Archive for the ‘Stocks’ Category

Should I invest my down payment in the stock market?

Tuesday, August 18th, 2015

Question emailed to me: Let’s say my good friend has $100K. He has approximately one year to make this money grow until he has to buy a house. $20K of that is already in stocks, but doesn’t exactly know what he’s doing.

What would your advice be to make the most out of this one year given his current finances?

Answer: Does your friend want to put 20% down on a house? Does he/she have any other liquid assets? Lastly, do they know the price range of the house they want to buy?

With 100k and a decent-paying job they’d qualify for a 500k house, 100k (20%) for the down payment and a 400k mortgage.

If 500k is above or close to the range they’re looking for the house then no need to make a cent, protect the money and keep it in cash.

If they NEED more money for a down payment, then don’t invest to do it because mortgage lenders scrutinize
finances very thoroughly these days and need to be able to trace every cent you have to decide to give people a loan or not. They will not loan money to someone if they need to rely on unpredictable investment income to pay the mortgage (down payment might be less strict, but the source of the money needs to be trace-able – I just bought a house and or mortgage guy said “no mattress money” which is a problem if you are saving a lot of cash (literal
cash – not in a bank).

Now to answer the question as best I can without knowing all the details of your friend’s situation, for people with a chunk of cash that will be used in 12 months or fewer for a down payment on a home, put it in a high interest savings account. I pulled all my money out of stocks and investments 4 months before I bought my house. I missed out on 5-10% rate of return over those months, but you can’t predict the future, especially such a short window of time as 1 year in the stock market.

For all we know (and any “experts”) the stocks could crash 20% the day before he wants to take his money out. No one truly predicts the stock market with great accuracy, and if they did they would be ridiculously rich and not handing out advice here.

Also, if your friend invests now and sells within a year, they will be paying short term capital gains which is a much higher tax than holding for a 1+ years. So while you may make some extra cash, I can’t see it being enough to take that big of a risk.

Predictions for gold, stocks, and currencies

Sunday, February 14th, 2010

Interesting article here that predicts gold prices will slide while large gains can be made with certain currencies in Asia. They say go heavy on stocks but from developed rather than emerging markets.

Abby Joseph Cohen at Goldman Sachs sees a bull market but I see a broken record

Thursday, August 6th, 2009

Cohen at Goldman Sachs says it’s a bull market. Again. Problem is Cohen is a cheerleader with one outlook for the market – positive. I was shocked when she started urging for caution after Lehman went under.

If you think we’re in a bull market then fine – start buying. But I wouldn’t take Cohen’s word for it.

Where will Berkshire go next?

Monday, May 4th, 2009

Interesting article here on Buffet, his travel agent, and how he is more likely to buy US companies than foreign ones right now.

Berkshire’s Class A stock lost 32% in 2008, but the company reported a profit of almost $5 billion. Also with so much of it’s business (2/3) in insurance and utilities it’s not a bad call for uncertain times – if you still trust Buffet after he invested in ConocoPhillips when gas prices were at an all-time high. That cost Berkshire a billion or two.

Cramer’s Mad Money stock picks short-worthy?

Friday, February 13th, 2009

Stock picks featured on Mad Money don’t live up to the host’s hype. That’s the theme of this Cramer-bashing article.

According the this article, they’re just following the pack:OTHER CAREFUL, HONEST EXAMINATIONS of the CNBC star showed the same underperformance — including several independent studies by finance researchers, and a 2007 review by Barron’s that found the only way to reliably profit from Cramer’s stock picks was to short them (see “Shorting Cramer,” Aug. 20, 2007).

Anyone else invest in GE stock?

Friday, February 6th, 2009

GE is down to under $11. I bought $1000 worth when it was $19 thinking I’d double my money; however, it looks to have backfired on me. I’m confident that it will recover, but it gets quite depressing seeing you kids’ first car fund (about 10 years off) dwindle away. I’m considering dumping another $1K into it.

Answer: Although the CEO says the dividend is safe, and we’re currently looking at 11% or so yield, I think there’s a bit too much risk w/ GE’s financial business. It’s not out of the realm of possibility that GE will need a bailout that will crush shareholders. And given the discount that some stocks are selling at I really think there are much better buys out there.

I think CSCO is a fantastic company that is taking advantage of the recession nicely to build out their business cheaply. They are a global leader in communications which will only become more integral in the upcoming years. They have some serious growth potential and are a safe stock given their phenomenal balance sheet and huge cash flow.

FSLR is has the best solar technology on the market. They have a great balance sheet and will most likely achieve price-parity first. I really think this one is going to the moon and now is a great time to get in.

Lastly, Alcoa (AA) has gotten absolutely crushed thanks to a perfect storm of plunging commodoties prices and a massive drop of in their business. The stock has gotten absolutely pummeled — just check out a 10 year chart. They will be back and if you can wait it out, you should see a phenomenal return on this.

So those are just 3 quick ones that I really like for the long term. In order of most potential, Id rank them as: FSLR, CSCO, AA. In terms of safest, Id rank them CSCO, AA, FSLR.

Advice for beginning to play the markets

Tuesday, September 9th, 2008

Question: I was wondering if anyone had any suggestions as to the best online site to use to begin investing. I’m not looking to use a broker but rather make my own decisions and see how I could do because I find myself getting increasingly more interested in the markets and would like to start to get a feel for them. Preferably a site with smaller commissions and an abundance of technical information would be best. Thanks for your input.

Also, I believe RIMM, the company who makes blackberries, is due for a big drop in the near future for more reasons besides the iPhone and wondered if anyone had any input on that.

Answer 1: You just want to buy and sell stock shares? Or do you want to invest in bonds and the money market? Have you ever done it before? Do you have a nice amount of money to play with? If the answer to either of those questions is “no,” I don’t know if you should just dive in.

Do you currently invest in a 401(k), 403(b), or IRA? If so, what about those investments leave you unsatisfied? If you’re just interested in learning and experiencing more about stocks and stock prices, you can find out the holdings in your retirement account and watch those.

If you want to learn by doing, but don’t want to risk anything, you can buy and sell shares of stock with play money at Investopedia.com. It’s a great learning resource.

Any better stock ideas?

Monday, August 25th, 2008

I am curious what others who invest and follow the market are investing in or liking these days. I will mention a few of my own and would like to hear your ideas.

1) I know it has become a joke but I have Apple. It has been fantastic. I am not buying any more because with the stock price going up as much as it has, it has become too big a portion of my portfolio to add more. I have sold some and of course been sorry. I have never seen a company hitting on all cylinders like that company is. I am holding my shares and occasionally writing covered calls.

2) Devon Energy this is a good oil and gas producer. Of course it has done well with the energy complex but it has the wild card of the potentially enormous discovery in the Gulf. It holds a 25% stake in what might be another Prudoe Bay. Of course we had a thread on this earlier. In any case the big money has been made there although I think there is more. I actually lightened up my energy holdings a few days ago, selling my energy share mutual funds in my IRA.

3) Two financials
a)CSE a beaten down financial. It has not suffered major credit losses but it’s stock price got down to $10 where it was yielding over 20% on it’s dividend. I bought at 10.6 and it is now over $15. The yield is still very good. They announced plans to buy the branches of Fremont Investment and Loan. I know that company from my days in the banking industry. They are high priced deposits but cheaper than repo agreements or other collateralized agreements used and certainly more stable. This is a case where I kind of caught a falling knife, which I don’t recommend but it has worked out.
b) USB a very well run bank out of Portland. They have largely escaped the blood in the financial industry. They have a dividend yield of 5%. I have owned shares for 8 years and bought more today.

Disney stock: Is it time to buy DIS?

Saturday, August 16th, 2008

We have a complaint about how Disney is trying to maximize profits by making more employees go without health insurance. Ethics aside, is Disney a good investment now?

This article claims that DIS has a wide moat. It’s tough for new competitors to enter the animation market.

I love moats, though as with with Ebay that doesn’t always mean short term success. Disney ought to continue making money (regardless of how well it does cheating employees out of health insurance benefits) but will it outperform the broader market? I’m not counting on it.

Marvel looking good?

Monday, May 5th, 2008

MVL stock might see a little boost if Iron Man continues to rake in big bucks. This is the first film financed by Marvel so its relative success has a bigger impact on MVL profits than previous films.

However, a successful Iron Man may already be priced into MVL stock so there’s no saying for sure if the stock will see a sudden jump.