August 31, 2009

China Manufacturing Grows at Fastest Pace Since 2008 (Update1) -

China Manufacturing Grows at Fastest Pace Since 2008 (Update1) - "China Manufacturing Grows at Fastest Pace Since 2008"

As economies and nations become interlinked - good news in another country becomes good news for everyone!

August 27, 2009

Green energy = More taxes?

The Obama administration is focused on green energy, or "clean" energy programs that make America more efficient and reduce our dependence on foreign oil. For instance, the current administration has provided billions in subsidies/funding for domestic automakers to provide new technology and more fuel efficient vehicles by requiring that the average mpg on vehicles be increased by 30%. This means that the American people will consume less gas at the pump, and drive further on a tank of gas. And as electric vehicles and bio fuels come to market, some of us won't use gasoline at all.

This is where the potential dilemma comes into play. As we drive more fuel efficient vehicles and consume less gas at the pump - the government receives less tax revenues for improvements to infrastructure such as roads, bridges, highways, etc. Currently, the federal gas tax is 18.4 cents per gallon (unchanged since 1993) of gasoline that is pumped in the United States. According to the Department of Energy, it is estimated that we consume approximately 378 million gallons of gas per day. Multiply this by $.184 and our government receives approximately $69,552,000 in tax revenues every day!

But again, as Americans drive more fuel efficient cars and therefore consume less gas, there will be less money coming in from federal gas taxes for improvement in our infrastructure. Eventually politicians will become aware to this decline in tax revenues and will have to find a way to keep the money rolling in, so they can fund the necessary projects to improve our infrastructure...and that they might be re-elected into office.

Maybe the government will choose to increase taxes on our utility bills as "plug in" vehicles become more popular? Or perhaps the government will employ a "mileage tax" to increase revenues by taxing people who take long road trips for vacations? Or since the average person commutes up to 30 miles Monday-Friday for work - maybe a mileage tax is a viable option? Or perhaps the government will just simply increase the current federal gas tax to, say $.50 cents a gallon?

In summary, what I'm saying is although vehicles with "better gas mileage" are better for the environment and takes less gas to fill up - they may still cost us more money in the end.


August 26, 2009

FDIC OKs rules easing bank buys by private equity - MarketWatch

FDIC OKs rules easing bank buys by private equity - MarketWatch: "FDIC OKs rules easing bank buys by private equity"

This was bound to happen - as the FDIC's capital begins to get low....

August 23, 2009

Real estate, capital gains, & deferred taxes

Just as there are opportunities in the stock market today, there are also several opportunities in real estate as well - where one can buy properties at a low price and invest for capital gains and/or for cash flow. But just as you eventually need an exit strategy for your investments in the stock market, you also need an exit strategy for real estate.

Take, for example, Shannon Banks who owns an investment property in the form of 2 duplexes with a value of $219,000 each, or a total of $438,000. After a down payment of $100,000, Shannon owes a total of $338,000 in loans for these properties that she bought in March 2009. Since each duplex can house 2 families each, she decides to rent out all 4 units for $700/month.

As the economy regains traction and the housing market stabilizes, it is estimated that in year 2011 the value of Shannon's duplexes will appreciate to a total of $620,000. Let's fast-forward and say it is now year 2011. Shannon owes approximately $315,000 on her property which is now valued $620,000 - which means she has approximately $305,000 of equity in her duplexes.

Let's say instead of selling her duplexes for a profit and paying fees and taxes on the sale of her investment, Shannon refinances to take advantage of the equity in her investment property. The bank gives her a new loan for $550,000. By refinancing, Shannon defers her capital gains taxes and pays off her original loan of $315,000 and pockets the $235,000. Since Shannon did not yet sell the property, she gets to defer her capital gains taxes until a later date.

So now Shannon can use her $235,000 to purchase another property that she can use to rent out and increase her already $2,800/month income, or she can invest this money into the stock market and not have to worry about taxes until she decides to either take her money out of the market, or decides to sell her duplexes.

This is smart money. Shannon is using her money to work for her, instead of her working for it! By deferring her capital gains tax to a later date - she ultimately pays less taxes. Why? Because of the time value of money. If Shannon defers her taxes to 30 years from today - the real value of what she pays in the future will be less than if she sold her property and paid taxes today.

Work smarter. Think harder.


August 19, 2009

Warren Buffett's 'Greenback Effect' Warning: A Call to Buy Stocks - Warren Buffett Watch -

Warren Buffett's 'Greenback Effect' Warning: A Call to Buy Stocks - Warren Buffett Watch - "Warren Buffett's 'Greenback Effect' Warning: A Call to Buy Stocks"

If you're not buying stocks - what are you waiting for? Do not depend solely on savings as the value of your savings are eroded by inflation and increased taxes. Financial freedom is about taking advantage of opportunities, and the opportunity to buy stocks this cheap won't be around forever. Do more than just invest in a 401k or 529 plan - open your own portfolio in Sharebuilder, TD Ameritrade, Scottrade, etc. and get started investing.

The US dollar index indicates that the dollar is getting weaker - which ultimately means that oil will eventually become pricier, along with more inflation that is a result of the government providing us with all this "stimulus", TARP, TALF, "bailouts", etc. Someone eventually is going to have to pay the government's tab - guess who? You and your children will have to pay these bills in the form of either increased taxes or increased inflation. Since most politicians need your vote to keep them in office - they won't mention the thought of increasing your taxes to keep inflation low - therefore, inflation will run high while your taxes remain the same.

Stocks are a better hedge against inflation than cash - period. Don't suffer while the economy is down AND get left behind while the economy is on a rebound. The recession is over...get in the game.

August 16, 2009

My stock picks

Stocks I like - Chevron (CVX); iShares Silver Trust ETF (SLV); Alcoa (AA); and ING Groep NV (ING)

These stocks are from reputable companies that currently have undervalued stock prices.

* CVX is a growth stock that will eventually rise as the price of oil rises - potentially next year

* SLV is a trust that invest in Silver, which has a a 19% YTD Return and can be a good hedge against upcoming inflation

* AA is a cyclical growth stock that is undergoing some difficulty as the economy struggles - but will increase in value as the auto & home industry stabilizes

* ING is a growth and dividend stock with a 15% yield payout, or $2/share. I like the bank's business model and know it also will increase as the housing industry stabilizes. I also love the dividend!

Store credit card a good deal? (Page 1 of 2)

Store credit card a good deal? (Page 1 of 2): "Store credit cards a good deal?"

Just a quick article for those of you harassed by store retailers to accept their credit cards - is it really necessary? Hopefully those of you who DO accept the cards will actually pay the credit cards off immediately. Because if you receive 20% off your purchase - but then you wait 1 or 2 months to pay the cards off - you end up paying more for your purchase than if you would have just paid cash. Overall, I would stick with cash for purchases...playing with credit cards usually gets you burned.

August 14, 2009

Tired of Overdraft fees?

I AM. Banks love to charge outrageous penalty fees to your checking/savings account even if you go over your account balance by just $0.01! Why? Because it is estimated that some banks receive about 75% of their revenue from assessing penalty fees to its customers accounts.

You think they would cut us some slack given that we’ve just bailed them out with billions of dollars of taxpayer money (in which we, including our children, will be paying for in the form of increased taxes for years to come – while our banks posts record profits amidst a recession). “U.S. banks will likely collect $38.5 billion from their customers in overdraft fees by the end of the year, according to a report in Monday's Financial Times. Many banks reacted to the financial crisis by increasing the fees for overdrafts and credit cards to keep profits up.”

This is an outrage – and unfair – and the reason why I choose to bank with ING the self-proclaimed “bad boy” of banks, that does not charge overdraft fees per transaction, but rather a low monthly interest rate on the amount that you go over. But if you pay the over draft balance before the end of the month – then they charge you no fee at all! Here’s an example directly from there website:

“An Electric Orange Customer has $1,000 in his Electric Orange, and an Overdraft Line of Credit limit of $165. He buys a new laptop computer for $1,100 using his Electric Orange Card. This transaction will be processed using the $1,000 balance in his Electric Orange, and $100 from his Overdraft Line of Credit. His Electric Orange balance will now appear as -$100 on our website, which reflects the $100 credit used from his Overdraft. He will then pay a competitive interest rate on the $100 he borrowed until it’s paid down with his next deposit.”

Therefore, if today I decide to overdraft my account by $50 and I decide to wait a week until I make a deposit – I do not get charged a penalty or overdraft fee! As long as I make a deposit before 30 days – in which I would be charged an interest rate of 7.25% on that $50 - which is still lower than most banks.

Why would a bank do this? (Not to mention they pay a higher interest rate on the balances in your checking and savings account than most all other banks!) The answer is that they decided to put consumers first – their business model is different from traditional banks in that they believe they can be just as profitable and succeed within their industry by treating people right.

Now the only caveat in joining a great bank such as this is that you first must have a good credit score to be accepted – because unlike traditional banks, this bank does not accept anybody. But if I did have bad credit, this would be yet another motivation to repair it – so that I too could be a part of a bank that protects my money, is FDIC insured, and shows that it actually cares for my account and my business.


August 11, 2009

Atticus Capital to close two hedge funds - Times Online

Atticus Capital to close two hedge funds - Times Online: "Atticus Capital to close two hedge funds"


FYI - On another note - The addition of hedge funds into an investor's portfolio has proven to be a great alternative to protect one's portfolio against traditional asset classes in a downturn economy such as the one we're experiencing.

August 10, 2009

Are rappers/hiphop artists making money? How many actually retire?

Whose your favorite rapper? – Lil Wayne, Plies, Rick Ross, Gucci, TIP, Jeezy, (fill in the next 90,000+)? In the videos they claim to have plenty of what the average American does not – money, cars, clothes, 10,000 sq ft homes, and the bling to go with it. Not to mention the M-16’s and the infamous “A-K” to protect it all. But given the mass fortune of wealth they portray in their lyrics, videos, and concerts –how much money do they actually have outside of the public eye? I didn’t notice many of them on the Forbes’ list.

But I’m not surprised since many “artists” only get paid 8% - 13% of their album’s retail sales price AFTER everyone else has got their cut (lawyers, label, manager, accountant, IRS, etc.) of that album’s sales. And if it’s more than one person they’ll have to split the remaining meager profits, which is close to nothing if you have like 5-10 people in your group (I wonder how many rappers retired out of WU-Tang? MC Hammer’s club?)

Only those at the top – which is about 6 rappers are actually making money today. The rest of the 90,000+ are probably making the equivalent annual salary of a data entry temp…like $35k/yr if they are even somewhat successful – which is why many of them eventually go broke, in jail, or decide to get real jobs after several years of trying to “make it”.

Not going to retire “artists”
1. Soul For Real
2. DMX
3. Rick Ross
4. Clipse
5. The Lox
6. Lil Kim
7. 95 South
8. Lost Boyz
9. Wu Tang
10. Young Buck
11. Yung Joc
12. Fat Joe
13. Plies
14. (the other 90,000+)

Face it – if you’re not JayZ, Lil Wayne, LLCoolJ, OutKast, Eninem, and maybe 1 or 2 more I can’t think of – then you’re wasting your time.

Hopefully the message gets out to the young and upcoming that there are better options than becoming a rapper/entertainer, and instead they should focus their time and energy in becoming a successful entrepreneur, surgeon, lawyer, or maybe a highly paid CEO who receives a “golden parachute” when they get fired or retire. The road to becoming a successful rapper is a lot harder than it is to go college and become a CEO or successful entrepreneur – but unfortunately parents focus not enough on education and teaching the next generation about financial literacy and working smarter.

This trend needs to change if we want our kids to become the next generation of leaders and employers, instead of followers and employees. Why are rappers teaching our kids to sell drugs, show your underwear, have lots of sex before you’re 15, commit a crime, and make an album about it? Imagine the pressures being felt by our young daughters who feel as if they are not pretty if they do not have a big ass or dress a certain way? Or that they need to have sex before they’re ready in order to feel loved or build their self esteem?
Take responsibility for your kid’s individual and financial future – show them the way even if you can’t get there yourself.

Dhata H. – this was a great convo that we had…


August 6, 2009

FTC OKs rule

FTC OKs rule prohibiting oil market fraud - MarketWatch: "FTC OKs rule prohibiting oil market fraud"

I'm glad FTC decided to act on this issue - hopefully they will follow through and keep prices normal for a while!

August 5, 2009

Work smarter with money; even if you have little money!

Not making enough money in your job? Don’t plan to be there forever? Or work forever? If you stopped working today – would you still get paid? A lot of us are trained to work harder and put in longer hours at work (sometimes up to 80hrs!) just to get noticed over someone else for that raise, promotion, and/or title. And if we don’t get the raise this year – we will try harder the next year. Working hard is good – but working smarter is GREAT! Why put in longer hours at your J-O-B and not be fully compensated for it? The Bureau of Economic Analysis showed that wages and salaries fell again for a tenth straight month decline of 0.4%, even though personal spending increased 0.4%. So we’re making less and working more.

But we can BE our own boss and not spend our life working for others – and it really doesn’t require an MBA or Doctorate degree, but rather just thinking differently and wisely about how to apply your money. I’ll show you 3 ways to do so:

1. Keep your day job (for now) – although we never get paid enough while working for someone else, it is the best alternative for a steady income in your household. While on the job be sure to take advantage of the 401k program and hopefully you invest the full percentage amount up to what your company matches.

2. Invest yourself – Instead of spending your extra money on movies, expensive shoes, or cars – why not open up your own investment account through Sharebuilder, Scottrade, TD Ameritrade, etc. and manage your own portfolio? And for those of you who don’t have the time to research stocks – you could easily invest in index funds that statistically have outperformed 70% of the investment managers out there.

3. Find Opportunities – “BE greedy when others are cautious, and cautious when others are greedy” – Warren Buffet. Did you know that if you invested $1,000 in Ford Motor Co. back in January 2009, you would have over $8,000 in your account today? In just 8 months!!?? (Yes I made the call to my friends and family to pick up this stock back in January, but sadly not many did…) This is an example of how to work smarter with money…even if you have little money! For those of us who DO have time to invest and research the stocks for our portfolio, you can find hidden rubies such as Ford was in January (there are still several out there waiting for you). Also take advantage of stocks that pay constant dividends – over time you will come to find that you may have a substantial amount being paid to you quarterly that adds to your bottom line.


August 1, 2009

How much would you need in retirement?

Is an early retirement possible for you and/or your family? How much can one expect to save if he/she regularly invests and saves their money up until their retirement? This is a serious topic because there are several sources of information telling us that if we save regularly for X amount of years then by the time we retire, we will be millionaires. But how much value will a million dollars hold by then?

I’ll provide a clear example of this:
Let’s say that William Brown makes $40,000 today and decides that he wants to have $1.5 million by the time he retires in 40 years from today – which would make him 68. He expects to receive an average pay raise of 6%. According to Bloomberg Retirement Calculator – If he made regular contributions and saved at least 20% of his salary annually he would accumulate a sum of $1,732,188 – which actually exceeds his goal (excluding Social Security) by the time he is ready to retire.

Brown believes that he is on track to a successful retirement if he averages an 8% return on his investments. Unfortunately, he did not consider the actual value his $1.7 million will be 40 years from today. Using TVM (time value of money), we are able to calculate how much $1.7 million is worth today to get an idea of what it would be like for Brown to retire in the future.

Using the formula of TVM:

FV/(1+r)^T = 1,732,188/ 1.08^40

This will give us an understanding of what Brown’s retirement will be worth in the future – or rather what will $1.7 million be worth 40 years from now. After solving for the equation we find that Willam Brown’s retirement will be worth roughly $79,734 for retirement. Assuming we don’t have a mortgage, credit cards, or any other bills that prevent our savings for retiremet – who can survive off of just $79k? Imagine the lifestyle adjustment....

According to Bloomberg, Brown needs to aim higher – and save more money in order to retire comfortably as the Time Value of Money erodes his retirement value.

How many of us can successfully retire?