Investing Curiouscatblog

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  • 12 Stocks for 10 Years Update – Jun 2007

    I originally setup the 10 stocks for 10 years portfolio in April of 2005. In order to track performance I setup a marketocracy portfolio but had to make some adjustment to comply with the diversification rules. In December of 2006 I announced a new 11 stocks for the next 10 years (9 are the same, I dropped First Data Corporation, which had split into 2 companies and added Tesco and Yahoo). Now I will add Templeton Emerging Market Fund (EMF) making it 12 stocks for the next 10 years. I like the emerging market area and liked the concentration in China and southeast Asia the Dragon fund offered. I still do, but given the rapid rise in the Chinese market especially other markets look more attractive than previously. EMF will allow for a wider geographic representation.

    At this time the stocks in the marketocracy portfolio in order of returns –
    Google (134% return, 15% of the marketocracy portfolio, 12% of portfolio if I were buying today)
    PetroChina (127%, 7.5%, 8%)
    Amazon (92%, 6%, 6%)
    Templeton Dragon Fund (73%, 11.5%, 10%)
    Toyota (69%, 10%, 10%)
    Cisco (54%, 6%, 8%)
    Tesco (14% [22.55 purchase price on Dec 11th 2006]*, 0, 10%)
    Templeton Emerging Market Fund (EMF) (15%, 2%, 4%)
    Intel (6%, 4%, 8%)
    Pfizer (-6%, 4%, 8%)
    Yahoo (-12%, 4%, 6%)
    Dell (-23%, 6%, 10%)
    (more…)

  • Incredibly Bad Customer Service from Discover Card

    So I had a Discover Card. They charged me for charges I didn’t authorize. They then force me through their maze of policies telling me that it was not possible to be more customer friendly – their policies couldn’t be any different they were the policy (as if that made any sense). So Discover Card had to shut down my account. I told them if they couldn’t provide better service then I didn’t want a new account after they closed my account which was the only way they wouldn’t charge me for charges I didn’t authorize. They owed me $240 from their cashback bonus program. Now they refuse to pay me the money I earned because they say that it is their policy not to pay the cashback bonus if an account is closed.

    After going around on that for awhile and them assuring me it was their policy and it was not possible for it to be done any other way by them or anyone else I asked what happened if someone died. Oh then the account is closed and we pay the money we owe on the cashback bonus. So obviously it isn’t that the account being closed makes it impossible for Discover to pay what was owed. It seems pretty obvious it is just a good way to take money Discover owes and just count on people not wanting to waste their time fighting to get what Discover owed them. Maybe one of their marketing people told them doing this to people that just had a parent/spouse… die might be bad publicity so they decided to actual pay what was owed in those instances. Jeez why can’t credit card companies just provide good service and treat customers well instead of only doing the absolute least they can that won’t spark outrage from the public and legislative action to prohibit such practices (I image not paying what was owed to people that died would spark legislative action if it wasn’t already illegal).

    Is it really legal to charge someone for charges they didn’t authorize and when they tell you they didn’t authorize them refuse to do anything about it if they don’t close their account and then say we are not going to pay your cashback bonus because your account is closed? it seems to be yet another instance of credit card companies doing everything they can to take money from customers. Of course they claimed it was impossible to do anything else it was their policy to do it this way and no other credit card company is any different.
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  • Credit Card Tips

    It is difficult to imagine trying to live without the convenience of credit cards. Yet many get into financial trouble in part due to their misuse of credit cards. By following a few simple rules you can avoid the missteps and use credit cards to improve you personal finances instead of falling into the credit card traps.

    First, don’t use your credit card for loans. Pay off your balance each month. Pretty obvious advice but way way too many people don’t follow it. If you use your credit card for a loans – 98% of the time that is a mistake and big risk to your personal financial future. Don’t do it. There is a reason pretty much all the advice from financial advisers on credit cards starts with this – it is the most important advice.

    Second, if you don’t follow the advise above pay off your loan as soon as possible. Payment the minimum payment is huge mistake. You should not be making any discretionary purchases if you are not paying down your credit card debt substantially each month.

    Continue reading credit card tips.

  • Real Free Credit Report

    From the official US Federal Trade Commission site:

    A recent amendment to the federal Fair Credit Reporting Act requires each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months. But there’s only one online source authorized to do so. That’s annualcreditreport.com. Beware of other sites that may look and sound similar.

    Viewing your credit report is an important step to financial security. You should review your credit reports annually (at least) to correct and any errors. Also doing so can be a tool to help you spot identity theft. The credit report site also has a large frequently asked question section with answers to questions like: What is a credit score? How do I request a “fraud alert” be placed on my file? Should I order all my credit reports at one time or space them out over 12 months? (I would suggest spreading the requests out during the year myself).

  • Cash Flow

    We will be posting messages on various terms and concepts in investing and economics. Here we offer some information on cash flow.

    Earnings per share include many adjustments to reflect the standard accounting wisdom, beyond the cash taken in and spent by a company (depreciation, expensing options, expensing long term investments over the expected life, writing off inventory…). Cash flow is a measure that tries to more closely measure the increase (or decrease) in cash for a company over a period of time.

    An advantage of looking at cash flow is it is more difficult to distort than earnings per share (though it is still very possible). A disadvantage is that standard accounting practices exist for a reason and often give a better picture than a simple view provided by the cash flow. Therefore cash flow is normally useful in conjunction with the earnings statement – not instead of.

    Operating Cash Flow attempts to eliminate such non-operations impacts (like selling or buying stock) and give a cash flow figure for the operation of the business. Free Cash Flow is equal to “operating cash flow” less “net capital expenditures.”

    Like many accounting terms, cash flow is more complex in execution than it seems but this gives you a start on understanding cash flow.

    More from the Curious Cat Investing Dictionary on Cash Flow

  • Washington Paying Out Money it Doesn’t Have

    Aid Is a Bumper Crop for Farmers

    The lawmakers voted to use $8 billion in new taxpayer subsidies to help farmers buy crop insurance to protect them against losses. The insurance would replace the disaster payments and reduce government costs.
    …
    One week before the presidential election, it passed a new $1.8 billion disaster bill to assist farmers hurt by bad weather. Two others followed in subsequent years, totaling more than $6 billion. Today, after a searing drought in the Plains, farm-state legislators are pushing for billions more in aid.

    The result is that farmers often get paid twice by the government for the same disaster, once in subsidized insurance and then again in disaster assistance, a legal but controversial form of double-dipping, a Washington Post investigation found. Together, the programs have cost taxpayers nearly $24 billion since 2000.

    Some politicians talk as though they respect capitalism. They claim to reject taxing people just to give that money to others. Yet they continually increase the debt (taxing our children and grandchildren) and make payments to corporations, farmers and others for no reasonable purpose, other than buying votes. In addition to payments to farmers the government pays those who build million dollar beach house when the predictable storm knocks them down. No rational capitalist or economist would support such behavior (a political consultant might if when voters reward those that buy votes with taxpayer money, which seems to be the case now).
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  • Estate Tax Repeal

    The estate tax is the most capitalist tax that exists. Capitalism, which some seem to think is based on people inheriting assets from their relatives, is not. Capitalism is based on the concept that each person gets to receive rewards for their work.

    Long before Adam Smith, noble rich passed on their wealth to their heirs. It was not Capitalist then and it is not Capitalist now.

    Unfortunately many seem to have skipped economics in school and accepted the claim that Capitalism is about protecting the rich. They seem to believe it is a tenant of Capitalism that those that have the gold make the rules. That is in fact a risk that Capitalists must protect the economy from, not something Capitalist approve of. Those who believe in the wealth being passed from those who earn it to those who they like, believe not in Capitalism but in the state not taxing the idle rich but instead taxing those who don’t have millions given to them. While many have come to believe that such idiocy is Capitalist, it is not. People should read the Wealth of Nations by Adam Smith to get a much clearer idea of what Capitalism is about than those in Washington DC have.
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  • Manufacturing Jobs Data: USA and China

    Originally posted on our Management Blog.

    Manufacturing Productivity and the Shifting US, China, and Global Job Scenes-1990 to 2005 (working paper – July 2005) by William Ward, Clemson University:

    Manufacturing productivity growth from 1990 to 2004 should have taken away 7.5 million of the 17.7 million manufacturing jobs that existed in the US in 1990, while GDP growth should have added back (at the new productivity levels of 2004) 5.7 million manufacturing jobs-for a net loss of 1.8 million. In fact, the US economy lost 3.3 million manufacturing jobs during that period
    …
    I find that 100% of the (3.0 million) manufacturing jobs lost since 2000 were lost to manufacturing productivity growth and that 100% of the (1.8 million) jobs that should have been added back by GDP growth in the US after 2000 were shifted to other sectors of the US economy than manufacturing.

    In this paper he is examines the factors leading to a reduction in manufacturing job worldwide. He concludes that job losses are mainly due to increased manufacturing productivity (worldwide, manufacturing productivity is increasing and jobs are decreasing – including China). (more…)

  • Saving for Retirement

    Our Financial Failings by Neil Irwin, Washington Post:

    Meet the typical American family.

    It has about $3,800 in the bank. No one has a retirement account, and the neighbors who do only have about $35,000 in theirs. Mutual funds? Stocks? Bonds? Nope. The house is worth $160,000, but the family owes $95,000 on it to the bank. The breadwinners make more than $43,000 a year but can’t manage to pay off a $2,200 credit card balance.

    That is the portrait of the median American household as painted by the Federal Reserve Board’s Survey of Consumer Finances.

    Saving for retirement is not complicated, it is just a matter of priorities. Most people care more about a Starbucks coffee each day (or season tickets, or new shoes, or a new car every couple of years or…) today than saving money for retirement. In a capitalist society we believe in letting people make their economic choices. The choices most of us make (in the USA) lead to the results above.
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  • How Not to Convert Equity

    CNNMoney is not exactly intellectual discussion of economic and investing issues but normally it offers fairly good material for the large number of people. Especially those who really don’t want to read Warren Buffett or Brad Setser. Still the following quote in their article, Cashing in on hot real estate is just wrong:

    They also have one extremely valuable asset: a house in the now trendy Silverlake neighborhood of Los Angeles that’s worth $1 million, nearly four times what they paid in 1995. The equity, Handel says, is “lovely,” but it’s not doing them much good right now.
    …
    San Diego-based certified financial planners Christopher Van Slyke and Terry Green recommend an unconventional plan: taking out a new $500,000 ARM.

    Handel and Laport can pay off their existing mortgage before the rate rises and retire their other debts. They can put the remaining $200,000 into stock and bond funds.

    To be sure, borrowing against a house to put the proceeds into the market rarely makes sense. But in Handel and Laport’s case it does because so much of their net worth is tied up in their home, and the super-hot L.A. real estate market looks primed for a fall…

    They can convert equity that might melt away.

    They can what? In no way does increasing their leverage convert equity that might melt away. Any amount of “melting away” will still happen after this increase in leverage – no conversion has happened. They still have a full ownership interest in the real estate. If the value of their house fell $300,000 before or after this supposed “conversion” they would “lose” (on paper) the same amount: $300,000. The investment risk for the house has not changed (for the whole portfolio you could argue it has but that gets complicated and subject to debate).
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