Well, I'm Finally Wrong!

So, hell has apparently frozen over and I am finally wrong about how the market was going to perform during the month of October. I assumed the run up of the market was a perfect situation for October's options Friday to cause a large drop and send the DOW tumbling towards 8500. However, the volatility was very subdued and as it turns out the DOW is sitting at about 9700. So, my bearish outlook has betrayed me and caused a pretty large miss by my prediction.

When confronted with a big miss, you can do one of two things; dwell on the mistake or find out why the market behaved the way it did and take something away from that to aid you in the future.

I chose the latter and this is what I came up with. The market is completely F'd. The US dollar is surging when Bam Bam is going buck wild printing money. The value of gold is off the charts at the same time. Consumer confidence is at an all-time low, yet stocks have surged despite the most recent pull back of a few hundred points off the DOW, which by the way was triggered by the DOW breaking the 10,000 point barrier. We finally get one quarter with an expansion rather than a contraction of the economy and now all the analysts are stating the recession is over. The recession may be over according to the definition, but in reality, the recession is simply taking a break before it lets loose again, once the market's euphoria has abated. We are not out of the woods by a long shot. Still with the threat of major inflation lurking for the next decade, stocks are still the best way to hedge against inflation.

For now, the best bet is still to utilize dollar cost averaging and refrain from the indefinite buy and hold strategy of the old days. You can still buy and hold, but you still need to keep an eye on all of your holdings, even if you have big boys like JNJ, XOM, PG, etc. No company is safe from going belly up. For now, keep and eye on things and see where the future takes us.

A Look Back: 5 Stocks For The Long Term

Hello again! The DOW is pushing towards 10K and October is less than a week away. The volatility seems to have been under control as of late, especially when compared to a year ago; when 2%-4% swings in a day were the norm and investors were bailing out left and right. Anyway, don't be surprised if the DOW does top 10K that you will see the institutions trim their positions in anticipation of October's options Friday (October 16th). If the market is still high by then, you'll see a spike in trade volume as call options will be exercised and a lot of shares will be trading hands. For example, if a investor purchases a contract (100 shares) for Exxon (XOM) at $65 per share and by the middle of the month of October, XOM is at $75 per share, the investor can exercise that option and take control of the 100 shares of XOM at a cost of $65 per share and can either hold the stock or sell it into the open market for $75 (or whatever the market price is at the time of sale) and have a taxable gain of $1,000. If prices are high across the board, you could see a flood of stock being sold into the open market and when that happens prices can nosedive (supply & demand). If the market is high, the pros simply increase their cash hoard and wait for the herd to act and then can scoop up relatively cheap priced stocks in the aftermath.

Ok, enough of that. Earlier this year, I authored a five part series describing what I felt were five stocks for the long-term and why (Feb. 27th-Mar. 26th). Since it has been six months since I finished the series, I thought it is a good time to check back in to see how those five beauties are performing. Let's have a look......

Stock #1: Cherokee (CHKE)

Feb. 27 Close Price: $13.94
Sep. 24 Close Price: $22.39
Percent Change: +60.62%

Looking at the numbers, it looks like the pick was a great one. However, remember that CHKE is a small company with a market cap of just shy of $200M. Also, this is short-term and things can change very quickly with a company this small. The good thing is that during the turmoil of this past winter, CHKE avoided taking on debt (current debt is $0) and has not missed a dividend payment. I still feel this stock is being ignored and still has a way to go, before it is fairly priced. With the current dividend yield of 8.8%, it is worth the wait.

Stock #2: Ticket Master (TKTM)

Mar. 2 Close Price: $4.30
Sep. 24 Close Price: $11.56
Percent Change: + 168.84%

Again, as will CHKE, TKTM is a small company with a market cap of about $650M. I'll be the first to admit this company was priced extremely low (about 50% of book value), when I wrote about this company back on March 2nd. I'll admit that I felt this company could not go any higher than $9 in the first 12 months and I subsequently sold my entire holding of it in August at just shy of $8, because I felt the company's financials and the price of the market made the company outside of my risk tolerance. It was a mistake to sell the whole position. I should have reduced my position by anywhere by 50% to 75% of my original position. Even though I picked up a 60% gain over a five month period (129% annualized gain), I missed out on the unusual spike in the price. My intention was that I felt the price was going to drop along with the rest of the market and then I would be able to pick it up again when it came back to $6. Anyway, you can't be 100% right 100% of the time. I'll take partially right any day of the week.

Stock #3 Terra-Nitrogen (TNH)

Mar. 9 Close Price: $119.49
Sep. 24 Close Price: $104.15
Percent Change: (12.84%)

The percent change is very deceiving with this company. The stock is extremely volatile. In the six months since writing about this stock, it has ranged from about $95-$140. In my portfolio, I've been reducing and increasing my position as the stock tops $130 and then goes below $100. Again, this company is relatively small, with it being on the boarder between a small and mid-cap company ($1.95B market cap). The current dividend yield of 8.88% makes it stock worth holding onto and with a P/E ratio of just under 10, it is very cheap considering it is an alternative energy company that will see its stock go much higher when the prices of natural gas recover. Keep an eye on this company and don't be too hasty to sell. This is definitely a company that you should definitely buy in slowly and exit slowly.

Stock #4 Exxon Mobile (XOM)
Mar. 20 Close Price: $66.09
Sep. 24 Close Price: $68.93
Percent Change: +4.30%

We've now are going from small companies to the largest (market cap) company on the planet. Despite the increase in alternative energy research, oil will still rule for the next quarter century and XOM will lead the way. As with extremely large companies, it is harder to grow more than a few percentage points per year, however, with oil still priced very cheap, it is a good time to get in. You can easily afford to get in slowly on this company and with the current dividend yield of 2.40%, you get a little bang for your buck. XOM has plenty of money to invest in new oil drilling and also has the ability to not only pay the dividend consistently, but also to increase it in order to attrack more investors. This is a company that is as solid as they come.

Caterpillar (CAT)
Mar. 26 Close Price: $30.78
Sep. 24 Close Price: $51.85
Percent Change: +68.45%

CAT is another large cap company ($32.5B market cap). Despite only about 10% of their revenues that can be tied to the housing market, the company took a beating when the housing bubble burst. What has really affected the company in terms of revenue is the credit crunch. The main function of this company is to sell and lease construction equipment. When the credit crunch started, companies and municipalities stopped expanding and starting or suspending projects. This caused the reveue of CAT to dry up quickly. By that time, the stock had taken a huge nose dive, because of the average investors misunderstanding of the companies main source of earnings. The company is still undervalued and that should reflect in the stock price when the housing market recovers, since the same folks that sold under the misconception, will buy back in under the same misconception. Regarless, the credit market will begin to loosen when the housing market starts to recover and the banks can unload some of those REO properties and get that expense off the books. Right now, I think CAT could go past 80 in the next 24 months. We'll have to wait and see.

Here is the overall results

Starting Stock Prices: $234.60
Sep. 24 Stock Prices: $258.88
Percent Change: +10.35%
Annualized Return: +20.70%
Overal Grade: B+

I give myself a B+ so far. The major blemish was on TKTM by selling my entire position rather than reducing my position. Some of this was offset by playing on the voltatility of TNH and treating it as a trade rather than an investment. You can still be long on this stock, but taking advantage of the spikes and dips in a stock such as this can pad your gains. If I went back to research my trades on this stock, my returns would be significantly higher, however, playing this game with stocks you aren't completely familiar with is a plan that will eventually fail. I do not recommend trying to trade a stock on dips and spikes over the long term. If you do decide to try this for a short period of time, be aware of the ex-dividend date in order to take full advantage of the dividend payout. Until next time.........

October's Coming....Hold On To Your Hats!

Ah, my favorite month is approaching. October might be the craziest month of the twelve in terms of investing. I should probably do a study to see if the suicide rate is highest in October. Why is it that October is so nutty for the market? No idea, it could be Halloween or it could be the start of the holiday shopping season. Last October, we saw the Dow drop about 1500 points, although it was just after Lehman went belly up. I'm not saying the market will have a huge pull back during October, but we typically see the biggest swings on a daily basis during that month. I'm going to throw a date out there for you.....October 16th. Why that day? It is the third Friday of the month, so that means that option contracts come due on that day, so the volatility tends to be large, particularly if the market has performed well, because if the market has done well, then people tend to exercise their call contracts and you see a bunch of stock dumped into the market and then picked up at reduced prices.

Anyway, what does this mean for the us? Me in particular feels the Dow is about 800-1000 points overvalued. And what do we do when we feel the market is overvalued? That's right, reduce your positions, sell your losers and stock up the cash so you are ready for the pull back. I have three sample portfolios that I started between Feb. 2008 and Nov. 2008. Each portfolio is valued at 1.5-1.8 million (each started at 1 million and dividends are not factored in). I'm currently carrying about 50-60 percent cash in each porfolio. That indicates how bearish I'm am currently. I'm very bullish, however, with alternative energy companies, oil and emerging country (mainly China and India) markets. Stay cool and devise a plan that eliminates the emotion of investing. Stick to the plan and you'll save yourself a lot of pain.

V Shaped Rally..............Not!

I'd like to welcome myself back from the layoff. No, I didn't lose my job. I went on vacation and was waiting for this short-lived, suckers rally to abate a bit. Now that we had a pull back late last week, I'd like to address all the experts out there who keep trying to figure out which letter of the alphabet the recovery is going to represent. The fact that people are focusing on trying to figure this out tells you they have no f'ing idea what is going on and what is going to happen, so they distract you with speculation about what kind of letter the recovery is going to represent. They do this, so that have a remote chance of getting it correct. They could pick a letter out of a hat and technically have a 1 in 26 chance of getting the right letter. Even still, they can eliminate certain letters like "T" and "O", because a graph showing the market ups and downs could never represent those two letters. The whole thing has about as much relevance as the "Doomsday Clock" developed post WWII.

The real issue is will we recover sooner or later. I tend to think that we may be treading water for quite some time, with the minor ups and downs. It remains to be seen if the government is going to cut spending and if consumers' confidence in the market returns and remains stable. There are also interest rate issues, government regulation issues and last and most important......inflation issues. I've been moaning and groaning about the printing of money and how the spending money is not a way to fix a problem rooted in spending too much money. Everyone has been telling me that I'm crying wolf, but now the Oracle has decided to put his two cents in and give my concerns about the subject some validity.

Read on.....

http://finance.yahoo.com/tech-ticker/article/306287/Buffett-We're-Going-to-Be-Crushed-Under-Mountain-of-Debt?tickers=tbt,tlt,udn,uup,brk-a,brk-b,spy&sec=topStories&pos=9&asset=&ccode=

Next up will be what to do now and where to look for some bargains before we start to see the slow and steady upswing.

Bam Bam’s HC Reform: WTF

Anyone who hasn’t been hiding under a rock during the past few weeks has heard of O’Bama’s healthcare reform bill. The basics of the bill are that healthcare be provided to at least 97% of the population. The tab for this overhaul is in the $600B range. The idea is that the bill will reduce the cost of treatments and medicine, which will reduce the premiums charged by healthcare providers. This means that folks with current health insurance will see a reduction in their premiums and folks that don’t have health insurance will have a choice of new and affordable plans. There are a myriad of other factors that go into this reform, such as making insurance companies accountable and increasing the competition. Also, the goal seems to be a McDonaldization of hospitals and other health care facilities. Basically, that means that no matter what hospital you go to, you’ll receive the same high quality care as any other place. One funny detail is the plan wants to require insurance companies to cover pre-existing conditions.

I, personally, have a few problems with this. One, the bill suggests that having health insurance is a “right”. The last time I checked the Constitution, it made no mention of health insurance being a right to every American citizen. There are people out there who take terrible jobs, simply because of the health coverage. It is not a right. Only about 60% of the jobs in this country offer health insurance as a benefit. The cost that this plan will have is going to be spread out amongst everyone in the form of increased taxes. The $600B price tag is simply the tip of the iceberg in terms of cost.

I am in favor of the tax on the “wealthy”, since there are so many loopholes in the tax code that the average percentage of taxes paid by the richest 1% in the country was about 17%, which is roughly the tax bracket shared by the average middle class person. Since the top 10% control 50% of the assets in the country, let them pay a few percentage points more. They can afford it and it will not affect their standard of living whatsoever.

To sum this up, O’Bama is 1/8th the way through his term and I did have high hopes for him. However, I give him an “A” for effort, but his ideas and performance are a lowly “D-“. Luckily, I’m and individual and my opinion means nothing in the grand scheme of things. Unfortunately for Bam Bam, if what he has put in motion does not yield any fruit in the next two years, we will have seen our first single term president since G.H. Bush (unless Palin gets the GOP nomination, then we’ll get him for another four years). Even if his plan does produce good results in the short-term, the full consequences of his actions will not be realized until well after he is gone from office. It will be a bit like the financial meltdown we are going through can be attributed to Clinton and not G.W. Bush, even though he is still an idiot.

So, what can we take away from all of this that can be used to our advantage? That’s as tough a question as there is at this point. You are kind of “damned if you do, damned if you don’t.” Staying totally in cash will subject you to inflation risk. Going all in the market can leave you open to market risk, especially since the jury is out on whether the economy is going to make a recovery sooner or later. Going all into bonds leave you open to interest rate risk. The yields are high, but the bigger issue is the reclassification of bond ratings that has taken place recently. You must understand the risk and weigh that against the interest rate. The spreads are still very large, so there is a lower risk than normal, but you still have to be vigilant in your research of the bonds you intend to purchase. As for myself, I’m still sitting on the side of the pool with my feet in the water; debating on whether I’m going to dive in or just wade in. It is times like this (and forgive me for sounding like a broken record) when flexibility is the key to being prepared for anything.

The market is approaching 9,000, but do not bet on it being at that level by the close of the year. Also, try not to look at the market overall, but rather the stocks you hold. Understand all the sectors and the industries within.

So……What Now?

It seems that everything is currently in a holding pattern as far as the market and the economy are going. The air breaks have been slammed and the free-fall is screeching to a halt. The question is, “When and will it reverse course? Let’s take a look at some of the big issues going on currently.

The answer is yes, no, soon and not for years, depending on what you are talking about. Let’s take the hottest topic that is currently being thrust into the news: Unemployment. Yes, it will reverse course and it will soon. However, the rate has a little further to go before we see it come back down. Bam Bam stated that if Congress put his stimulus plan through back in January that the unemployment rate would not increase beyond the then 8% rate. Oops! We are currently at 9.5% despite the approval of the stimulus plan. Most experts are calling for the rate to reach 10% or the popularly vague estimate of “double digits”. I’m calling for 11.5% is where it shall peak by the end of 2009. Despite new jobless claims that have been recently reported, many folks are taking temporary, part-time and contract jobs. To me, these jobs are short-lived and mask the true seriousness of the unemployment situation. When the market comes back, it will take time for companies to shore up their finances, before they start expanding again and adding jobs.

Next up is the housing market. Yes, housing prices overall will come back up, but they are likely to hang at these low levels for a long time (3-5 years), before you see any significant increase in home prices. This is good for folks that are starting their working careers and are looking to purchase a home. The lagging prices will present excellent buying opportunities, but on the flip side, more money down is required and credit isn’t as plentiful as it was back in 2006. It’s tough for folks who are retiring now, because the baby-boomers on average have about 60% of their net worth tied up as equity in their home. The dreams of retiring, selling their home and moving to a tropical location may not happen or will have to be put on hold. These folks got it from multiple sides, with their 401(k) getting spanked as well as the equity in their home shrinking at an alarming rate. Hopefully, they were diligent over the years to build up a healthy savings to access while their investments recover, rather than having to liquidate or move their investments around thereby taking either a realized loss or a paper loss.

Last up is the stock market. Yes, it will reverse course, but not as soon as you would like. The market will remain pretty flat for the rest of 2009. We should see a small recovery, but the market will be deflated for next few years before a significant and sustained rally occurs. Americans have changed the way they handle money. More folks are saving, which means less money is being put in the market, which should keep prices low. This offers a wonderful opportunity for anyone willing to continue to invest. The market should recover a little ahead of the housing market, but for now, we’ll have to wallow in this for a bit. But, remember to take advantage and keep buying, but also do your home work.

A Look Back on the 2009 Predictions

Well kids, it’s half-time for 2009. I made few predictions back at the beginning of January and I thought I’d take a moment and revisit those predictions to see how my Nostradamian abilities have fared thus far. And……away we go!!

Predictions

Bernie Madoff Ponzie Scheme will exceed $50B- As the final answer could take years to figure out considering if the value of losses should be based on actual investments or the valuations of the fake investments. Honestly, I’m not sure why they are even debating this, but it would seem the actual money invested should be the given valuation. So far, investigators and the SEC have increased the losses to $65B in the past couple of months. So far, I’m partially correct, but that could change either way.

Nationwide Increase in Tolls- A few states have announce state wide toll increases, however, the increases are nothing out of the ordinary and certainly not a nationwide epidemic. I assumed an increase would occur in order to offset tax revenue reductions from employment and sales taxes. Still six months left to change.

Worldwide Number of Billionaires Falls Below 1,000- Unless there is a massive rally in the markets around the world, I should be just fine. The number at the beginning of the year was about 1,125 and as during the month of May, it was announced the number fell below 800. I should be safe on this one.

The British Pound will fall below the US Dollar in value- It is a good thing I’m not trading in currencies. Yahoo Finance posted the exchange rate as $1USD equal to 0.681 British Pounds at the beginning of 2009. It has come down a little and currently sits at 0.610. The British Pounds has not nosedived (yet) and the US Dollar is sucking a little more than I thought. With no interest rate hike in the near future by the Fed., I will most likely be wrong.

The Dow Will Break Through 7,000 in the First 100 Days- I was very accurate with this prediction. I was scary accurate last fall when I said the DOW would bottom around 6,500 sometime during the late 1st Quarter of 2009. March 9th, it closed at a low of 6,440.08. It closed below 7,000 on March 2nd for the first time at 6,763. No magic formula for that prediction; just a gut feeling and a little bit of luck.

More Ridiculous Bailouts For Big, Stupid Companies That Suck- I’ve actually stopped keeping track. Unless you’ve been living under a rock for the past six months, you know this one is dead on. Anyone could’ve predicted that. The scary thing is the amount of money outlay has heighted the threat of inflation. The really scary thing is that the Fed isn’t going to hike the interest rate in the near future and they stated they do not feel inflation is a threat. Wow, wow, wow, wow, holy F’ing WOW!!

One of the “Big 3” Auto Companies Will Fail or File For Bankruptcy- In most cases, 2 out of 3 ain’t bad, but when we are talking about the Big 3 filing for Bankruptcy protection; well, it’s bad! I should’ve left the fail part out, because I knew the Gov’t wouldn’t let any of these idiot companies go out like Bear and Lehman, no matter how much money they had to print!

At Least One European Country Will Drop the Euro- No one yet, but I’m still betting on Italy to be the first and go back to the Lire. Don’t count out Spain, Germany or Ireland, either.

Predictions that Most Likely won’t Happen in 2009

England will default- If the British Pound goes down, this will happen, but no real danger, yet.

AIG will Fail- As long as the Gov’t is still handing out monopoly money quantities of bailout money, AIG should be safe.

Unemployment will reach 20%- As of now, we’re hovering in the 10% range, which most economists are saying will be the peak. Unless something huge happens or they start computing the rate the way it used to be prior to “Wild Bill” (Clinton), then this number is unlikely.

Oil will Drop Below $25- I was close just over $32 was the low. It is sitting at about $70 currently and should settle somewhere between $80-$90 by the end of the year, unless something very unexpected happens.

China’s Economy will Blow Up (Not in a Good Way)- I’m still convinced that China is the most overrated economic producer in the world. If the US Dollar experiences high inflation, you could see some black clouds hovering over China, since they are sitting about ½ Trillion in US Treasury Bonds. Their record keeping and earnings reporting guidelines are poor, which can lead to easy book cooking and other sketchy ways of reporting company financials.

Housing Market Recovers- At this point, it seems as though the housing market has stopped the freefall in prices, but a recovery of the losses sustained over the past 18 months is much further off. The market has basically stabilized and hopefully will resume the historic 6% average annual appreciation.

Oil Exporters will Figure Out how to Protect their Tankers from Pirates- I’m still sticking by my idea of Bo and Luke Duke riding shotgun on these things and when a speed boat approaches, they crank back their bows and blow these guys out of the water. I would have suggested the A-Team, but they apparently aren’t best shots around. How can it be that during the shows run, they failed to actually shot anyone despite firing about 2,000 AK-47 rounds per show at the bad guys? The only way they would work is that the sun glistening off of Mr. T’s gold chains might blind the speed boat driver and end up crashing into the side of the tanker. Face it (no pun intended), since Hannibal has been deceased for 15 years, no one is around to devise a solid plan to foil the would-be pirates. Even if he was still around, smoking cigars on an oil tanker is probably not the safest thing.

The National Debt Reaches $15 Trillion- Still not likely, but we are now sitting at a smidge under $11.5 Trillion instead of smidge under $11T. Unless a wave of massive bailouts happen, which is very unlikely, then we will not come close to $15T. Unless things change, we will reach that mark in the near future.

The Government Issues Another Stimulus Payout- No word on whether any payout will be given. The government is more concerned with keeping unemployment at bay, rather than giving out $600 checks to everyone in hopes that they’ll visit the mall and spend it.

Gold will Top $1,000 per Ounce- Gold is currently at about $940 per ounce. The price has been driven up due to investors using it as a hedge against inflation, rather than going with defensive stocks. This shows that until investors feel confident about the market, the price of gold could still go higher.


Keep an eye on these for the second half of 2009.

T.E.D.’s Excellent Adventure!

You’re probably wondering why Bill wasn’t mentioned in the title of this segment. Well, the TED I’m referring to is the TED spread. The TED spread is the difference in the yields between T-Bills and the short term bank lending rate. When the sh*t hit the fan last fall, the yields on T-Bills were beaten to death by the sharp increase in demand due to the rotation of investors out of stocks and into T-Bills to wait out of the storm. Historically, the spread in a normal market is about 10-50 bps (0.1%-0.5%), but last fall saw record spreads over 200 bps (2%). Generally, the spread fluctuates according to the supply and demand of T-Bills.

So, you’re probably wondering why the hell I’m writing about this. Well, here’s the deal. The spread has been gradually shrinking since the end of the 1st quarter. As of the end of May, the spread was sitting at around 60 bps (0.6%), which means that the yield of the T-Bills is increasing. So, what does this tell us? The supply of T-Bills is increasing, which means that more investors are starting to take the money they parked into the T-Bills and are investing it elsewhere. What else does this tell us? Well, it tells us that folks are feeling more confident about the market and are starting to put money back into stocks, which could signal a broad rally and not suckers rally. It also tells us that companies are starting to issue bonds again, which gives rise to the credit freeze thawing. Several companies had bond issuances ready to go, but held them out of the market until they felt the demand was there.

Remember what I’ve told you before. The market tends to recover well in advance of the economy. If you wait for unemployment to drop and some wing-nut from the Fed. declaring the recession is over, then you will have missed the boat on the rally. If you recall, around this time last year, the Fed. finally announced we were in a recession that started in November 2007. I declared it in January 2008 as it was happening, not 8 months into it. Am I saying you should jump in with both feet? Hell no. Do your homework and buy in incrementally. Be aware of inflation and keep a healthy amount (20%-30%) on the sidelines in case things go south, so you can remain flexible and be able to scoop up any bargains that may come or at least increase any current positions and lower your cost per share. Tune in next time, when I discuss inflationary hedges and why gold may be a poor choice, let alone the consensus best choice to hedge inflation. Until then……Be excellent to each other and party on dudes! (you know I had to come back to that!)

How And When To Get Defensive

What the heck does investing defensively mean? Why and when should we invest in such a manner?

Ah, these questions are very common and often addressed on such silly shows that appear on MSN, however, they are rarely ever explained in a manner that the average investor can understand. They merely spit out terms such as cyclical and business cycle to describe stocks. They probably use this, because they themselves have no f’ing idea what they are talking about.

Anyway, what does investing defensively mean? In the most basic terms, it means investing in companies that do well or are consistent during economic booms and busts. Basically, they produce goods and services that are needed regardless of the state of economy and market (a.k.a. non-discretionary items). Some of the best defensive companies actually perform better when economic conditions are poor.

Why should you invest defensively? The main reason for having your portfolio contain some defensive stocks is so you have a hedge for when the market takes a big dive. This will mitigate your portfolio from having a large drop and taper your paper losses. It also helps balance your portfolio.

When should you invest defensively? This question has a not so simple answer. It all depends on the person and their investment goals. If you are the type that doesn’t like a lot of risk, then your portfolio should contain mostly a diverse number of defensive stocks with a mix of bonds, cash and other equities. If you like a lot of risk, then you should probably only invest defensively, when you think the market is ready for a large drop (at least 10%). Then you would trade out your bull market stocks for defensive stocks. If you just the average investor willing to take a little risk, but not a lot of risk, then you should always carry some defensive companies in your portfolio. If you think the market is overvalued and due for a correction, then you would want to increase your defensive holdings to reduce your losses in the event of a large drop. If you think the market is undervalued, then you should look to lighten up on your defensive holdings and snap up stocks with bigger potential upside.

To further illustrate what defensive stocks are, I’ll list some examples and why they are considered defensive stocks.

Johnson & Johnson (JNJ)- huge product line from shampoo to over the counter medicine. Nearly all of their products will continue to be purchased during poor economic times.

Proctor & Gamble (PG)- basically, the same reason as JNJ, but their product lines deal heavily in beauty and health care. However, they also have food and coffee brands.

McDonald’s (MCD)- does well in any economy, but does extra well in poor economies, since people will sacrifice the health for cheap food.

Reynold American, Inc. (RAI)- one word, “Tobacco”!

Who’s Next: Bailout and Failure

Sorry for my long layoff. The market has not been doing much, so there really isn’t all that much to discuss. However, we are nearly five full months into 2009 and a lot has happened. As a matter of fact, it appears that two more of my predictions for 2009 may in fact come true. One is that one of the big three may fail. GM is under pressure to restructure its debt and cut expenses by June 1st and I do not think they will make it, but you never know. The second is that the Federal government may have to bail out California.

I’d discuss those situations further, but both are extremely complicated. I can summarize GM’s situation as dire and most likely will have to be taken over by the Feds, much in the same way as Fannie May and Freddie Mac. If not a take over, then bankruptcy is the only other option. If you own any GM shares, sell now and shame on your for holding them this long.

As for California, their main problem is the fact that the majority of the state’s tax income is directly linked to property values. When times are good for the housing market, the tax revenues are sweet, but when foreclosures and slumping housing values occur, then revenue is a little thin. The problem with California is not so much the lack of tax revenue post-housing crash, but what happened to the loads of money that came in from 2004-2007 when homes were overvalued? It was spent is the answer and the budget they are used to working with has a huge gap ($20+ billion) as a result. Way to plan for the future Arnold!

Anyway, enough of the bad stuff. I’ve got good news!! The market has stabilized and is up about 25% since the bottom in early March. Housing prices seem to have stalled and are no longer in a free fall. What does all of this mean? It means that we have about 6-9 months before we see the economy start to grow and unemployment start to shrink. We should see this recovery start between December 2009 and February 2010. Of course, it won’t be officially acknowledged until the middle of 2010.

Stay focused on the stocks you own and if you feel confident; start buying in slowly. Beware of the banks and other financial sector companies. I still think that there will be at least one large bank or financial institution that will fail before the year is out. Be sure to do you homework and understand the risks involved when investing. Patience, due diligence and having clear investment goals are the ingredients in choosing solid companies to invest in which are appropriate to your investment goals. Good luck and no matter how the market reacts, good or bad, always have cash on hand. If you are 100% invested, then you need to start selling some stocks or adding cash to your portfolio. Having all your money in the market constricts your flexibility. With a dynamic market that exists nowadays, you have to be able to make moves quickly and take advantages of the drops. No matter how good or bad the market is, you need to have a healthy amount of cash on the sidelines ready to jump into the game at a moments notice.

Managing Risk In Your Portfolio

Let’s get it all out on the table. We are totally baffled by what is going on in the market! The average person does not trade stocks, but rather will hold them for a number of years. We have two things working for us. One, the market is down and pretty much every stock is cheap. You can sit there and say two to five letters out and pick a winning ticker. Let’s put it this way geniuses; anyone who bought anything since January 1st, made money. That is just dumb luck or a very savvy person seeing a downturn turning further down.

Let’s be honest, no one saw the down turn (the big one in October) coming, except me. I missed the bottom by two weeks premature. I did not however, realize there would be a 25% hike from that bottom by mid-November. I figured the run would come in December. But, the market is a crazy thing. No one is immune to the carnage that can come from what the market can do. Diversification is the key; you need to spread your investments appropriate to your age and investment goals.

If you set some rules for yourself, you can remove the emotional moves that people make and ultimately keep yourself out of serious trouble. Setting up buy points and sell points can lead you to simply sell when the price reaches a certain point and buy when the price falls to a certain level. A lot of hedge fund managers operate in a similar manner. Keeping a certain percent cash level in your portfolio is also another way to tell yourself to buy or sell.

Rebalancing your asset spread can also help you sell off stock and take gains and buy more stock that has dropped. A very simple example is you own $50 of Company A and $50 of Company B. At the end of the month, Company A’s stock value is $60 and Company B’s stock value is $45. Your portfolio is worth $105 (up from $100). If you rebalance your portfolio, you would have to sell $7.50 worth of Company A stock and pick up $7.50 worth of Company B stock in order to have Company A and Company B’s value be $52.50.

Keep these little tips to help navigate the madness. Generally, using these tactics, will mitigate risk, but the trade off is that you will rarely buy at the bottom and sell at the top. The idea is risk management. Keep on keepin’ on!

Mutual Funds: Friend or Foe?

Ah, Mutual Funds, what are we to make of them? On the one hand, they are a great and relatively inexpensive way to get a lot of exposure to the stock market without having to do diligent research on individual companies. Americans have been infatuated with mutual funds, ever since Mr. Bogle (founder of Vanguard) came out with the first mutual fund. I refrain from using the name of this mutual fund, not because I do not know it, but because I intend to prove a little known point about mutual fund names.

Here’s the skinny on mutual fund names…….the do not necessarily indicate the overall strategy of the fund and its holdings! Please, if you take anything away from this, take the previous statement with you. If a fund contains in the name the word “value”, do not assume that the strategy of the fund is to find large companies the managers of the fund deem as undervalued. If the fund name contains the word “growth” in the title, do not assume that the fund has chosen large cap stocks to help grow the net asset value (NAV) over the long term. A fund like that could be loaded with small and micro-cap stocks that are extremely risky. Many of the funds should be named “Cross Your Fingers and Hope Good Things Happen Fund”. That would be more accurate. The first thing to do when looking for mutual funds is to ignore the names. The names are a marketing ploy to get you interested and to assume a sense of safety. This is not a conspiracy theory, it is a fact, plain and simple.

What you want to look at first is the “asset class” the fund falls under. There are five different asset classes, Bonds, Large Cap, Mid Cap, Small Cap, International. These asset classes are listed in order from least risky to riskiest. The vanilla cousin (in my opinion) is the index fund. These funds mimic a stock market index (S&P 500, NASDAQ, Russell 2000, etc.). The turnover rate on these funds is low, so they more or less have a buy and hold strategy relative to mutual funds. This keeps the expense ratio down, thereby, allowing more money to stay invested. International and small cap funds tend to have higher turnovers (they trade stocks often), which increases commissions and these costs are passed on to the customer (you). The idea is that with these high risk funds; over the long term you will get a higher return than a mid cap or large cap fund.

Do not be fooled by “set it and forget it funds”, otherwise known as target date funds. These garbage funds are made up of the mutual funds that are available in your 401(k), 403(b) or 457(b) plans. They rebalance every year to become more conservative as you get closer to retirement. The problem with this is that their idea of conservative and your idea of conservative can vary greatly. Mutual funds are not guaranteed. The average 401(k) plan lost 1/3rd of its value in 2008. Some of these folks had these target date funds and now have to work 2-5 years longer before they retire in order to have enough to live on. Anyway, without further delay, I will examine three mutual funds that one of the three people who actually read this mentioned to me.

First up, CGM Focus Fund (CGMFX). To be honest, I had never heard of this fund until about an hour ago. The main things you need to look at are the asset class, the manager and the holdings. I have no idea who the manager is and really do not care. The biggest thing that jumped out at me was the holdings of this fund. I appears that the top ten holdings are mostly large cap companies, such as Abbot Technologies, Wal-Mart and McDonald’s (affectionately referred to as “Wack Arnolds”, thanks Snoop). The strange thing and alarming thing about this fund is the top ten holdings appear to make up about 75% of the overall holdings. Most mutual funds have about 75-250 stock holdings and rarely ever hold more than 5% of their assets in one stock. Abbot makes up close to 11% of the holdings. This fund actually goes against my statement of fund title having nothing to do with the fund itself. “Focus” appears to be dead on. This mutual fund is “focused” on relatively few companies compared to its peers. This fund contains financial companies, retail companies, medical companies and energy companies. The problem with so few companies is that it is feast of famine with returns. Hence, since 1999, it’s best one year return was 80% and the worst return was -49% both happened in 2007 and 2008 respectively. Also, during the past 12 months, the fund has shed 55% of the NAV. This is bad for the shareholders and good for the potential shareholders. The expense ratio is actually fairly low (.97%, 97 cents for every $100 invested), considering the turnover in the past 12 month was 504%. If you are inside 10 years of retiring or needing to use the money (remember, just because you retire doesn’t mean you have to draw on your 401(k), unless you are 70+ when you retire), I would not recommend this fund. It is way too risky for short term, but could produce some serious returns for someone 15 years + from retiring.

Second up, Fidelity Contrafund (FCNTX). This is a prototypical large cap fund. It has several recession proof companies in it’s holdings (Proctor & Gamble, Johnson & Johnson) and does not carry anymore than 5% of any one company. The fund has had the same return (or lack there of) as the overall market over the past 12 months. It has shed approximately 1/3rd of its value. The one folly I found was that is has Pepsi and Coke listed in its top 25 holdings. I guess they are using each company as a hedge against the other and are hoping soda consumption increases.

This fund has an expense ratio of .94% (94 cents for every $100 invested), however, compared to CGMFX, this fund has a lower turnover and lower volatility. Its return rage for the past ten years has been 28% to -37%. It’s up years and down years are about the same, so over the long term, the CGMFX fund might be a better bet, if you are at least 20 years out from needing the money. The major problem with this fund is that the market index it measures its performance with has beaten it handily six of the ten years. Considering you could be paying 1/4th the fees for an index fund, the index fund would undoubtedly be a much better investment over the long term.

The Contrafund name is a little strange to me. Typically, I would associate a contra anything related to investing as a fund that shorts stocks, but this one does not. Maybe the founder of the fund enjoyed the Nintendo video game contra. Too bad you can’t press up, down, up, down. Left, right, left, right, B, A, B, A, select, start and get 30 times what you started with.

Last up is the American Funds Capital Income Builder (CAIBX) (A.D., I hope this is the one you were asking about.). This fund has stocks which pay a decent dividend, which can actually coincide with the name of the fund as an income builder. The fund has a yield of 6.6%, however, do not be fooled by the dividend income yield. This fund can lose money. The good thing about this fund is that it has an expense ratio of .55% (55 cents for every $100 invested). The fund appears to be spread across the board in terms of holdings, which makes it less volatile and requires less maintenance, hence the lower ratio. This fund is also intriguing, because it has a mix of domestic and international stocks, which can make it more volatile, but the lower expense ratio makes it that much more attractive.

The bad thing about this fund is that the folks who think this fund is an income builder will view this fund as safe and loaded with bonds and cash. This fund took a 31% hit last year. Yes, it did do well during the dot.com bubble, but it is not invested the way the name advertises. If you want to build income with low risk, hit up the stable value funds. Every 401(k) has them. They basically give you an annual yield of about 4% on average. Of the three, I think this fund is the highest risk, simply because the name is misleading and the average investor would choose this without investigating.

Overall, these three mutual funds are just fine. Any mutual fund is fine to invest in, as long as you understand the holdings and risk involved. Filter out the names, because the are developed by the marketing department hoping to get silly, yahoo’s to buy in based on a name, rather than investigate the holdings.

Thanks A.D.

Time To Take A Step Back

Hello again. I know it has been some time since my last post, but I’ve been delving into the market trying to pull some nuggets of knowledge out of the craziness that presents itself before us. As a side note, I hate the word “nugget” when referring to knowledge or information. I’ve noticed that in the workplace, it is often used in this manner. To take it a step further, I find it strange that lingo, phrases and gestures are often adopted by all employees at a given firm. I’ve made it my goal to not fall victim to the brainwash that is apparent at these locations. People at my company, and I’m sure at many other companies, use the phrase “Going Forward”, which sounds so corporate. I prefer “From Now On”.

Anyway, back to business, if you want to call it that. I’m sure many of you are flying high over the recent 1500 point climb by the DOW from its 2009 low. Don’t get too pleased with yourself just yet. If you dumped all of your money in around the middle of March, then slap yourself in the face. That is irresponsible and you will most likely lose money in the long run, because you will stay in too long when the market drops. It would be a good idea now to take some of the profits you have made during this recent rally. The market has risen about 25% in the past month, but do not assume this is a sign of turnaround. There is still plenty of trouble on the horizon, but the one thing you can take solace in is that the worst appears to be over in the short-term.

Typically, the market turns around before the economy turns around. Even though the market has come back in a big way the past 4 weeks, the one problem with it is that it is still volatile. Companies are still reporting poor numbers overall (yes, there are a few that have come through very well, especially Wells Fargo) and the job market continues to decline. Will the market continue to rise, perhaps (in the short-term), but it can also crash back to the previous low as well. All it takes is some big companies coming up short on their quarterly numbers and a larger than expected job decrease and you could see this plane crash into the mountain. The market needs to stabilize first, before you can have warm, fuzzy feelings about the economy. We can’t have the 1%-3% daily swings up and down.

The financial health of the largest banks needs to be accessed before any hope of a recovery in the near future can be established. Yes, Wells Fargo posted a nice profit in the first quarter, but Bank of America, Citi, just to name a few need to show stability and the willingness to start lending again at reasonable levels. Once this happens, the gears will start turning and the economy should start the process of climbing back up out of this hole.

Remember, the market will recover before this process of economic recovery occurs. If you buy incrementally like I have been preaching, then your chance of buying at or near the bottom is much greater and it will help keep your cost per share down as well, thereby increasing your overall return. Make sure you do not take this strategy to the extreme, because you will rack up ridiculous amounts of transaction costs. Most online brokerages charge a flat fee for each trade, so the smaller your dollar amount, the more of a return you’ll need to establish in order to offset the commission costs. Everyone is different and has different goals. Find out what is the appropriate amount of money to use per trade and how often you will be buying. The way I look at it, is that the higher the amount of money you invest per trade, the more frequently you can buy in, because the percent gain you’ll need to offset the commission is much smaller.

I, for instance, use ING Direct, which you can set up auto-trades every Tuesday during the month and four bucks a pop (real-time trades are $9.99 each). I trade in $500 increments (usually). So my net investment is $496. In order to offset the commission charge, I only need to obtain a return of .081% on my investment. If you trade in $100 increments, you would need a return of 4.2% on your $96 net investment to break even. The biggest drain on long-term earnings are commission charges and taxes. Good luck navigating this market. Patience and cash rule!

5 Stocks For The Long-Term: Stock #5

Caterpillar, Inc. (CAT) is the fifth and final stock you should be looking at for the long-term. This stock has been beaten to within an inch of its life because the implosion of the housing market. This company produces construction equipment, mining equipment and engines that run on diesel and natural gas. Many investors view this company as dependent on the housing market, particularly new home sales to drive its revenue. Less than 10% of this company’s revenues are actually tied to the housing market. This is a company that is involved in many different markets and because of the overselling of this stock over the past year, it is currently sitting at a bargain price.

It is currently trading a few dimes shy of $30, which is a few bucks off its low of about $21 and change. Its 52 week high was in the mid-$80’s, which I think was a little too high, but it was still riding the housing high that started in 2004. The current dividend yield is 5.7% and the EPS is at about 5.5, which is extremely low for this company. Also, the dividend has been increased each and every year since 1992, with no missed dividend disbursements. Through thick and thin, this company always delivers that all important dividend.

Three catalysts will drive this stock back up. First is the Stimulus Plan. A major part of this plan is to create jobs by strengthening the country’s infrastructure. Once this gets started, equipment sales should skyrocket. This, however, is contingent on the second catalyst, which is the loosening of the credit market. Once financing is available, Caterpillar’s customer base (the ones who survived the debacle) will start purchasing at the same levels they were before the economy went bust. These guys will be trying to boost their production and grab up market share left by the ones who had to shutter their operations. Lastly, the housing market will turn around (assuming the credit market loosens) and all the bums who thought this company was dependent on the housing market will begin buying up shares.

Two big red flags for this company is that currently it is loosing money, but that will be short-lived when the three catalysts kick in and the second is the $30+ billion in debt it currently has on its books, with only $1.5 billion in cash. If the growth prospects for this company weren’t so great, I would normally steer clear of a balance sheet like that. This baby has nowhere to go but up, however, be cautious, because it could still dip a few bucks. Again, this risk can be reduced by buying in slowing and building a position while the stock is underpriced. Remember, this company should not rise at the same rate it declined in the fall. Be patient and think with your head and put your emotions on the back burner. Actually, take your emotions and put them in the garbage and take the garbage out to the curb. They have no place here!

Five Top Stocks For The Long-Term: Stock #4

Exxon Mobile Corp. (XOM) is stock #4 of this five part series. Yeah, yeah, I know, everyone hates the oil companies. I say, “If you can’t be ‘em, join ‘em!”. Also, even with demand having slowed considerably, the company continues to set new quarterly net profit records each and every quarter. When the price of oil is low, the company still makes a ton of money and when the price is high, the company still makes tons of money. Even better, when the price of oil drops, the average idiot investor sells his XOM lot, for fear of the stock nose diving. Bitch Please!! The stock has dropped nearly 30% since its high of $96 during last summer. Revenue and earning for XOM are down about 30% each, but management has still been able to have the ROA and ROE return 20% and 39% respectively.

Another huge reason to love this company besides the fact the stock is trading far below it’s 52 week high is that it has about 3.5 times the amount of cash in its holdings as it does total debt. Also, the price to sales ratio is under 1, which is another indication that this stock trading at just shy of $70 is priced right to buy. The current dividend yield on this stock is about 2% and with all that cash in its holdings, the company can easily raise that dividend every year in the foreseeable future.

Since the dollar appears to be heading for a downward spiral in the short-term, the price of oil should start to creep up, which again will help XOM gain more folks buying the stock. Be smart and start building your position before the late arrivers being to buy up the stock when oil starts to surge up.

Remember to buy incrementally and not go all in. This is not No-Limit Texas Hold-Em. The movement of this stock is directly affected by the price of oil. It may move more or less relative to the movement of oil, but the relationship between the two is direct. Even though oil is low right now, it will most likely move up in the future, however, it could fall even further down into the low 30’s or even the high 20’s should demand continue to decline. OPEC has price controls on this and can at least choose a bottom on price by cutting supply, but it is still a good idea to buy smaller chunks periodically in order to minimize risk. Yes, you will leave some gains on the table, but you will also mitigate potential losses as well, should your timing be less than ideal.

Five Top Stocks For The Long-Term- Stock #3

Hello again! I know you've been waiting with baited breath for the third installment of this series. So far, we have a retailer and a company that lives off of discretionary spending. You must be thinking that these two companies are terrible choices, because the current economy has changed the spending habits of the average American, so that we are no longer a nation of hedonistic whores. This is precisely why these are great companies for the long-term. They've been kicked around pretty badly and when the dust settles from this economic meltdown, slowly but surely, the old spending habits will return to the previous norm.

To all of you who are still non-believers, I shall bestow an energy stock on you, so that you can relax and get on board. Terra Nitrogen (TNH) is the energy stock of the future. This stock is as volatile a mid-cap (middle size company) as I have ever seen, however, despite the craziness going on in the market, it has remained relatively stable. What does this mean? I haven't a clue, because the market is as irrational as ever and nothing makes a bit of sense. Everything nowadays is so uncertain, it is difficult to pick a stock. Remember this, good companies will come out on top in the end.

TNH is an alternative energy company specializing in nitrogen energy products for industrial and agricultural use. By having both sides of the equation covered in terms of clients, this gives the company excellent stability and growth prospects for the future. Since it is an option to oil as a fuel, it poses an excellent position for the long-term, when oil becomes scarce. It is also a wonderful alternative fuel for all of you hippy, tree-huggers out there worrying about the health of the planet.

TNH has traded as low as the mid-$70's and as high as the low-$170's during the past twelve months. It is currently just shy of $120 per share, so you can argue that in terms of valatility it is in the middle of it's price range. The key factors are that this company with a market cap of about $2.5B has no debt and is currently paying a dividend of $11.88 annually, which at the current price is just under a 10% yield. It is a solid company with a future and wonderful balance sheet that pays a dividend equivalent to a junk bond and not near the same amount of risk.

Another attractive aspect of this stock is that it trades at just 8 times earnings, which for an alternative energy company with huge potential for growth is extremely cheap in my opinion. The management is exellent and simply the fact that the company is able to flourish in this market is proof enough it is a strong company. The only possible bump in the road for this company is that it has to make some changes to its plants in order to comply with the Clean Air Act. Luckily, these expenses are relatively low and the competition has to undergo the same changes.

Remember, this stock is volatile and make sure that you do your due diligence and if you do not have tons of money, buy in small increments to lessen the risk. Until next time.....

Five Top Stocks For The Long-Term- Stock #2

Yeah baby! Ticket Master is the shizznit! Unfortunately, I hate ticketmaster, but as a business, it has a natural monopoly that the government has overlooked. Anyhow, to make it better, Ticket Master's stock has gotten crushed recently and it looking better than ever at less than 3 times earnings. The reason why it has been destroyed lately is because people have stopped shelling out $350 clams for Billy Joel type acts. Pearl Jam had it right about 15 years ago, when it took Ticket Master to task for inflating concert tickets. Remember back in the day when you could go see a top notch band for less than $20? Those prices pre-date 1995, but Ticket Master ruined it all. However, when Pearl Jam cannot get the "man" to change it's evil ways, you must concede. It's basically, "If you can't beat 'em, join 'em!" I think of this company the same way I think of Exxon.


Because people are idiots as a whole (present company exclued), they will eventually pick up the pace of purchasing from Ticket Master, once they get used to the garbage economy that we have, will go back to their hedonistic ways as reinflate the company with overpriced purchases of tickets for entertainment. Let's put it this way, the last concert I was at was in 2004, when I went to see Deftones in front of a crowd of less than two thousand people a MCC's hockey rink for $17 and the icing on the cake was a duet with Chino and Stan from Linkin Park who was playing the following night at Blue Cross Arena in Rochester, NY. Ticket prices are out of f'ing control. Look at Hanna Montana ticket prices. People are remortaging their houses in order to finance those ticket prices. Ok, ok, enough of the complaining. I'm endorsing this company for good reason and here's why.

1. As already mentioned before, the P/E ratio is below 3, which is ridiculous.

2. Price/Book ratio is at .21, which, again, is ridiculous. Think about it this way. You pay a two dimes for every dollar of assets. Don't use this stat by itself, because companies who are having problems could fall this low before going out of business. Think about it this way as well, this company is still making money and is trading at 1/5th it's book value. This would be an excellent company to buy bonds from, because if the company goes out of business, you would be ahead in line of the shareholders to collect on your money.

3. It has nearly 30% of its shares held by insiders, so you know they feel the value and the company's financial health are good. On the flip side, only 1.5% of the shares are being shorted, which shows that investors know people are stupid and would rather go to a show than feed their kids.

4. This type of business is cyclical and this stock will be down for as long as the economy is down. Once unemployment recedes and people start spending again, this stock should take off. This is a good time to buy as just so you know, I do not own this stock.............yet.

5. FYI-this stock does not currently pay a dividend and also, it's 52 week high was $27 and it is currently trading at just under $5. Be sure to do your homework before buying or selling.

Peace, and I'm out!!

Five Top Stocks For The Long-Term- Stock #1

Before I begin this five part series, I’d like to remind everyone that I do not recommend you invest in any of the five companies I’m going to mention. You have to come to that decision yourself based on research you have done and the investment goals you have set for yourself. Remember that calling something a good investment is a relative term. What is good for one person could be bad for another person. This is simply an analytical exercise show the pros and cons of five different companies from five different industries whom I think are good investments for myself, based on my research and investment goals. So, on to company #1, Cherokee, Inc. (CHKE).

Many of you have probably never heard of Cherokee, Inc. If you’ve ever shopped at Dick’s Sporting Goods, Target and/or Eastern Mountain Sports, this is where you would find the products Cherokee makes. I call this my “Hippie Company”, because it gears towards sportswear and equipment for hikers, mountain climbers, rock climbers, campers and any other outdoor activities associated with nature.

I first bought this stock back in July 2006, when it was trading in the high twenties. It reached a high of about $38 per share during the summer of 2007. It currently is trading at just shy of $15 per share, but the great thing about this company is one, it is small (Market Cap of $130M), which means that it has room to grow. Again, I am long-term on this stock, so I can wait. If you are looking to make quick money, this is not the stock for you and you will end up broke before long anyway going for the quick hits and trying to turn over stock as fast as possible. This is when you slip into the world of the day trader. Chances are almost guaranteed you will be busted within a couple of months or less choosing this strategy.

Here are some more pros concerning CHKE.

1. No Debt- What I mean by this is no “long-term debt”, every company carries some debt in the form of accounts payable for example.

2. Only 2 analysts follow this stock- Analysts are idiots and their rankings of companies are typically driven by the investment companies they represent, which poses a huge conflict of interest. However, if they down grade a stock, the herd takes note and follows suit. The fewer the analysts, the less attention is paid to the company, which limits the volatility.

3. Great Management- The ROA and ROE are 38% and 50%, which is pretty ridiculous in this current economy. Also, the insiders hold 15% of the outstanding shares, which shows they are confident in the company enough to put their own money out there.

4. High Dividend Paid consistently- the current dividend is yielding 11.8%, which is like a junk bond, but without the high risk. Remember 75% of your long-term gains come from dividends reinvested.

Here are some cons concerning CHKE

1. High percentage of shares shorted- Currently 13.7% of the outstanding shares are being shorted by institutions. This means that they are bearish on this stock, mainly because of the industry it is in and the current economic crisis.
2. Low Amount of Cash- Currently has $14M in cash. Relative to its market cap, that is a lot, but the company is undervalued in my opinion and with stockpile of cash in the bank, it limits its ability to grow or expand into other markets. It also limits its ability to buy back stock when the price is cheap.

Since the stock is roughly half the price of when I purchased it 2 ½ years ago, as an investor, you can assess the situation in one of two ways. You can look at it as a bad investment, because you have an unrealized loss of 50% of you investment or you can investigate further into the company and determine if it is a buying opportunity or if the fundamentals of the company have changed and you have confidence in the company to flourish in the future. I prefer the latter, because I do not dwell on “unrealized” losses or gains for that matter. You have to constantly reevaluate your stocks in order to make an educated decision on what to do next. I have been checking everything with CHKE and I like what they are doing and I do not see any red flags that would indicate anything is terribly wrong with the company. I see this as an opportunity to lower my cost per share by doubling my investment (don’t confuse this with doubling a position. Doubling your investment means doubling the dollar amount you invest. Doubling your position means doubling your number of shares). Here is how “Dollar Cost Averaging” works in this situation. Just as a reminder, I’m using approximate prices and not factoring in dividends reinvested.

July 2006- 10 shares @ $30= $300
February 2009- 20 shares @ $15= $300

Total 30 shares for $600= $20 per share

With this, my “unrealized loss” has gone from 50% to 25%, but remember that you now have twice as much money invested that you could possibly lose, but you also have the possibility of making twice as much money, should stock price increase. For example, if the price returns to $30, my profit would be $300 or 50%, because the market value would be $900 for my 30 shares, but again, this is an “unrealized gain”, so don’t get too excited if this happens to you. This means that you must decide if the stock is priced low, fair or high and act on the conclusion you come to.

Doubling your investment amplifies your investment much more than doubling your position. Here is the same example, but instead of doubling the investment, we’ll double the position.

July 2006- 10 shares @ $30= $300
February 2009- 10 shares @ $15= $150

Total 20 shares for $450= $22.50 per share

With this, my “unrealized loss” has gone from 50% to 33%, but remember that you now have $450invested instead of $300 that you could possibly lose, again, so the stakes are higher now. For example, if the price returns to $30, my profit would be $150 or 33%, because the market value would be $600 for my 30 shares, but again, this is an “unrealized gain”.
Buying incrementally like this helps lower the effects of a volatile market. Remember that you may run into a stock that you think is really low that you already own and you increase your investment and the stock tumbles even lower. Do not get discouraged and try to keep a level head. Remember that the stock market is not rational by any means. I attribute a mob or riot type mentality to the market. Perfectly law abiding citizens can get caught up in a riot and behave the opposite of what their values are, because they simply follow what the crowd is doing. Until next time…..

The Stimulus Package- Dum Di Dum Dum!!

Back again and this time we got a big daddy of a problem here. You've got to love the government's sense of humor. The whole thing started off by coming to the table with about $750 Billion worth of tax cuts, tax credits and a miriade of other changes O'Bama and the Dems. felt would bring the economy out of the red hot burning ashes of the recession/depression. The Repulicans in their infinite wisdom were against the stimulus package, which in my opinion, I'm somewhat in agreement with, but for different reasons. Their problem with it was mainly it was throwing too much money around. When I read about this, I said to myself, "WTF?". Did the Republicans suddenly have amnesia and forgot about the Bush administration and the fact that the national debt doubled during the 8 year reign of terror? I think the real reason is the Republicans, who in general are well off financially, are worried about big government and having some of their control taken from them. Personally, I really don't care.



Anyway, O'Bama and the Dems. decide to make some changes in accordance with the wishes of the Republicans in an attempt to come to some compromise. So, the go back to the drawing board and make some changes and come back with $850 Billion. Again I said, "WTF?" A few more changes later and we are looking at slightly over $900 Billion. Pure genius.



Here is the deal on the whole kit and kaboodle. The Dems are too short sighted in this and Republicans should just shut the f*ck up, because they already had their chance for the past eight years, so they have credibility. However, should this package get passed, the Dems will have one uped the Reps in the f*ck up department. The long-term damage to the dollar and the inflation rate will dwarf the possible (not guaranteed) boost to the economy. As I have stated before, we could be looking at hyper-inflation sometime in the next 3-7 years because of this package. I'm not saying we could end up like Brazil or Mexico with 5000% inflation rates, but we could easily make the 18% inflation rate we saw in the late 70's early 80's look like a walk in the park. If this garbage keeps up, I might start shorting the dollar and heading down to the bank to buy some Yen and Euros to hedge against the fallout.



Now the big question is what should be do about our portfolios? It's too early in the game to make any drastic changes. Stay the course. If things get bad, your dollar buys more shares, if things get good, your dollar buys less shares, but the portfolio value goes up. By aware about what companies and banks get stimulus money. They are talking about capping cash compensation for executives of companies who get a "significant" amount of stimulus money and even more importantly, they are thinking about imposing a suspension of dividend payments to shareholders of these companies. Bank of America (I own) will almost certainly be one of these companies. This is extremely important to keep up on, because with no dividends to reinvest into your portfolio, this could really hurt your overall return, since about 75% of your portfolio growth over the long term is attributed to dividend reinvesting.



Just for fun, the extreme fallout of this whole thing could be the whole stock market closing and stock shares dissolved. If you want to invest and companies want to raise financing, then they all would have to issue bonds. Doubt that will ever happen, but the sh*t would hit the fan if it did.



FYI- I'll be starting a five part series outlining the five best long-term stocks to invest in and why. Peace out and enjoy the weekend!

What To Do When Stocks Are Not For You!

Before I begin, I just want to point out the title of this post rhymed. Don’t worry, I won’t quit my day job. Anyway, enough of the small talk and on to some big talk.

Most of you for at least the last six months have been scratching your heads when you receive your brokerage account, 401(k), 403(b), etc. statements. Many of you are noticing that all the gains (unrealized gains) you had made over the previous 2-3 years have evaporated, or maybe you haven’t. During the housing run up, everyone was feeling good about how well their retirement plan was performing. Some of you probably even increased the amount of money taken out of your paycheck when the market was rocking and your account was blowing up (in a good way). Then, when things started to unravel, most folks do at least one of these three mistakes.

First, you think about switching your investments, but decide to wait, because you believe the mutual funds you have chosen have just hit a bump in the road. Then, when the market has gone down too far for you to handle, you decide to move your investments at a far greater loss than when you initially thought about moving them.

Second, you decide to reduce or even stop your paycheck deferments, because you feel like you are throwing money away and will bring your deferments back to normal levels once the market recovers and your funds start to perform well again.

Third, you move your entire portfolio and future deferments into a money market or stable value fund, because it is safe and you have decided the investing in anything riskier than that is just gambling with money.


If you are part of the 90% of people who have done one of these three things in response to the market, you didn’t make the wrong choice (remember, there are no rights and wrongs in investing), you made the less ideal choice. Of course there are exceptions for choice #3, since if you are close to retirement (less than 5 years away), then you should have moved your money to safer waters. The problem with that is you should have had your investments in something safer to begin with being that close to retirement, unless you are going to be collecting a pension and do not foresee needing to access your retirement account immediately upon retiring.

So, what is the right or more appropriately, what is the “appropriate” answer? Now, let me remind you this is strictly my opinion and is only for folks who are long term (15+ years) until they retire. Remember this phrase, “Stay the course”. What this means, when referencing investing, is to understand that the market goes up and it goes down and sometimes stays at relatively the same levels for a period of time. When you start moving your investments around, which is what most do when the market is down, then you are attempting to time the market. If the market was rational, this would be a fairly easy thing to do, but often time the market reacts or actually overreacts to certain types of news. The internet has made news available virtually the second it is obtained. By the time you are reading the latest news on a company, the market has already made an adjustment. New news is in fact old news by the time you read it. The other problem is that sometimes the market reacts in the opposite direction of what rationale would dictate. Most of the time, people will buy more when the market it performing well, which leads to overpaying for a stock and will sell when the market is performing poorly, which leads to selling when the price is well below its intrinsic value. Get your head out of your ass and eliminate the impulse to do the wrong thing. The idea is to exercise the dollar-cost average strategy. The idea is that you invest the same amount into the same funds each pay period. That way, you’ll mitigate the risk by not trying to time the market. During extended bear markets, you may even try to increase your investment, thereby purchasing shares of a stock or mutual fund at a lower price, which will get you more shares for your dollar and reduce the overall average cost per share.

If stocks are not for you, then what should you invest in? Remember that savings accounts are suitable for short term savings. Over the long term, their rates of return are lower than the consumer price index (inflation rate). This will create losses due to a reduction in purchase power. There are a couple of things you can invest in other than stocks or stock mutual funds.

First, you can invest in bonds. There are several different types of bonds, treasury bonds, savings bonds, municipal bonds etc. or even bond funds. Bond funds are typically available for any company 401(k) plan. Bonds are considered safer than stocks, but are not guaranteed investments. They can go down in value and their rates of return typically trail stocks over the long term.

Second, you can invest in a money market account. The interest rates on money market accounts vary according to how the market is performing and also to interest rates. If interest rates fall, the rates of return on the money market account will fall as well.

Lastly, you can invest your money in bank products. This includes, CD's, savings accounts and even money market accounts that have a fixed, yet variable rate. They adjust the rate on a weekly, monthly or quarterly basis, depending on who where you are investing. Many are now coming up with on-line savings accounts. The rates now are typically 2.5%-3%, however, they have been as high as 5.25%. Once the Fed starts raising the rate, you'll see these rates start to climb. The only draw back to bank products, is that you have to pay taxes on the interest each year, as long as it is more than $10. It can be a great way to park your money until the crap storm blows over. The crap storm will last another 10-12 months. If you are emotional about your money, park in the banks. If you are a nut job like me, then keep increasing your contributions to your 401(k) and max it out if you can. Try not to pay too much attention to the garbage that is going on. The internet is a great place to get information, but it causes as much damage as it prevents. Peace and I'm out!!

The U.S. National Debt and You

The biggest concern of the average American nowadays is the economy. With the vote today on whether or not Obama will get the second half of the $700 billion released to pump into the economy, the main concern that pops into folks’ heads is how the hell are we supposed to recoup those funds for the tax payer? Keep in mind that we are at the tip of the iceberg on this trendy little bailout period we are experiencing. Next on the bailout list (drum roll please)……..California!! Yes, an entire state will get bailed out this year and no, I’m not kidding. I’m dead serious!
Anyway, what is the national debt? I’m not asking this question to insult your intelligence, however everyone has some idea, but do not have a grasp on it completely. For most of the people whom I have conversed with concerning this topic; they have no idea or only a partial understanding of what comprises the national debt.
The national debt is very simple to understand. It is made up of all the debt obligations of the government. So, if you own any government backed or government issued debt instrument (i.e.bond), then that is part of the national debt. The government pays you, the bond holder, the interest on the bond (if applicable) periodically and then at the time the bond matures, you get the face value (principal) of the bond. Many institutions, both domestic and foreign, own US issued debt instruments. The bond example is just one type of debt instrument, but I won’t bore you with all of the types of debt instruments. The funny thing about US investors who hold government issued bonds is that they interest payments and principal are paid back with tax dollars. Essentially, you are being paid back money you lent to the government with your own money, even if your share of the tax dollars being used is proportionally microscopic to the total.
This type of debt comprises about 60% of the total national debt. The other 40% comes from deficit spending. The total national debt is approximately $10.7 Trillion. It has increased about 60% since 2003 and has doubled since 2000. The biggest contributors to the national debt have been the wars in Iraq and Afghanistan ($900B) and deficit spending. Many ask the question, if there is always a budget deficit, how do we reduce or eliminate the $10.7 trillion bill. The answer is, we don’t.
Here’s the other issue, where is all this bailout money coming from? Is there some secret emergency fund that this money is stashed in? Nope, there are TARP funds and other agencies that have “authorized” funds in varying amounts. None of these agencies have actual money, just authorization to spend money. One of the cool things about the government is that when the time comes when approval is given to one of these agencies to use their “authorized” funds and there is no money, we simply print more. Pretty sweet! I need to get me one of those printing presses, so I can print some money when I run out. When this printing of money occurs, two things take place. First, I get pissed off and second, the value of the dollar goes into the toilet. The reason why this occurs is the basic rule of the more of something there is, the less the value of each individual unit.
A byproduct of the dollar’s value getting deep sixed is that inflation occurs. If this bailout trend continues and the government keeps pulling the handle on the money machine and yelling “ca-ching” with each pull, we could possibly see a scenario straight out of Brazil a few years back. Basically, the country decided to not pay back debts they owed to other countries and defaulted. The main reason is that their economy was so bad, they had to print money to keep it going. They printed so much money, the inflation rate was 5000% (that’s not a typo) and the Brazilian currency was effectively worthless. In order to stop the rate of inflation from increasing exponentially, they had to stop printing money, which meant they couldn’t meet their debt obligations. The problem with a country defaulting is that the creditors are people and institutions in other countries who are holding defaulted Brazilian bonds and other debt instruments. This creates a ripple effect throughout the planet. I doubt the U.S. is going to reach that point, but unless the trend changes, we’ll eventually reach that point. If the U.S. defaulted, then the world will have a meltdown and would never recover. Everyone would pretty much have to start over from scratch.
In closing, to give you an idea of how bad we are as a government and a country in terms of money management, I’ll leave you with the following stats:

Total US Currency in Circulation (worldwide)- Approximately $900 Billion
Total US Credit Card Debt- Approximately $14 Trillion

Source: I read it somewhere. I can’t remember where, though.

Next on tap, where to invest if you don’t like stocks.

As a side note, the next rap song about money or anything relating to the government should have an Obama look-a-like dressed in a rhinestone jumpsuit pulling on a huge handle and cranking out sheets of money with a big smile. That’s just the image I get in my head when the subject of government bailouts comes up.

Technical Difficulties

I was just reviewing the recent posts and it appears that two were spliced together. I will be producing an little ditty on the recent moaning over the national debt and what it means to you and I. I'm a conspiracy theorist, so I believe the government is trying to sabotage me;) Forgive the sarcasm. I'll be on in the next few days. Hey, for all of you sports fans, what the heck happened to Boston College losing to Harvard. Not only are the players distraught, but their kids will most likely be working for the guys who beat them at hoop! Talk to you in a day or so!!

Resolutions 2009

Happy New Year, one day late. Sorry, but I was indisposed during yesterday and could not post my most anticipated discussion to date. And, without further delay here are my predictions I think will happen in 2009 and predictions that most likely won’t happen, but would present an interesting scenario for the public, if any one came to be. Here we go!!

Predictions That May Happen In 2009

The Bernie Madoff debacle will total well in excess of $50 Billion. It will most likely be released that the scheme is closer to $100 Billion.
Tolls across the country will be increased due to the decline in travel.
The number of billionaires world-wide will shrink to under 1,000. There are currently about 1,125.
The British pound will sink below the value of the American Dollar.
Housing prices will continue to decline for the entire year of 2009.
The DOW will drop below 7000 within the first 100 days of 2009 (April 10, 2009, in case you want to count it out to figure out the date.).
More ridiculous bailouts for big, stupid companies that suck. Bailouts do three very bad things: 1.They undermine capitalism (think of Darwin’s Theory of survival of the fittest), 2. Create Big Government (please do not interpret my fear of Big Gov’t to mean I’m a Republican and also do not misconstrue that because I said I’m not a Republican that it means I’m a Democrat. I’m an American)_
The Big change O’Bama is supposed to make, will not happen. This guy is a politician, not Batman! The only change that occurred is we elected a President who is one, not white and two not old. However, I think we elected the right guy, because the other guy would’ve been just like the current guy and the other guy teamed up with the chick from Alaska who is an embarrassment. The whole point of being elected President, it to “be elected President”. The means and the end are the same.
One of the big three auto companies will fail or at least file for bankruptcy.
At least one country in the European union will drop the Euro as their currency and go back to their old form of currency.

Predictions That Most Likely Won’t Happen in 2009, But Would Be Interesting If They Did

England will default. This would be crazy, but not impossible. Their economy is going through the worst dookie storm in their proud history. Everyone expects countries like Brazil and Russia to default (they have before), but if a vital country such as England defaulted, the snowball effect would land the world into the deepest depression in history.
AIG fails. This is not out of the question by any means. The fact that they are spending their portion of bailout money to pay dividends and bonuses to their sorry excuse for an executive staff, shows they could possibly blow through that money without investing it into the actual company to make it viable. So, all that money could be blown and all those policy owners, employees and not to mention the taxpayers all get left holding the bag.
Unemployment will reach 20%. Not likely, but if either of the previous two predictions comes true, it will definitely happen.
Oil will drop below $25 per barrel. Oil is sitting at just below $42, but I think it bottomed at $34, which I believe was an overcorrection. Again, if any of the previous three happen, you could see the demand sink so much that it will drive the price to those levels.
China’s economy will blow up (not literally and not in a good way). This is probably going to happen, just not likely in 2009. I believe their business practices will be the reason for the demise of that country’s economy. With the lead paint thing from 2007 to the importation of fish that they breed in overcrowded fish farms (they basically swim in their own waste which contaminates the filet.), their due for a collapse.
Housing market recovers. Not likely this soon, but it is wishful thinking on my part. I bought a house in July 2008 and would like to see my equity increase, but in reality it is probably worth less than what we bought it for despite the great price we got it for. Rest assured, my property tax assessment will still increase and so I’ll have to take off of work to go to grievance day. Super!!
Oil exporters will figure out how to protect their tankers from pirates. The fact that pirates even exist in today’s world is beyond me. These guys show up and take over an oil tanker with a five man raft with a motor on it. I can see that happening once and then just hiring a sharp shooter for $10,000 to, I don’t know, shoot a hole in the f’ing raft. If they make the adjustment and come in a wooden raft, hire an archer for $10,000 to shoot a flaming arrow or better yet, one of those exploding arrows from Rambo or the Dukes of Hazzard. Even better, get Stallone or John Schneider (Bo Duke) to shoot the flaming arrow at the boat. However, I don’t think you could get one of those guys to do it for $10,000. I wonder what think tank they hired who is still working on that little problem? WTF
The national debt reaches $15 Trillion. Probably won’t happen in 2009, but if they start printing money for more bailouts and our GDP keeps shrinking, it just might happen. Currently we are sitting at a smidge under $11 Trillion.
Government issues another stimulus payout. Not likely, because the real difference would be make with the loosening of the credit market. If checks are issued to tax payers, most of the money will be tossed into savings accounts or to put towards credit card debt. It would backfire, just like the one last year.
Gold will top $1,000 per ounce. Not likely as it currently sits at about $880 per ounce. The demand should increase as the stock market continues to decline in the 1st quarter and folks start getting defensive.

For entertainment purposes only. My Sure Thing Predictions For 2009

Paris Hilton will still be useless.
Pirates will still be hijacking oil tankers with sharpened sticks and six shooters.
Peace will not happen in the Middle East.
McCain and Palin will still be mavericks.
More Hallmark and Lifetime channel Christmas movies starring has-been actors will still be made and still suck and I will watch every single one of them. I’m still waiting for a Christmas movie starring Dustin Diamond (Screech Saved By The Bell for all you youngsters).
Unions will continue to suck companies dry and operate inefficiently. Boeing is the latest victim of unions sucking and the fallout hasn’t been realized yet.
Suicide bombing in Afghanistan and Iraq will still be considered trendy.
College tuition will continue to increase while the value will continue to decrease. College tuition is the only product I know of whose demand and price increase and the utility decreases all at the same time. College education is the biggest rip-off on the planet, but a necessary evil. Educational background should have nothing to do with gaining a job. Every job should have an interview process and an exam directly geared towards the position in question.
The majority of investors will continue to buy high and sell low. Ah, the irony of human reason. Fight the herd mentality. Buffett said it best. “When everyone is fearful, be greedy. When everyone is greedy, be fearful.”
G-Dubyah will write his memoirs. Hopefully, they’ll get someone to proof read that piece……of dookie.
James Lipton will still be a legend in his own mind and a complete failure.
J-Lo will still have no discernable talent to speak of.






Every year, folks all over creation tell everyone what they are going to do differently this year, from breaking bad habits, to going back to school and getting or finishing that degree. As we all know, talk is cheap and a vast majority of these resolutions are not started or completed. I've got a New Year's resolution for you, "Don't declare any New Year's resolutions!" That way, you will have started and completed a resolution without having to do anything.

Okay, enough of that. Let's move on to ten resolutions that you can apply to improve the health of your personal finances. Here's the list for you to pour over and integrate with your life. These are all attainable and can make a vast difference in your life. It only takes some discipline. Here goes!

Pay down your credit card debt "correctly". There is nothing that can whoop your mf'in ass like credit card debt. You hear all of these commercials about people not being able to pay the interest on their C.C. debt and it is totally true. There are three kinds of interest rates you are typically charged on your bills: interest from purchases, interest from balance transfers and interest from cash advances. The credit card companies typically charge varying rates and will line your balances up so that you have to pay the lowest rate through to the highest. This will become illegal in 2010, because by having your payments go directly to towards the balances with the lowest interest rate, the credit card company can make more money by waiting until the lower interest rate balances are paid off before having the payments work on the higher interest rate balances. The bottom line is to take the amount of money that you have allotted each month towards credit cards. Take the lowest monthly payments from the lowest interest rate cards and subtract that from the total you have allotted for credit cards. Whatever is left over goes to the one card with the highest interest rate. I know this goes against Suze Orman’s advice of pay off the lowest balance cards first, but I ran the numbers and it doesn’t work. Too bad, I don’t have the paycheck she gets from the networks. F’in idiots!!!

I know this is anti-American, but spend less than you make. Yes, this goes against the foundation of what make our country the greatest economic force on the planet, but think about the dollars you spend and think about the tax revenue that is created from it and then think about the waste of those tax dollars the government is responsible for (sorry to end that sentence in a preposition). Save you money. Take some serious thought into making sure that what you are buying is what you need. Think about it this way, do you need a snuggie or should you just wear your bathrobe backwards? Think about it!

Pay extra on any outstanding debt. Never underestimate the power of compounding interest. This has two sides. One is side is the compounding affect of saving money in an interest bearing account (preferably one that is higher than inflation, bank savings are a waste of time and money, CD’s or money market accounts are the way to go.). The other side is paying just a little bit more onto your debts. Everyone is so in love with just paying your minimum payment and going on. This is horrible, even if you don’t charge anything on that card each month. You don’t get anywhere doing that, but on any kind of debt, you can save a bunch of time and money by paying a little extra each month. As Wesley Snipes said in Blade, “Some MF’ers are always trying to ice skate up hill.”

Get rid of your cell phone. What are you, F’in helpless!. I got my first cell phone when I was 22 years old and that was 9 years ago. I used about 80 minutes per month, including nights and weekends and I had an 850 a month plan. Everyone is without any survival skills when it comes to not having their cell phone. It is their umbilical cord, their handicap. Grow the hell up you idiot. Get rid of the I-phone and blackberry, unless it is pertinent to your job. Reduce the expense. The average cell phone bill is $100/month!

Start grocery shopping weekly. Nothing wastes more money than idle food in the pantry. Most folks will do it on the fly and end up buying things that may not use for weeks or never, such as “Jell-O Pudding”. Maybe you need it for comfort. Maybe a bum needs a cardboard box for comfort. Don’t laugh, that’ll be you soon, if you don’t get your sh*t together. Plan out your meals and go once a week. Get what you need and call it a day.

Take all the ones and fives out of your wallet every pay period. Sound stupid? Well, you are a little on the smooth brained side. If you don’t know what that mean, then you don’t need to worry about money, because you are in a greenhouse getting watered. Saving any kind of change is an unreal way to save. Wachovia bank has a savings method of taking every electronic (except ATM) transactions and taking a dollar for each transaction and putting it into a high interest account. The bank also allows you to make up to $100 worth of auto transfers to the account and gives you a bonus at each anniversary based on the amount you saved. Things like this take the worst enemy (you) out of the equation from saving.

Raise your credit score. For one, check your credit score to see where you are at these days. Just because you had good credit five years ago doesn’t mean you have good credit now. You have to use your credit cards regularly and keep any old cards you have active. An A+ credit score (thanks to the mortgage collapse) is 740 and higher. It used to be 670 and higher. People suck, institutions suck and we are the ones taking a big bite out of the sh*t sandwich. Keep the old cards and pay down the others, but do not cancel. The ratio of debt used is a key factor and so is current debt, which means if you don’t have any CC debt, use your card once a month to keep it current and pay it off at the end of the month.

Get a second job! I know, I know it is the worst thing ever, but it can clear you out of debt in a hurry and with little fuss. Most of you think that, OMG, I have a Psychology Degree and should be raking in 6 figures. First, Phych and Sociology is merely the remedial Philosophy. And yes, I have a B.A. in such (meaning Philosophy). Plop that big ass check from delivering pizzas on any debt or savings you have. A little goes a long way.

Getting rid of PMI. Private Mortgage Insurance. Ah, it’s the only mafia like business left!! I’m not kidding either! Here is the deal. You buy a house. The bank says (I went through this) we need more money down. For what? I said. Well, there isn’t any PMI company that will cover you unless you put 8% instead of 3% down. Mind you this is $13K more. So, they blamed it on the market changes. I said of course, “WTF IS THE PMI FOR”? I feel like if the mortgage fails, the bank will be compensated because of the PMI, which the mortgagee pays for. How is there a housing crisis? It should be insured, or maybe it wasn’t. Why do foreclosures hurt the housing market, when there is PMI?

Last one. ‘F’ Suze Orman, she is a hack. Oh, wow, she is a woman. Follow her if you desire.