Blog – Page 140

And he’s a mime, too! Here he is doing “Stuck In Center Alignment On Control Your Cash”

Why can’t everyone be like the big man? Year after year of quiet excellence, and no desire to share his personality with the world at large. Consistency and aptitude still count for something, right?

We could give a damn who wins the NBA title; not that we’re not fans, rather that we have no emotional investment nor rooting interest in something that only tangentially affects us. But it’s hard not to pull for the stoic giant who forever redefined the power forward position. Would that everyone on the planet knew what they were good at, and didn’t waste their time trying to be something else. Besides, he could use one more ring for the thumb.

There are blog carnivals. There are personal finance blog carnivals, and most of them are horrible. Cut, paste, present. You can read one of those if you want – it won’t take long – or you can stay here and at least be entertained and possibly learn something. Doesn’t that sound better? Of course it does.

The Carnival of Wealth. A week’s worth of posts from around the personal finance realm. Some are great, some are not. None are average, or they wouldn’t be here. Submitters, go here. Readers, sit back and ingest:

Week after week, Ken Faulkenberry of AAAMP Blog has an uncanny ability to submit his post seconds before we decide we’re going to start writing the CoW. That’s why he’s usually at the top, and remains so this week. Ken argues that you do well in a bear market by losing less than everyone else does. That isn’t technically true, but his point is undeniable – understand the difference between a secular bear market and a cyclical bear market. You can start by guessing which we’re in now.

Here’s an example of what not to submit to the CoW. It’s someone’s middle school essay on investing in oil and gas. Someone going by the name “Lynn Jackson”, writing at One Cent At A Time. “Lynn” explains what you need to do before buying shares of, say, ExxonMobil:

You will be faced with evaluating different companies for their experiences, success rates, and their fits with your needs.

Using “needs” as a noun, -1 point. “Lynn” continues:

In turn, these companies will want to get a lot of information about you to assess your suitability. You will need to work with a lawyer, because this weight of investment requires a considerable amount of regulation and compliance.

Huh? A post written for the most novice of investors, claiming that a company you’re interested in buying a piece of will keep a dossier on you? There were 2 comments on this post last we checked, and neither commenter challenged “Lynn” on this falsehood. If you’re looking to do a hostile takeover, then yeah, this post might be valuable to you if you can get past the unspeakable liberties “Lynn” is taking with the English language. “Lynn”, we’re trying to delight readers, not scare them away.

Good Lord. Speaking of middle schoolers, this next one opens with the last resort of every 12-year-old who has a report due Monday morning and it’s now Sunday night: a dictionary definition!

Purpose – what does this word mean to you?
The dictionary defines purpose as ‘The reason for which something is done or created or for which something exists’

That’s from Savvy Scot. Have at it.

Someone at UPromise wrote an advertorial for Jason at One Money Design, and allowed him to put his name on it. Or maybe he really did write it himself. No way to prove it. Either way, he got paid. Oh, did we forget the link? Oops. Remind us to go back and insert it.

Does anybody proofread anymore? We’re not talking about an occasional typo slipping through. We’re talking about a post so replete with errors that it makes us want to find the college admissions officer who greenlit the submitter’s application and give her a Breathalyzer test. Sean at One Smart Dollar lists (bloggers love lists) 8 jobs that don’t require a degree. The funniest part of this post is that out of the millions of college dropouts who went on to wealthy and productive lives, the 2 Sean cites by name are Mark Zuckerberg and…Ryan Seacrest. Yes, with the right brand of hair gel and sufficient shiny teeth, you too can be a barely closeted no-talent. But don’t despair, because

While college can cost thousands of dollar, the cost to take a few classes to before a real estate broker is much less.

Read that aloud for full effect.

Keep in mind that being a real estate broker is not a 9-5 type of job.

Fine as far as it goes, but he follows that up with a Control Your Cash favorite – the utterly superfluous sentence:

Real estate brokers often work nights and weekends.

If you don’t read your own stuff, why should the rest of us?

(A post titled “How Many Keywords Should You Run On A Page?” Yeah, we can’t wait to run that.)

Did we run a submission last week on checking your credit score? You mean we missed a week? That won’t do. If the most overwritten topic in personal finance is “creating your emergency fund”, “checking your credit report” is a close second. We’ll let Squeezer at PF Success handle it from Oh God, we don’t even have it in us to write interesting comments on the inanity of this particular repetitive blog topic anymore.

Should we just tank at this point? If we run the worst carnival on the internet, do we get the 1st pick in next year’s carnival draft? Let’s try.

Complex Search lists 10 reasons the housing market won’t recover anytime soon. Most of the reasons are valid, even though the post is wildly self-contradictory. Opening line:

We’re all pulling for the housing market to recover.

Start of the next paragraph:

If you’re considering buying a home because you want to live in it for 30 years, this market is perfect for you.

So we’re not “all” pulling for the housing market to recover. Some of us want prices to stay low. You just said as much! Even better, this post was written by John Haller, the self-proclaimed founder of Fidelity One Credit Corp, “a socially responsible company.”

“We’re socially responsible” is like “I have a great sense of humor.” If you have to say it…

Socially responsible? Guess what Fidelity One specializes in. Car title loans! You can’t make this up.

At least one person’s going to send us an email this week saying, “Why do you have to be so critical?”, to which we’ll respond, “Click on the links in the CoW.”

And just like that, PKamp3 from DQYDJ.net has to come in and ruin everything. Original topic? Check. Readable English? Check. A little humor and lots of expertise? Check. And he slew at least one dragon of conventional wisdom, too. PKamp3 says you can’t look at a stagnant market level over a certain period and say you’d have been better off keeping your money in a mattress. Why? Because dividend reinvesting, that’s why. PKamp3 backs up his points with irrefutable data, too. Damn him. And we were doing so badly, too.

What’s this? Another good post? Now you’re just rubbing it in. Stephanie at Nerd Wallet shoots down a gimmick from C1 Bank. Buy a CD, get a Mercedes. Of course there’s a catch, and of course the smart folks at Nerd Wallet are happy to bring it to your attention. This post is so comparatively good, we’re not even going to point out the tired “car loses value the moment you drive it off the lot” mantra.

(sigh) From Liana Arnold at CardHub, an honest and critical review of the 3 latest travel rewards cards from Bank of America. Again, rewards are everything. Credit limit is close to everything. Interest rate is nothing. (Not “interest rate is zero”, but “interest rate is nothing.” Download our book if you think that’s a distinction without a difference.)

Now we’re in danger of squeaking into the playoffs.

And again. John Kiernan at Wallet Blog wants you to just buy a freaking house already, alright? Mortgage rates have a lower bound (zero). They’re rapidly approaching it. God, the universe, John Kiernan and the Control Your Cash principals all want you to buy a house. Just do it.

Andrew at 101 Centavos is back. He embodies all the traits we love here at Control Your Cash: strong opinions, original research, the ability to write without stultifying…he’s basically the opposite of a mommy blogger. This week he writes about institutional investors’ reluctance to include Walmart in their portfolios.

Did you know that only 31% of Walmart stock is held by institutional investors? You didn’t, and you probably don’t know what to make of that number because it’s meaningless without a frame of reference. According to Andrew, 60-80% of a typical stock that trades on the New York Stock Exchange is held by institutional investors. So we figured that maybe Walmart’s low number is a result of the company’s enormous market capitalization: there’s so much Walmart to go around that Ma and Pa Investor can’t help but own 70% of it. Andrew proves that that’s not the case, and explains why brokerage houses are largely insane.

(Seven Essential Navigation Tips for New Boat Owners? From something called BoatInsurance.org? That’s more like it.)

On balance, that was awful. Here’s your money back. The good news is we’re on Investopedia, all the freaking time. And you can follow us on Twitter (@CYCash). And we’ll have something of our own creation here on Wednesday. Stay tuned.

She's smiling because she's AB-. That'll get you $20 a quart.

A company is struggling, and the struggle has no quick resolution. (How) can you profit off this situation?

Case in point, and a real-world example. We needed an polyurethane iPad Smart Cover, which is made by Apple and sells for $40. It’s the only accessory we could find that hit the multiple criteria of a) being made especially for the product it’s supposed to accessorize and b) coming from a trusted manufacturer (Apple itself). There are plenty of knockoffs available, but we’re not interested.

While we’re certain the Smart Cover does what it’s supposed to, we still wanted to take a look at it rather than just read the description on Apple.com. So we headed to Best Buy, America’s dominant electronics retailer since the demise of Circuit City. You can touch and play with the iPad Smart Covers there. We did.

Then we bought one on eBay for $23. With free shipping and no sales tax.

Here’s an immutable law of commerce that we’re already seeing regular examples of and will continue to for the next few years: Businesses that operate as showrooms, rather than as businesses, are at a huge disadvantage. Look at the position retailers such as Circuit City and Borders (and now Best Buy, and others to follow) have put themselves in. You can walk in off the street and examine the merchandise at your leisure. The employees range from obsequious to unobtrusive, but none of them are going to give you the hard sell. (Imagine a car dealership operating the same way. More specifically, imagine walking around the floor looking at new models and responding to every salesperson with “No thanks, I’m just looking.” The car dealership would kick you out within minutes. Maybe electronics retailers and bookstores need to place their staff on commission.)

The old business model isn’t just old, it’s counterproductive. Using a retailer/marketplace like Amazon or eBay, plus the wireless provider of your choice, you can walk into Best Buy, look at the items available, buy them from someplace else, then discreetly leave the store. If you really enjoy irony (as distinguished from coincidence), you can buy the items from Amazon or eBay with a phone that you bought at Best Buy. If you’re feeling really daring, you can do it with a floor model display computer.

There’s no obvious solution to this, either, short of Best Buy drastically lowering its prices. Either that or the company could get out of the retail electronics game, and operate exclusively as a seller and installer of large appliances and car stereos. When Best Buy hires us as consultants, that’s what we’ll suggest. Until then, our ideas are merely opinions.

As a customer, your options are plentiful. As an investor, you can make money here: you just have to be resourceful about it. Imagine a market so relatively free that it lets you sell stuff you don’t own.

BBY seems like a perfect example of something worth selling short. This is vastly different than selling a house short. You borrow the stock, hope it loses value, then buy it, then return it to the lender at the original price.

Sound like too much work? Heck, it’s an opportunity. The holder of BBY obviously thinks it’ll appreciate, so it’s only fair that there be a mechanism for profiting off daring him to be wrong.

The compact explanation is as follows. BBY is currently trading at around $20. Say you borrow $20,000 worth of shares, which you can hopefully figure out is 1000 shares. You wait 3 months, and the price has fallen to $16. You then buy $16,000 worth of shares, sell them to the entity you borrowed the original 1000 shares from, and pocket $4,000 (less borrowing charges.)

But instead of following the predicted downward trend for those 3 months, Best Buy gets a patent for a perpetual motion machine. Or finds an oil patch underneath its corporate headquarters (which would be noteworthy, seeing as it’s in a Minneapolis suburb.) The stock shoots up to $60, and the lender wants his 1000 shares back. That’s going to cost you, Ace. $60,000, to put a nice round number on it. You’ll be out $40,000 for your little exercise in semi-sophisticated trading (again, plus borrowing charges.)

What about the actual specifics of short selling? It starts by opening a margin account. E*Trade*, for instance, will let you open a margin account with a minimum balance of $2000 if you already have a regular account with them. When you use a margin account, you’re borrowing E*Trade’s money. You can’t run away from them if you come up short. They know where you live, and they have your money.

So say BBY falls in value, but not by as much as you’d like. After your arbitrary 3-month period, the borrowed money comes due with the stock sitting at $19.53. How much would you make?

This isn’t hard to figure out, and you can probably do it in your head. $470, right?

Go back and read the post again. From the top. E*Trade (or anyone else, other than a particularly dupable family member) is going to charge you interest. Your net profit for that imperceptible decline in the stock price is 0.

Never make an investment without knowing the interest rate you’ll be charged on any money you borrow.
Never make an investment without knowing the interest rate you’ll be charged on any money you borrow.
Never make an investment without knowing the interest rate you’ll be charged on any money you borrow.

Should we say it once more, underlining this time, or did you get the message?

Brokerages start with something called the “base rate”. E*Trade set its at 4.14% a couple of years ago, and it’s remained untouched since. If you have half a million dollars in your margin account, you get to borrow money at the base rate. (Put a million in your account, and they’ll take 25 basis points off the base rate.) But the less your ability to repay, the higher the interest rate you’re charged. That’s why unsecured credit cards charge so much, which you shouldn’t be paying interest on anyway. With that $2000 minimum balance in your margin account, you’ll pay a 430-basis-point premium on the money you borrow. 8.44%. You’re almost better off borrowing on that credit card. Almost. Here’s the list of interest rates, segmented by size of account balance:

Making money’s a pain, isn’t it? For a beginning-to-intermediate investor, better to find something undervalued and buy it long than search for something overvalued. The worst thing that a stock you perceive to be undervalued can do is fall to 0. A stock that you think is overvalued, but isn’t, can rise so high that you’ll lose your margin account, your house, your 401(k) and the respect of your friends and family. Now, who’s up for some trading?

*Technically, the name is supposed to be in all caps. They should consider themselves fortunate that we’re deigning to indulge even one of their typographic fantasies by spelling the company name with an asterisk. The asterisked name spawned an asterisked comment, adding to the confusion, a confusion that this asterisked comment can’t hope to resolve.

Carnival of Wealth, Tim Duncan Edition

Expose Yourself For Fun And Rewards

Buy Now!

Looking for something?