Steadfast Finances

  • Home
  • About Me
  • Contact Me
  • Departments
    • Administration
    • Banking
      • CDs
      • Online Savings Accounts
      • Savings Accounts
    • Bargain Hunting
    • Commodities
      • Gas Prices
    • Consumer Education
      • Business Ethics
      • Documentary Films
      • Public Awareness
    • Debt Reduction
    • Energy crisis
    • Entrepreneurship
    • Financial Crisis
    • Financial Planning
    • Frugal Living
      • college life
    • Green Living
      • Energy Conservation
    • Investing 101
      • Buy on the Dips
      • Dividend Investing
      • ETFs
      • Faith Based Investing
      • Fixed Income
        • Municipal Bonds
      • Global Economy
      • Index Funds
      • Mutual Funds
      • Politics
      • Variable Annuities
      • Vulture Investing
    • Investor Psychology
    • Lessons Learned
    • Long-Term Stocks
    • Market Themes
    • Microtrend Investing
    • Multiple Income Streams
    • Personal Finance Tips
      • 20s Something Advice
      • Auto Sales
      • Credit Cards
      • Credit Cards
      • Cutting Expenses
      • Mortgages
      • Saving for College
      • Saving Money Online
      • Technology & Automation
    • Productivity Tips
    • Real Estate
    • Retirement
      • 401k
      • Annuities
      • Roth IRA
    • Saving Money
      • Budgeting
    • Taxes
  • Subscribe via RSS

The Best Counter Argument to ‘Green Shoots’ that Main Stream Media will Never Discuss

July 7th, 2009  |  Published in Investing 101  |  2 Comments

One of my biggest pet peeves with the financial media is the near fixation on one side — the Buy! Buy! Buy! side — of the story.

If an analyst or money manager speaks out with a bearish forecast, it’s a reasonably good bet that you won’t see them appear on that network as much as someone who agrees with what they’re trying to promote (e.g. Peter Schiff’s bearish calls).  I’m not suggesting it’s some great conspiracy or certain TV personalities shouldn’t speak beyond their field of expertise, but when you hear nothing but rah-rah rants when the economic data tells you something entirely different, a smarter person begins to question the quality of their advice.

Then comes along an interview with a guy like David Rosenberg who gives one of the most realistic economic forecasts I’ve seen in 2009.  In less than an hour, he basically dismantled Bernanke’s “Green Shoots” analogy with honest to goodness ironclad data.

I would be floored if I wasn’t a glass-half-empty realist.

Unfortunately, Squawk Box is an early AM show so it didn’t get the prime time viewers that it deserves, but thanks to embeddable media files, you get to view it here.

Couple highlights:

  • 18% of personal income is being supported by Uncle Sam. Double that of LBJ’s great society of 1960s.
  • Unemployment rates will shoot past the 10.8% high from the 1980s.
  • Going back to 1900, the stock market goes through 16 Year Supercycle Intervals.
  • Only $0.08 of every dollar that Uncle Sam is giving in stimulus is being pumped back into the economy.
  • The bounce from March to May 2009 was nothing but a 40% dead cat bounce!
  • S&P 500 earnings will only be ~$50 for the next four quarters.
  • Stock market rallies are meant to be rented, not owned.
  • We’re halfway through a secular bear market that began after the 2000 crash.

[email and RSS Readers please click to site for video]

While some will say Rosenberg’s analysis is nothing but negative hoopla, I consider his advice to be the most refreshing thing I’ve seen all year.  His reasoning and conclusions actually felt real, instead of unrealistic expectations plucked from the imaginary Green Shoots analogy just to keep social unrest at bay.

Blog Traffic Exchange Related Posts
  • The Stock Market Bubble No One Talks About
  • 20 Questions to Ask Yourself Before Choosing an Online Discount Broker
  • Cable Bills Too High? Disconnect, Renegotiate Better Rate or Watch TV Online?
  • Maybe Pacino was Right: Be Careful What Kind Of Leaders You're Producing
Blog Traffic Exchange Related Websites
  • The Hidden Cost of Free Stock Trades
  • How To Buy Stocks In This Volatile Market
  • Wall Street Journal's Tips for Surviving this Financial Nightmare
  • The Greatest Economic Stimulus Plan Ever!
SUBSCRIBE: If you enjoyed this article, please sign up for new article alerts by RSS feed or by Email.

Why Do We Rent Some Stuff but Buy Other Stuff?

July 4th, 2009  |  Published in Lessons Learned, Saving Money  |  2 Comments

I read an interesting post at PBS earlier today entitled Why Do Brides Buy Dresses While Grooms Rent Tuxes?, and I must say, the question has been bouncing around in my head all day.

Not because the question is all that difficult, but that it got me thinking about all the other things in my daily life that I unknowingly buy because I’m “supposed” to buy versus rent what I’m “supposed” to rent.

Primarily, I’ve been asking myself:

Why do we tend to do things just because that’s the way it’s always been done or it’s always worked that way?

Is it because we’re just not self-aware enough?  Perhaps we find it comforting to continually doing things out of habit?  Maybe we just simply don’t want to rock the boat?

Could be lots of things.

As for me, here are a few things I came up with.

What I’m Buying that I Should Rent/Get for Free

  1. Books.  I don’t read books nearly as much as I did years ago (I blame blogs for that), but I still occasionally catch myself being drawn into a bookstore to scan the bestsellers.  I do this when I’m bored or to waste time while I’m out shopping with the significant other.  Instead, I should be turning to the local library.
  2. Magazines.  I have a few subscriptions to trade journals (mostly pharma and biotech related) so I can stay up to date with modern industry practices, but much of the content is now available online.  Still, I enjoy my regular routine of breaking out a red pen and highlighting the main points so there is some value I can’t replace.
  3. My girlfriend. After all, why buy the cow when you can get the milk for free.  Scratch that idea.  She occasionally reads the blog and I’m sure I’ll regret it later.  (Please note the obvious sarcasm.)

What I’m Renting that I Should be Buying

  1. My SUV.  I’ve been leasing a SUV for just over two years now, and while I’m thoroughly addicted to new car smell, I probably won’t be doing it again in the future.  I’m a 30+ guy with a girlfriend so the need for a pimped out ride just isn’t there anymore.
  2. Computer related equipment.  I noticed on my last DSL payment that I’m actually paying rent for the use of their wireless modem.  Same goes with the cable company’s TV hardware.  Perhaps there is a way to buy my own or switch to a plan where these fees, while minimal, can be eliminated.

As you can see, the list is pretty short considering I’m a fairly frugal minded person, but I’m curious if anyone else has run across the same question and made the necessary changes.  If so, what were they?

Blog Traffic Exchange Related Posts
  • Financial Planning 101: What To Do with Sudden or Unexpected Cash?
  • Want to Be an Active Investor? Try a Fantasy Stock Market Game First!
  • Unwanted and Shunned Dirty Jobs Will Become the Big Money Jobs of the Future
  • Why Index Funds are Bad Investments
Blog Traffic Exchange Related Websites
  • Get Rich, Stay Rich, Pass It On: A Mini Review
  • Last Minute Gift Ideas
  • If I Were Going to Do Credit Card Arbitrage...
  • My Tenant: "I've Lost My Job and I Can't Pay You..."
SUBSCRIBE: If you enjoyed this article, please sign up for new article alerts by RSS feed or by Email.

Should We Adopt a National Sin Tax on Junk Food to Reduce Obesity Epidemic?

July 2nd, 2009  |  Published in Consumer Education, Politics  |  36 Comments

I’m not a fan of paying higher taxes. Nor am I a fan of people going without health insurance.

As we’ve heard over and over on the 6 o’clock news and political debates, our current health care system cannot continue along its present course and represents a serious threat to the health of the U.S. economy.  Therefore, I’m reluctant to admit that substantial changes will be required (both monetary and personal responsibility) if we plan on altering our future.

Unfortunately, we are living in an era where we are so concerned about offending someone that we’re willing to turn a blind eye to the obvious, and withhold what must be said until we’re among the safety net of our supporters or behind the security of a computer screen.

The Case for Higher Taxes to Pay for Health Care

At present, the likelihood that higher taxes will become a necessary evil to pay for government sponsored health care is gaining ground.

Personally, it really doesn’t bother me all that much.  If called upon in the future, I’m willing to pay a slightly higher tax rate so uninsured Americans can have access to life saving drugs or little Danny falls off his bike and breaks his arm.

No problem, happy do it, just play me a patriotic song and tell me I’m doing my part for the good ol’ Red, White & Blue.  Heck, I’ll might even enjoy it.

As long as the people getting it actually deserve it!

Then comes a news report which says the Obesity Epidemic in America is still going strong.

[Email and RSS readers may need to click to site to view video]

Obesity in America - NBC News.

Obesity in America - MSNBC Diabetes Spending & Increasing Percentage of Obese Children.

Should Junk Food Have a Sin Tax?

When we, as a nation, are discussing future budget crises partly because we can’t push ourselves away from the table… I think we might need to reassess the problem.

Most of the things that are considered “bad for you” in the U.S. come with a regulatory agency warning label, and possibly a sin tax.  Goods like cigarettes, alcohol, and even gasoline, have an additional sin tax attached to them because they’re (arguably) bad for us in their own unique ways.  Not to mention, they’re a cash cow for the tax man.

So why should junk food be any different? It’s well known that sugar stuffed goodies or chocolate covered yumyums are contributing to the obesity epidemic. Why should food that possesses little nutritional value but contributes to the cancer/diabetes/heart disease epidemic be immune from taxation?

Better yet, why should the people who consume these foods (if you can call them that) eat significantly more of them compared to the population mean, have a body mass index greater than 30%, and still get access to the same government sponsored health care that everyone else is supposed to get when they retire? Moreover, be eligible for disability insurance solely because of their weight and medical conditions directly related to their eating habits.

Why should junk food mega-consumers be allowed to contribute as much in taxes as much as the next person, but indulge in a lifestyle that will undoubtedly cause them to take more out of the Medicare system than they actually contributed during their working years. Critics will (correctly) say that these individuals will die off sooner than normal resulting in lower overall health care costs. However, considering that medicine is constantly extending the human lifespan and the cost of medical care/drugs will always increase, it’s an arguable debate at best.

This situation hardly seems fair to the majority of the population, and because of that, it’s a viable question and should be pushed to the forefront. In a fair and just society (which we’re supposed to live in), those who spend more in the end should be expected to pay more upfront. Right?

A National Sin Tax of 2% for Junk Food?

What if, just for arguments sake, a 2% sin tax was placed on anything bearing the label “junk food”? 

When an item would be purchased at the grocery store, a mandatory 2% sin tax was added to the item just like everyday sales tax. It will be used to fund Medicare deficits, educating the general public against an unhealthy diet, as well as providing temporary financial assistance to anyone who can’t afford medical care.

After all, this sin tax will target the majority of people who are, or likely will be, posing a greater risk to the sustainability of government sponsored health care (e.g. Medicare).

Then again, is a 2% sin tax enough? How about a 5%? An extra quarter for a bag of Doritos or Snicker’s bar doesn’t seem that bad. Does it?

How About a Visual Debate?

If my words haven’t convinced you, perhaps a quick visualization of the problem can sway you.

Should this “disabled” person qualify for the same government sponsored health care…

  • food-addiction-obese-guy-in-wheel-chair
  • … as this person? cancer-patient-third-stage-hodgkins-disease-during-chemotherapy-fuck-cancer
  • Why should a person who overindulges like this…
  • obesity-epidemic-fat-lady-smoking-cigarette-and-sipping-soda
  • … gets the same benefits as a veteran who lost a limb fighting for their country (notice the absent right leg)?
  • us-veteran-amputee-handcyclist

It’s a powderkeg of a debate just waiting to go off, but because of political correctness, no one wants to bring it up.

Considering our present situation (severe recession, financial crisis, record numbers of uninsured, etc), it’s a debate worth having regardless of the hurt feelings and political fallout.

Then again, perhaps complaining about our problems while doing nothing to solve them is just the new way American way.


Attribution-NonCommercial-NoDerivs License
Photo Credits by order of use: colros, hoodiefanatic, colros, richardmasoner.

Blog Traffic Exchange Related Posts
  • How Many Sob Stories Must We Tolerate for Consumer's Stupidity?
  • 20 Frugal Tips from Someone Who Lived Through the Great Depression
  • 20 Reasons Why I Love the Recession
  • Screw You Economics: My Most Hated Stealth Fees and How to Get Around Them.
Blog Traffic Exchange Related Websites
  • Save Money on Health Care
  • Peer Pressure to Eat Unhealthily
  • What are Health Savings Accounts and Should I Have One?
  • Books: Get Your Motivation Back!
SUBSCRIBE: If you enjoyed this article, please sign up for new article alerts by RSS feed or by Email.

Should You Invest like a Shark, or a Goldfish?

June 29th, 2009  |  Published in Business Ethics, Financial Crisis

When I was an undergrad, I was a paid research assistant for one of the most accomplished professors at my university.  He was at the top of his field, a multimillionaire, and one of the most egotistical a*sholes on Planet Earth.

He was the ruler of his small, but strangely powerful, universe.  He knew it, and could not care less about trampling over anyone who got in his way (academically or in the business world).  Being young and impressionable, I frequently stood in awe of him.  Mainly because I wanted to be just like him and have the option of driving a Mercedes Benz or helicopter to work each morning.

Every week, he would schedule a working lunch with his two undergrad RAs (Pete and I) where he would bestow us with some wisdom while simultaneously busting our cojones for not generating results fast enough to meet his satisfaction.  During one of our last lunches of the spring semester, he inquired if we would be taking his bioethics class (with a strong emphasis on the business side of bioethics) next fall.  Pete barely had time to shrug his shoulders before I gave my typical smirk and said “No” in a sarcastic tone.

When he inquired as to why, I suggested taking an ethics course from him would be like going to church with Satan delivering the sermon.  He got a chuckle out of my answer, and quickly retorted a question that I find myself repeating over and over again to myself on a weekly basis when it comes to choosing my long term investments.

Would you rather be the shark, or the goldfish?

After seeing the puzzled look on my face, he quickly went into a ten minute spiel about the benefits of knowing where the line between good ethics and bad ethics is drawn (a shameless plug for taking his class).  But more importantly, he stressed that there are potential rewards for having the ability to convince yourself (and everyone else around you) that it is perfectly acceptable to do a balancing act upon the line between the ethical and the unethical when it comes to your best interests.

I took this to mean that it’s justifiable to bend a few rules or make a few exceptions when it comes to making a living in a world that wants to classify you as a good (the goldfish) or bad (the shark) businessman.

He corrected me (a common occurrence), and said I over analyzed the question.  Like always.

He simply said his question was about having the mental toughness to eat your prey when you had the chance.  After all, if you choose not to be the shark, you choose to become fish food.

Should Business Ethics Matter when Making Investments?

Last week, I read one of the most damning articles I’ve ever seen about a publicly traded company.  Too bad it happened to be about my favorite investment bank — Goldman Sachs (NYSE: GS).

I’ve been a shareholder in Goldman Sachs in the past, and I guess I still am considering I own a few shares of the Vanguard Financials ETF (VFH), but after reading the Rolling Stone article by Matt Taibbi, my ethics radar kicked on and I began considering whether I should — or shouldn’t — buy another 100 shares of GS the next time a buy on the dips opportunity presents itself.

After all, if they’re the great architects responsible for engineering the constant boom and bust cycles we keep experiencing, then who else would you want to side with?

Taibbi-Goldman-Sachs

[Email and RSS readers may need to click to site to view embedded article]

So what say you?  The article does a very good job labeling Goldman Sachs as the biggest (and smartest) shark in the pool that is Wall Street.

But does such a thing repel you?  Does it make you curse their bubble-making ways and blacklist them when it comes to future investments?  Or does that make you want to invest in them since they’re the best cash cow on Wall Street?

I suppose you have to ask yourself… are you the shark, or are you the goldfish?

Blog Traffic Exchange Related Posts
  • Best Reads & Gauging America's Animosity Towards the Big Three Automakers
  • Wall Street Goes Nuts but Index Funds Unchanged.
  • Forget Stock Analysis, I'm Using Pat Robertson's Annual Conversation with God
  • Why You Should Avoid the Overhyped, Breaking News Stocks
Blog Traffic Exchange Related Websites
  • Honest-To-God Rave Review Of Atomic Blogging !
  • Steppenwolf / Hermann Hesse
  • Should You Invest in a New Bike Right Away?
  • Thursday, Holy Week, part 3
SUBSCRIBE: If you enjoyed this article, please sign up for new article alerts by RSS feed or by Email.

Everyone Needs a Mentor

June 27th, 2009  |  Published in 20s Something Advice, Consumer Education

It’s nice to see that I’m on the right track when it comes to giving personal advice.  Back when I started this blog, my second post discussed the Top 10 Financial Moves I Ever Made.

Number one my list was:

Find a successful investor to serve as a mentor.

Seems I’m not the only one who subscribes to this theory!

Google’s CEO, Eric Schmidt, gives a brief 40 second interview with CNN Money in their The Best Advice I Ever Got series.

[Email and RSS readers please click to site for video feed]


Aside from the obvious benefits of having a coach to tell you what you’re doing wrong and help you get it right, Schmidt introduces an idea that I particularly struck me as interesting.

He says that:

Almost every professional performer that we follow, whether they be an actor or athlete, has a coach.

What this says to me is that it doesn’t really matter if you’re a 20s Something fresh out of college or the CEO of a major company — everyone needs a coach!

Moreover, that it’s always beneficial to have someone around to help you review your performance, even if you think you’re doing everything right.

Without delving into the depths of becoming some lame “life coach”, I do think there is tremendous value in finding someone around you to be a coach/mentor.  After all, how many of us want to reinvent the wheel when it comes to any of life’s lessons or have the capacity to view ourselves as we do the athletes on ESPN.

Not many I’m sure.

Blog Traffic Exchange Related Posts
  • Weekend Reads: Productivity Sappers and Tea Baggers Edition
  • Free Shipping Rewards: Offering Some Relief to Online Bargain Shoppers
  • Forget Stock Analysis, I'm Using Pat Robertson's Annual Conversation with God
  • Should General Motors Go the Way of a Gangrenous Limb?
Blog Traffic Exchange Related Websites
  • A Camping Trip the Family Can Enjoy
  • Successful Blogging
  • Accordion
  • New Blog
SUBSCRIBE: If you enjoyed this article, please sign up for new article alerts by RSS feed or by Email.

The Pros and Cons of Investing in ETFs

June 25th, 2009  |  Published in ETFs, Index Funds, Investing 101  |  3 Comments

In last decade, specialty ETFs (Exchange Traded Funds) are probably the hottest thing to hit Wall Street since the rise of the discount brokers in the mid 1990s.

Initially, ETFs were not very popular because they only tracked the performance of a few stock market indices.

However, in today’s investing world, ETFs — and especially the sector based ETFs — couldn’t be more popular!  In fact, they’re so popular that if you can come up with the most screwball of an investment idea, I can almost guarantee that an ETF is available for you to buy through your broker.

Whether you want to buy U.S. Treasury bonds, buy soybeans, or even buy a combination of emerging market currencies, there is probably an ETF already out there with your name on it.  Just do a quick Google search with the words “ETF” and “your investment choice”, and Google will hook you up.

However, like all things in life, you must consider the pros and cons.  Investing is not a game, so you should consider the advantages and disadvantages of ETFs very carefully before using them.

Advantages of ETFs

  1. Instant diversification.  Just like index funds, a diversified ETF is a cheap and efficient way to reduce your risk.  If owning just 10 stocks keeps you awake at night or you believe that you can’t beat the S&P 500, ETFs that track a stock market index are an excellent place to begin your search.
  2. ETFs trade just like stocks.  Unlike mutual funds or index funds, ETFs trade on an exchange so you can buy them at any time during the day.  No longer do you have to wait until the market closes to buy or sell your holdings.
  3. Low expense ratios.  The more basic index ETFs are fairly cheap, while the more esoteric ETFs can be rather expensive.  Occasionally, ETFs can be less expensive than index funds.  If you’re an avid index fund investor, it could benefit you in the long run to verify if an ETF is the better alternative.
  4. Can pick specific sectors and still stay diversified.  Certain ETFs will allow you to buy multiple stocks in a specific sector, but still reduce your risk since you don’t have to pick one individual stock.  For example, if you feel the financial sector is a good investment, you can buy the XLF (a collection of various financial companies) instead of just buying J.P. Morgan or Bank of America.
  5. Invest in esoteric or specialty markets.  You can make an investment in almost anything using an ETF.  Gold, soybeans, light sweet crude, TIPs, or the U.S. Dollar.  The world is your oyster - so to speak!

Disadvantages of ETFs

  1. Frequently used by the Mega Daytraders.  ETFs, particularly the ultra leveraged (2x or 3x) ETFs, offer tremendous earning potential for aggressive daytraders and/or swing traders.  If you trade these, beware you are swimming in the deep end of the pool and 10% intraday price swings are commonplace.
  2. Diversification can reduce potential profits.  If you’re an aggressive trader, diversification can sometimes be a bad thing.  When holding a large group of stocks, your portfolio can only go as high as your worst performing investment.  Plus, why would you want to pay a management fee on a 3x leveraged ETF when certain high beta stocks just as volatile without paying the management fees.
  3. All ETFs are not created equal.  ETFs are an investment product sold by investment management companies, so some will be more costly than others.  Generally, the more esoteric the ETF, the higher the management fees will be (index ETFs are cheap vs. 3x leveraged ETFs are expensive).  Some companies even have competing ETFs, so it’s best to shop around to find the lowest expense ratios.  Simply enter your chosen ETFs into Yahoo Finance or Google Finance, and it will display the expense ratio under the ETFs profile or prospectus.
  4. Liquidity issues.  Some ETFs are not frequently traded, and the low volume can result in a significant gap between the bid and ask price.  For example, an actively traded ETF differs by $0.01.  Whereas an inactively traded ETF may vary as much as $0.25 to $0.50.
  5. Investing in items you don’t understand.  One of the cardinal rules of investing is to understand what you’re investing in.  Just because you have the option to use ETFs as an investment vehicle to become a Forex trader or a commodities futures trader, it doesn’t mean it’s a good idea.  In fact, it’s likely a bad idea since and you now have a 50/50 chance of losing your money.  That’s called gambling!  If you must, practice your trading skills first in a stock market simulator.

Got any other ideas on ETFs?  Do you use them as long term investments or short term trading vehicles?  Have you began replacing your traditional index funds with ETFs that track an index because they are more cost effective?

Blog Traffic Exchange Related Posts
  • 10 Reasons You Should Never Short a Stock or Index Fund
  • Avoiding the Bubbles: Knowing when Not to Buy Can Save You Thousands
  • Vanguard Starts a New Investing Blog
  • Why You Should Avoid the Overhyped, Breaking News Stocks
Blog Traffic Exchange Related Websites
  • 5 Reasons To Avoid Index Funds?
  • Let's Play "Invest Lazy Man's Money"
  • Actively Managed ETFs
  • Sunday Money Roundup - Stocks and Things
SUBSCRIBE: If you enjoyed this article, please sign up for new article alerts by RSS feed or by Email.

J.D. Power Says Initial Car Quality has Never Been Better

June 23rd, 2009  |  Published in Auto Sales

J.D. Power just released their initial quality survey for new automobiles this week, and surprisingly, the overall quality of all the autos sampled have never tested higher.  Better yet, the quality gap between the Big Three and foreign automakers is shrinking.

Good news for consumers!  Bad news for parts suppliers and repair shop owners.

Not surprisingly, American autos only had one auto brand — Cadillac — in the top five for initial quality.  Yet, on a more positive note, quality from the Big Three as a whole improved 10% from 2008.

The big shocker would have to be the performance of Hyundai, which moved from #13 to #4.  I guess hiring (e.g. headhunting) all those engineers from Toyota and Honda was a good idea after all.

[Email and RSS viewers may need to click link to view video]

Video highlights from the J.D. Powers Vice President interview:

Top 5 for Initial Quality

  1. Lexus
  2. Porsche
  3. Cadillac
  4. Hyundai
  5. Honda

Bottom 5 for Initial Quality

  1. Jeep
  2. Saab
  3. Smart
  4. Land Rover
  5. Mini

Most Improved for Initial Quality

  1. Suzuki
  2. Saturn
  3. Jeep (strange since it was also in the most improved rank)
  4. Cadillac
  5. Scion

I’m actually fairly impressed with Hyundai’s performance.  I looked at them two years ago when I was in the market for a car, but passed because they didn’t rank very well in the quality department.

Based on the J.D. Power’s study, some of the CNBC staff gave their Hyundai Genesis gave it a thorough once over this morning on Squawk Box (see video).

The quality is there, the looks are there (looks somewhat like a Mercedes) and it’s a fairly good value considering Hyundai cars are very competitively priced since they’re trying to gain market share in the U.S.

I’ll be in the market for a new car next year, so I might have to give them the benefit of the doubt when the time comes.

~ ~ ~

More details can be found at J.D. Power’s 2009 initial quality survey.

Blog Traffic Exchange Related Posts
  • The Pros and Cons of Investing in ETFs
  • Ford CEO Mulally's Drive to Washington Costs Over $20,000
  • Pork Barrel Spending Projects Come to Light with Obama's First Stimulus Package
  • Does a Stock Market Plunge Affect Your Disposable Income?
Blog Traffic Exchange Related Websites
  • Adding to the Mock Portfolio
  • Review of the Toyota Prius
  • Pownce Is Shutting Down
  • Tennis Racquet Racket Review
SUBSCRIBE: If you enjoyed this article, please sign up for new article alerts by RSS feed or by Email.

What Does “Buy on the Dips” Actually Mean?

June 22nd, 2009  |  Published in Buy on the Dips, Index Funds, Investing 101  |  3 Comments

Several folks have asked me over the last few weeks what does phrase “buy on the dips” actually mean.

The official Investopedia definition is:

A slang phrase regarding the practice of purchasing stocks following a decline in prices. After a significant dip in the price of a security or stock index, investors should increase positions or purchase different stocks to capitalize on what is seen as an eventual upswing.

In other words, it’s like having the ability to buy a stock (or index fund) while they’re on sale.  Nothing more, nothing less.

For example, take the S&P 500 index over the last 12 months.

sp-500-2008-2009-market-sell-off-buy-on-the-dips-example

When the market was in free fall, no one wanted to own stocks.  Even long time investors were piling out of the market in February and March, only to jump back in in April or May when the news reports had a more positive vibe.  Exactly the opposite of what they should have been doing.

However, there were a select few out there who were taking advantage of the situation, and slowly dollar cost averaging themselves into the market by accumulating individual stocks or index funds they still believed had a promising future after several consecutive market sell offs.

The only difference was that they saw through the negative “doom & gloom” news, exercised chessmaster like patience, and bought stocks when the S&P was in the 700 to 900 range instead of buying in the 1300 to 1500 range.  In the end, it gave them a 40% to 50% discount on their buy in price.

Another example would be Ken Lewis, CEO of Bank of America, who bought 400,000 shares of his own company when the news surrounding BAC couldn’t be worse.  The financial sector was about to collapse, the credit markets were frozen, and Bank of America was suspected of being nationalized.

However, he quietly stepped in and bought over a million dollars of his own company’s stock that hadn’t seen the $4 dollar mark since 1984.

bank-of-america-bac-ken-lewis-insider-buying-during-financial-crisis1

As you can see, Lewis (and several other BAC executives) didn’t buy at the exact low point, but they accumulated shares at a very low stock price not seen in 25+ years.  And now, they have effectively doubled (possibly tripled) their investments in only four months.

How about you?  Have you ever considered adopting this strategy beyond your typical biweekly 401k or Roth IRA contributions?  Were you successful?

~ ~ ~

Disclosure: I do own S&P 500 index funds for my personal portfolio at the time this article was published.

Blog Traffic Exchange Related Posts

  • The Best Counter Argument to 'Green Shoots' that Main Stream Media will Never Discuss
  • 40th Money Hacks Carnival
  • Weekend Reads and the Stock Market Retesting the Lows?
  • Preferred Stock Index Funds: The Future for High Yield Dividend Investors?
Blog Traffic Exchange Related Websites
  • Sunday Money Madness: Gas Prices Drop
  • Best and Worst Money Moves
  • REVIEW: Stock Investing For Dummies, by Paul Mladjenovic.
  • Is a $5 Stock Cheaper than a $30 Stock?
SUBSCRIBE: If you enjoyed this article, please sign up for new article alerts by RSS feed or by Email.

Sometimes the Hardest (and Wisest) Thing to Do is to Do Nothing

June 20th, 2009  |  Published in Buy on the Dips, Lessons Learned, Personal Finance Tips  |  4 Comments

ChessThere is an old (and unresolved) debate among historians that the game of Chess was invented as a way for a King to teach his Generals battlefield tactics.

The King found that the younger headstrong Generals would attack quickly without much of a strategy or consideration for the survivability of his armies.  Their idea was that brute force was always the best way.

The older, more experienced Generals would exercise patience, lie in wait for an opponent to expose his jugular, and crush him with a series of well executed counter offensives.

As the younger Generals found out, sometimes the hardest decision to make was the decision not to act, or at least, not to act on their basic impulses.  In other words, the best thing for them to do was to be patient, wait for a more favorable opportunity to present itself, and only then should you pounce.

Being a guy in my lower 30s, I’m beginning to see the wisdom in this all encompassing life lesson.  No longer do I charge into something without carefully considering the collateral damage, the time invested in the project, or that I might get a better payoff (lower cost, less work, or both) if I just exercise a little more patience.

Exercising a little patience can off big time!

Longtime frugal living advocates probably know this better than I, but here are a few ideas of how I’ve applied the lessons learned from exercising more patience when it comes to my personal finances.

  1. Wait for high tech to become everyday tech.  I like my tech gadgets as much as much as the next guy, but my days of walking through Best Buy as excited as a sixteen year old with a Playboy are over.  I’ll wait for the hype to settle, and allow free market competition to lower the price for me.  Heck, I may not buy the gadget at all.  And for the record, I’m still waiting to play Halo 3!
  2. Buying off season.  Rarely will I buy something during peak season.  It has to be a must have item or a situation where saver’s remorse will make me regret not shelling out a few extra bucks for something I really want.
  3. Buying on the dips.  Being an independent trader, I often use a “buy on the dips” strategy where I’m waiting for a short lived bargain in an individual company’s stock price.  If a stock has a negative press release, it might drop 15% immediately and slowly make its way back to normal valuation.  But this strategy doesn’t have to be limited to the stock market alone since it can be adapted to nearly any situation where there is a bargain hunter and a seller.
  4. Vulture investing.  Vultures have one of the most under appreciated jobs in the animal kingdom.  They make a living from recycling the scraps that no one else wants at that time.  Vulture investors function in a similar manner, where they can swoop in, buy up the assets at a fraction of the cost while providing somewhat of a benefit to those holding the desired asset (e.g. real estate selling at half price).
  5. Use time to your advantage.  Just like in sports, time can often be used to your advantage to force the hand of your opponent.  For example, instead of going to the farmers market early in the morning, go one or two hours just before closing.  This way, you might be capable of picking up a bargain since farmers won’t have to pack up their excess product, allow it to go unsold and potentially go to waste.  You run the risk of getting no fresh produce, but you may also pick up a few bargains the early birds weren’t offered.  It all comes down to knowing your situation and how much risk you’re willing to take.

Got any situations where patience benefited your wallet?

Blog Traffic Exchange Related Posts
  • 40th Money Hacks Carnival
  • The Pros and Cons of Investing in ETFs
  • Weekend Reads: Three Day Easter Holiday Edition
  • Ford CEO Mulally's Drive to Washington Costs Over $20,000
Blog Traffic Exchange Related Websites
  • Rethinking the Buy and Hold Strategy
  • Keeping Your Money Safe in Economic Turmoil
  • Dollar cost averaging and assumptions
  • Google Arbitrage - Still applicable?
SUBSCRIBE: If you enjoyed this article, please sign up for new article alerts by RSS feed or by Email.

What’s Worse than Trillions on the National Debt Clock? Try the Carbon Counter!

June 18th, 2009  |  Published in Consumer Education, Green Living  |  7 Comments

…

…

What could be more eye opening than the National Debt Clock with a few trillion dollars up for display?

Our National Debt

Try the new Carbon Counter courtesy of Deutsche Bank.

deutshce-bank-climate-change-advisors-carbon-counter-clock

According to Deutsche Bank’s website:

The Carbon Counter displays the running total amount of long-lived greenhouse gasses (carbon dioxide, methane, nitrous oxide, ozone, and chlorofluorocarbons) in the earth’s atmosphere, measured in metric tons.

I couldn’t be happier to see this.  The sad fact is that we’re borrowing from our children’s future, and calling it Gross Domestic Product (GDP).

If anyone disagrees with me, just remember that the dollar may influence our lives today, but it’s pretty worthless if you don’t have a habitable planet where you can use it.
Attribution-NonCommercial-NoDerivs License

by Kevin Krejci

Blog Traffic Exchange Related Posts
  • Stop Chasing High Interest Savings Rates with a Rewards Checking Account
  • America In Debt: 24% of American Families are Debt Free!
  • I.O.U.S.A - New Documentary says America Going Broke!
  • I.O.U.S.A. The Movie is Free and Now Available on YouTube
Blog Traffic Exchange Related Websites
  • Lessons This Generation Can Learn
  • Fools Born to Buy Debt Allow Wall Street Exports to Boom
  • Is the Residential Crisis leaking into Commercial Market?
  • Handling Debt Collection Phone Calls
SUBSCRIBE: If you enjoyed this article, please sign up for new article alerts by RSS feed or by Email.

About Steadfast Finances

A Personal Finance & Investing 101 blog that delves into current events, macroeconomics, and techniques to improve your bottom line.

GET FREE UPDATES

 Updates by RSS

Updates by Email

Add to Google Reader or Homepage

Follow me on Twitter

Translator

English flagItalian flagKorean flagChinese (Simplified) flagChinese (Traditional) flagPortuguese flag
German flagFrench flagSpanish flagJapanese flagArabic flagRussian flag
Greek flagDutch flagDanish flagHindi flagPolish flagNorwegian flag
Filipino flagHebrew flagUkrainian flagVietnamese flagThai flagTurkish flag
By N2H

Recent Posts

  • The Best Counter Argument to ‘Green Shoots’ that Main Stream Media will Never Discuss
  • Why Do We Rent Some Stuff but Buy Other Stuff?
  • Should We Adopt a National Sin Tax on Junk Food to Reduce Obesity Epidemic?
  • Should You Invest like a Shark, or a Goldfish?
  • Everyone Needs a Mentor
  • The Pros and Cons of Investing in ETFs
  • J.D. Power Says Initial Car Quality has Never Been Better

Popular

  • Living Beyond Your Means: School Bus Driver Losing Her $800,000 Home to Foreclosure
  • Should We Adopt a National Sin Tax on Junk Food to Reduce Obesity Epidemic?
  • Why Index Funds are Bad Investments
  • 40th Money Hacks Carnival
  • 10 Ways to Prove that Frugal Living is Really Green Living in Disguise.
  • 20 Reasons Why I Love the Recession
  • Stop Chasing High Interest Savings Rates with a Rewards Checking Account
  • Beware Recession Based Advertising: All That Glitters is Not Gold.
  • Discussing Retirement with Parents: Is a Comfortable Retirement No Longer an Option?
  • Newsweek Suggests it's Your Patriotic Duty to Stop Saving and Start Spending
  • Blogroll

    • The Wallet - WSJ
    • Guzzo The Contrarian
    • Patrick.net: Housing Crash News
    • Ask Mr. Credit Card
    • Blueprint for Financial Prosperity
    • Behavior Gap
    • Free Money Finance
    • No Credit Needed
    • Suria Investment Newsletter
      Free Investment Newsletter

  • Tags

    Auto Sales bailout Bargain Hunting behavioral economics Buy on the Dips CNBC Consumer Education Credit Cards credit crisis credit default swaps Dividend Investing dollar cost averaging economic crisis Energy crisis Financial Crisis foreclosures Frugal Living Gas Prices Great Depression Green Living Index Funds Investing 101 Jack Bogle Jim Cramer mortgage backed securities Mortgages Mutual Funds National Debt oil Online Savings Accounts Personal Finance Tips Politics Real Estate Real Estate bubble Recession Retirement Roth IRA S&P 500 Saving Money Stock Market stock market bubble TARP Taxes Vanguard Vulture Investing
    Free PageRank Checker

    Money Hackers Network

    ypblogs.com Blog Flux Local pfblogs.org logo Ajax CommentLuv Enabled 79f4da90cd6cf4d735f48570d799a00a Personal Blogs - BlogCatalog Blog Directory Social Networking for Bloggers, Free Blog Submissions, Blog Traffic

    Archives

    Categories

    • 20s Something Advice
    • 401k
    • Administration
    • Annuities
    • Auto Sales
    • Banking
    • Bargain Hunting
    • Budgeting
    • Business Ethics
    • Buy on the Dips
    • CDs
    • college life
    • Commodities
    • Consumer Education
    • Credit Cards
    • Credit Cards
    • Cutting Expenses
    • Debt Reduction
    • Dividend Investing
    • Documentary Films
    • Energy Conservation
    • Energy crisis
    • Entrepreneurship
    • ETFs
    • Faith Based Investing
    • Financial Crisis
    • Financial Planning
    • Fixed Income
    • Frugal Living
    • Gas Prices
    • Global Economy
    • Green Living
    • Index Funds
    • Investing 101
    • Investor Psychology
    • Lessons Learned
    • Long-Term Stocks
    • Market Themes
    • Microtrend Investing
    • Mortgages
    • Multiple Income Streams
    • Municipal Bonds
    • Mutual Funds
    • Online Savings Accounts
    • Personal Finance Tips
    • Politics
    • Productivity Tips
    • Public Awareness
    • Real Estate
    • Retirement
    • Roth IRA
    • Saving for College
    • Saving Money
    • Saving Money Online
    • Savings Accounts
    • Taxes
    • Technology & Automation
    • Variable Annuities
    • Vulture Investing

    ©2009 Steadfast Finances
    Powered by WordPress using the Gridline Lite theme by Graph Paper Press.