Adventures in Money Making

BHP bought 1.5 million shares today. They report this on their website. Pretty amazing how much stock they've bought back. The stock buy backs along with their regular dividends and diversified commodity base makes them one of my favorite stocks. Plus the fact that everyone I know isn't harping on about them (like Qualcomm in 1999) makes it even more attractive.

Along with Anglo American (AAUK), these two are great commodity plays. Plus they're both down over 5% this week makes it a good time to jump in. I plan on holding both for a long long time.

As usual, do your own Due Diligence. If you don't know what that means or how to do it, put your money in ING Direct instead!

Today's market rebound was disheartening. Even though my portfolio is down on the whole, my invesrse S&P500 fund was up 7% yesterday. Now I don't know whether I should hold it or bail. On the other hand, if we saw another day like yesterday, I could exit and take my profits! But then gain, everyone else seems to be really happy with the rebound. I guess thats the closest we'll ever get to world peace. I'll take it ;-)

Labels: Commodities, Investing, Stocks

The stock market suffered the biggest loss today since the terrorist attacks on September 11th 2001.

They were allegedly caused by profit taking in China caused by the governments comments on cracking down on the rampant stock speculation taking place and by Greenspan's comments on the US facing a mild recession later this year. Even Oil and Gold were down today. So was every other sector!

The only green mark in portfolio was URPIX which was up 7% today, but I didn't own enough to offset my losses. Still, the losses are to be expected and a 30% cushion still isn't bad. Hopefully WCI will drop even further and I can actually profit from my remaining puts (which are currently underwater)

I did use the drop in GDX (gold mining ETF) to sell some March puts. If they expire worthless, then I'll have made some money and if they don't I'll own some GDX shares for less than what I sold them during the last options expiration period.

Wonder how long and severe this correction will last?

Labels: Options, Stocks, WCI

There's a very interesting article today about how strip clubs are over-looked and under-valued. I'm not sure I necessarily agree with that point of view but there are some interesting points to consider.

* They're recession proof. (along with barber shops and fast food joints)

* They have very low overheads.
The strippers pay for the luxury of working at strip-joints so there are no employee salaries or payroll taxes to worry about. Just rent and electricity!

* The have multiple profit points
First there's the entrance charge that runs $20 or more. Then comes the food and drinks. Even if they aren't allowed to provide alcohol, they charge steep fees for providing glasses and ice if the customers bring their own booze. Also they rent out room for private dances. According to the article that can run around $400-$500.

But the one thing that can't be denied is the terrific performance of 2 stocks mentioned in the
article. Ricks Cabaret Intl Inc (RICK) went from $7 to $11(baring todays market performance) in 6 months and VCG Holding Corp(PTT) went from under $3 to over $12 in the same time!!!!





You can read the whole article at MarketWatch.com.

Costco will no longer enforce its "satisfaction guarantee" on consumer electronics. You now have only 90 days to return a product.

According to BusinessWeek,

In general, Costco allows its customers an unlimited grace period to return purchases for a full refund. The only exception was a six-month deadline after the date of purchase for returning desktop computers. That unlimited timeframe still applies to Costco merchandise other than consumer electronics. Electronics goods purchased before the new 90-day policy goes into effect can be returned at any time.

Good! Whenever you abuse something, it goes away. It was just a matter of time before they scrapped their policy. Good thing they didn't wait until they went out of business! I like Costco and shop there a lot. I just picked up a 24 pack of awesome "Fat Tire Beer" from there!

For many parents, savings for their kids education is a big concern. Many opt to put them in a tax-deferred savings vehicle like the 529 plan.

Not only is this a good way to save for children's education related expenses like tuition, lodging, groceries, books, etc but there are some other loophole available too.

* You can change the beneficiary at any point to favor someone who goes to a more expensive school.

* You can use the money for your own education.

* You can give upto $60,000 to a single beneficiary in one go, although you can't give that same beneficiary any more contributions for 5 years.(since the maximum gift amount is $12,000 per year)

* You can use it as an estate planning tool by moving money out of your estate (but not necessarily out of your control). If grandpa & grandma each gift $50,000 to each of their 5 grandkids, thats $500,000 out of the estate in one fell swoop! Of course, they better not die too quickly, else some of it may be taxable!

* Being able to change the beneficiary may also allows you to skip paying estate tax for several generations!

It might be complicated to understand and setup, but I think its definitely worth checking into.

Labels: Planning, Taxes

I've been looking for cheap insurance for the past few months. But FREE insurance is even better! Unfortunately, I don't qualify, but for those that do, there are some great programs out there. Here's some info. If anyone is interested in more info, send me an email and I'll hook you up with the insurance agent.

Who is Eligible?

Seniors aged 70 to 80 (in some cases 68 up to 85) who meet ALL the following:

* Minimum net worth of at least $1,500,000 – (includes residence and all assets)
* In good or reasonably good health (no terminal illnesses)
* Currently uninsured or vastly underinsured in relation to net worth

How Does it Work?

If the insured qualifies, then usually this program funds the premiums for the first two years of a life insurance policy based on insured’s net worth. Should the insured pass away during the first two years the insured’s beneficiaries are entitled to the full face amount of the policy less premiums paid out and interest. There are never any fees or costs to the insured in any way at any time.

Example (insured passes away 18 months into the policy on a 2M policy. Heirs receive 2M less premiums and interest estimated at ~$200,000 leaving heirs with $1,800,000.)

After two years the insured has the option to continue paying the premiums and repay the loan (usually only done if the insured becomes terminally ill and it makes economic sense to the heirs). Or, the policy is sold on the secondary market by the lender(s). In most cases it is sold for above and beyond the premiums and interest already paid. In this case, the profits are split 50/50 with the insured and lender(s). Insured’s profit is expected at anywhere of 1-5% of the face policy.

The collateral for the loan is solely the insurance policy and is completely NON-recourse to the insured. Should the policy later be unable to be sold the insured is under NO obligation to repay any premiums or fees and the lender(s) take the loss.

Why does this work?

This program works as a win-win for the insured and the insured’s heirs as a result of several factors. After two years these policies are able to be sold on the secondary life settlement market for at least what the premiums paid out are for the following reason(s):

Premiums on life policies are currently very low due to high competition among insurance companies and the fact that many policies lapse or insured(s) fail to pay the premiums and the insurance company keeps all the previously paid premiums. Because of this high lapse rate and competition, the premiums are kept low. This may end soon and premiums will rise and this program will end, giving reason to lock in this program now!

Insurance companies are risk adverse and need to balance out their portfolios (meaning a Company may need 75 year olds and be willing to offer preferred rates to 75year-old’s to balance out their portfolios of non-75 year-old’s) companies are willing to offer preferred or standard rates to someone that really should not receive this preferential rate. The investors on the secondary market will pay top dollar for a policy written on someone in this scenario.

Many seniors over 70 develop illnesses after two years and/or their health deteriorates over time. These policies become more valuable to the life settlement market which means it can be sold at a profit!

The past week has been terrible for stockholders of sub-prime lenders. Today a major home builder, Toll Brothers reported that its net profit fell nearly 70% in the 1st quarter.

There's a major slow-down in many markets across the country. Inventory is piling up and home prices are dropping. However, for renters who are looking to become home owners, this is positive news.

Today I spoke to a friend of mine who's a CPA. He has a builder client who's looking to offload some of his brand new homes at a 20% discount to current market value. (Thats not the same as a year old appraisal for 20% more! Its discounted off the current market value.)

If you're looking for a new home, thats the way to go. Find a builder who needs out and buy directly from him. You'll get a great deal. Thats not to say you won't get better deals in the future, but if you want a home NOW, this is the best deal in town.

So if you're looking for new discounted homes in various parts of San Diego or downtown condos, shoot me an email.

Labels: Deals, Real Estate

Today was a great day in the markets. Well actually the Dow, Transports, Industrials and Russell sank on inflation worries. Gold spiked up $23 and Oil closed above $60.

Novastar Financials(ticker: NFI), another mortgage lender, tanked 42%.

And the Bank of Japan raised interest rates a quarter of a percent. I didn't think they had the back bone to do it! The BoJ's prime lending rate is now a whopping 0.5%! But they said they'll take their own sweet time in considering future rate increases so the Yen didn't spike on that news.

Well a good day for gold and oil is a good day for my portfolio!

Labels: Economy

I left my previous company last March and therefore stopped contributing to the 401k. I was planning to roll it over into a rollover-IRA but didn't get around to it. Luckily I did check in a few times to make sure the asset allocation was ok and I'm glad I did.

From April 1st 2006 until Feb 20th 2007 it returned 16.66%. And for the year 2006 it returned a stellar 21.4%. Now if I could keep this up, I'd be in the running with Warren Buffett ;-)

Of course my regular brokerage account hasn't done nearly as well, basically because I buy individual stocks and not mutual funds, because I think I'm so damn smart!! (Actually it was those stupid WCI puts that ruined the performance) Anyway, as soon as August rolls around (thats the 1 year anniversary of the new account) I'll post how that account did. Right now its not worth even mentioning!

My Roth IRA which I opened in September is up 11.66%. My previous Roth which I opened in 2002 and funded with $4,000 has a balance of $1.99. Its been like that for about 4 years and I don't have the heart to transfer it to TDAmeritrade or close it. Don't even know if I can close it.

Anyway, I'll be funding the wife's 2006 Roth at Bank of America. I just got an email that if you maintain a $25,000 balance they'll give you 30 free trades per month which is pretty sweet. Don't know if they have the same breadth of products as TDAmeritrade but they can't be too bad.

Incidentally I found out that TDAmeritrade had taken out some of my dividends from last month and reapplied them the next day. When I inquired why, I found it was because the fools didn't know what the Canadian Loonie to US Dollar conversion rate was and mistakenly gave me $0.002 cents per US Dollar. That didn't even make a 1 cent difference which leads me to wonder where all those rounding errors go??? Is there some programmer (like in 'Office Space' or 'Superman III') who's getting fat off these?

Even though Anna Nicole Smith's husband (did they marry? I don't really follow this sort of thing) Howard Stern was an attorney, her will was supposedly taken straight out of a textbook and wasn't even proof-read. She apparently left everything to her son (who's deceased) and specifically excluded all unborn future kids.

Don't know why she'd write in something as wierd as that but apparently thats what you get when you pay $19.99 for your will. So not only will Dannielle Smith-Stern be dragged through a six ring circus of paternety suits, but her mom's money will probably be dragged through the probate courts, the IRS and then finally through her legal guardian's hands. (& maybe her attorneys too!) Good luck getting that dough!

When you die, the last thing you want is for your loved ones to
(a) fight over your money/possessions
(b) pay an obsene amount of tax - both inheritance and income tax
(c) be dragged through the probate courts to get it

Better you spend a little time learning about it and a little bit of money to make sure everything is sorted out before you die.

Labels: Planning

After playing phone tag for nearly 4 months I finally met with an insurance agent today. I've been meaning to get disability and life insurance for myself and the wife and today I got some good quotes.

For me a $1000/mo disability policy thats indexed to inflation costs only $29/mo. Term life insurance that starts out at $300k and eventually reaches $600k in the 10th year only costs about $248/year. It increase every year but its not a lot. In the 10th year it'll be around $745/year. The advantage with this plan over a fixed premium product is that this plan is good until I'm 80. The fixed premium product is only good for 20 years.

The cost for my wife's policy is cheaper by about $50-60/year. We're not getting disability for her since her company has awesome coverage already.

Since I'm getting insurance as a safety net for my family and future kids, I want to keep up my policy until they're atleast out of college. Since I don't currently have any kids, we're talking atleast 20-25 years. Getting a policy that lasts for nearly 50 years is a good way to ensure this, since I won't have to go through medical check-ups again and there's no chance of my failing to qualify for insurance because of bad health later on.

Insurance is cheapest when you don't need it! If you're planning on having kids you need to get life insurance. If you have a decent job you need disability. Get it now!

Labels: Planning

I've been selling covered calls on GDX - yes I know selling puts is the same risk-reward ratio but I usually do pretty well in selling far out options. I lost a whopping $40 than if I had outright sold them on friday. I'm hopping we'll see a small dip in the market next week so I can buy back in at roughly the same price.

I'm thinking I might actually buy CEF or SLW (Silver ETF) instead since I think there's a chance than silver might run up more than gold on a percentage basis this year. The markets closed today, but earlier kitco.com reported that Gold was around $672.00/oz. quite a jump in the past few months. Hopefully it consolidate before resuming its next leg up.

My GG naked puts expired worthless so I made $138.50. If they had expired in the money I wouldn't have felt bad about actually buying the stock.

Labels: ETFs, Gold/Silver

Looking at the unbelievable Valentine's Day rally in the stock market, I decided the market might be heading for a correction. I read somewhere that smart money had the highest amount of short futures contracts since May of last year, when the market corrected quite a bit.

The easiest and cheapest way to short the S&P 500 is to buy a Profunds Inverse Market Fund like URPIX. It has amongst the lowest expenses for funds in that category and if you buy through TDAmeritrade, there are no fees to buy or sell. Not only that but $10k minimum is also waived.

The only problem is that it takes about 3 days to get in or get out of this trade, a move that may have been implemented to prevent people from daytrading mutual funds.

Anyway, I finally got filled friday at a price of $13.29. Lets see if this trade works out. I'm not really good at timing the market and as seen by my WCI puts, I'm actually quite terrible at this sort of thing! But since I don't want to sell any of my stock, this way, I'm hedging my bets. But hopefully, I can get better at this sort of thing.

Speaking of WCI, Bill Gates's foundation announced they were bailing on it but that didn't help. The stock still went up! Its up 30% since October!

Labels: Stocks

Rich at Queercents has a good post on what it takes to be middle class and makes a great case on why being middle class (at a $75k annual income) means barely getting by.

Sadly, I agree with the post. Ever since the 1960s, where a single earner in the family could provide for a family and send the kids to college, the average american's standard of living has been eroding at a steady pace. Of course the average house is 30% bigger than a 60s house but apart from the bump in creature comforts, there has been a drastic decrease in the amount of savings.

It now takes 2 incomes to maintain a decent lifestyle, and again, most people barely get by. There's the choice people have to make - do I want to save for my retirement this year, or go on vacation? And with the government lying about the rate of inflation, Social Security payments (or bank savings rates) haven't been keeping up. As a result, many seniors who thought the government would take care of them have an even more difficult choice - should we buy food or medicine?

In California, where the median house price is $550k (and dropping), being middle-class is even more difficult. I have friends, where both spouses work. One of their incomes goes totally towards house payments! So far I've turned down my wife's complaints about moving into a bigger house on the grounds that we can't afford it. I'd rather make the extra payments into areas where the house prices are appreciating and the rent covers most of the mortgage. Its better to have 5 appreciating assets you can afford than 1 depreciating "asset" that you can't. (isn't that really a liability?) Of course, the popular press will make stupid comments like "your house is your biggest asset" instead of saying, "if your house is your biggest asset, it just means you don't really have any assets and are probably broke". (that deserves a seperate rant of it own!)

Just goes to show that no one will take care of you. Its up to you to make your own financial future, to learn about finances and investing, to make the right and smart decisions, to live below your means, and to develop alternate means of income. And thats Kiyosaki's philosophy in a nutshell! Now you don't have to read the book ;-)

Labels: personal finance

I'm currently half way through a great book by Jared Diamond called Guns, Germs, and Steel: The Fates of Human Societies.

It delves into 30,000 years of human history and tries to answer the question how some cultures were able to dominate over others and become successful. Its an incredibly interesting book and the author has done a ton of research. If you're too lazy to read it, its also available on DVD from National Geographic.

It doesn't have anything to do with investing but I had to recommend it nonetheless. On the other hand, anything you learn can spark a million dollar idea! Check out some really dumb ideas that made millions.

Labels: Book Review

Bank Of America is going to start giving out credit cards to illegal immigrants who don't have social security numbers.

Apparently there will be some checks in place to make sure they're not financing terrorists. The applicants must maintain a bank account for 6 months and pay an upfront fee.

What I'd like to know is how on earth can they open bank accounts without a social security number?