensure that the target company's management r