Value Added

Enough with Bernie Madoff and Michael Jackson. All this sensationalism and in depth news and no value added to your life. Yesterday, I got a lesson in technical analysis that was insightful and I plan to use along with my fundamental knowledge and experience. But while individuals look for 1000% return on some unnamed pharma stock or penny stock, there should be a focus on dividends. A steady return can help one be optimistic in a bear market. For example, I own GME (Gamestop), I like their business model, there in a niche market and have a fortress balance sheet. However, they pay no dividends, so even if the stock doubles within a year, my annualized return would be 50%. Also, the opportunity cost would be greater, because I did not purchase another security paying a 4% dividend so I do not get to compound my returns. I am aware growing and technology firms reinvest free cash but make sure you provide room in your portfolio for dividend paying securities.

How to always win in Texas Hold'em

Very interesting story courtesy of 60 Minutes.
Watch CBS Videos Online

Just Stopped the Madness Already!

This is a great post, courtesy of Phil's Stock World. There is a tendency for individuals to marry a position and overestimate the accuracy of their beliefs or measurements. People tends to be bullish because they own stocks and bearish because they are short. But to increase profitable you have to be willing to contradict yourself and change as facts change. Society looks down upon those individuals who change their mind. Politicians and elected officials are criticized for changing their minds regarding laws and policies. But why must one be concretely faithful to their opinions and beliefs even when facts change. This post is very informative and should be approached with an open mind. Stay flexible and cut losses!

Friday Bank Closure Report

Every Friday this year, the FDIC has seized the assets of least one bank or thrift and June 27th was no exception. The FDIC seized the assets of 5 banks (2 in Georgia). Currently, I have a short position on a Georgian bank, which to my regret has not been closed. But below is the list of banks closed yesterday.

41st Bank Failure of 2009 (8th in GA)

* FDIC Press Release
* Closed Bank: Community Bank of West Georgia
* Location: Villa Rica, GA
* Size: 1 office, $199.4 million in assets, $182.5 million deposits
* Possible Uninsured Deposits: $1.1 million
* Acquiring Bank: None
* Estimated Cost to Deposit Insurance Fund: $85 million
* Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com

42nd Bank Failure of 2009 (9th in GA)

* FDIC Press Release
* Closed Bank: Neighborhood Community Bank
* Location: Newnan, GA
* Size: 4 offices, $221.6 million assets, $191.3 million deposits
* Possible Uninsured Deposits: All deposits transferred
* Acquiring Bank: CharterBank, West Point, GA
* Estimated Cost to Deposit Insurance Fund: $66.7 million
* Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com

43rd Bank Failure of 2009 (1st in MN)

* FDIC Press Release
* Closed Bank: Horizon Bank
* Location: Pine City, MN
* Size: 2 offices, $87.6 million assets, $69.4 million deposits
* Possible Uninsured Deposits: All deposits transferred, except some brokered deposits
* Acquiring Bank: Stearns Bank, N.A., St. Cloud, MN
* Estimated Cost to Deposit Insurance Fund: $33.5 million
* Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com

44th Bank Failure of 2009 (5th in CA)

* FDIC Press Release
* Closed Bank: MetroPacific Bank
* Location: Irvine, CA
* Size: 1 office, $80 million assets, $73 million deposits
* Possible Uninsured Deposits: All deposits transferred, except brokered deposits
* Acquiring Bank: Sunwest Bank, Tustin, CA
* Estimated Cost to Deposit Insurance Fund: $29 million
* Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com

45th Bank Failure of 2009 (6th in CA)

* FDIC Press Release
* Closed Bank: Mirae Bank
* Location: Los Angeles, CA
* Size: 5 offices, $456 million assets, $362 million deposits
* Possible Uninsured Deposits: All deposits transferred
* Acquiring Bank: Wilshire State Bank, Los Angeles, CA
* Estimated Cost to Deposit Insurance Fund: $50 million
* Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com

ING Direct $25 Bonus

ING Direct is offering a savings account bonus of $25 for opening an Orange Savings Account by August 3, 2009. The promotion page is located at ingdirect.com/save, and the reference code is VE222. Bonus is only available for new customers, and it's limited to one bonus per household.
Opening the account takes less than 10 minutes and requires a minimum deposit of $1, so there should be no excuse not to open an account that pays twice the interest than many brick and mortar banks

Flagstar $100 Bonus

This bonus is only available to residents of: GA, MI, IN Only .
Flagstar is offering two checking account promotions. One offers $100 for opening a checking account and establishing direct deposit of at least $250/month. Here's the online promo page . The website makes it look like you can apply online; however, I called, and the CSR said that a branch visit is required. Some of the important details in the small print include:

* New checking account customers only
* Minimum opening deposit of $50
* Direct deposit of income of at least $250 per month
* Direct deposit must be established within first 60 days of account opening
* $100 will be deposited into your account within 30 days after first direct deposit
* Account must remain open and active for a minimum of 6 months
* Bonus will be reported in your 1099


The other checking account promotion guarantees 2% APY for 12 months from account opening for all balances up to $100,000. It requires opening an interest-bearing checking account (I was told the eChecking doesn't qualify). Like the $100 bonus, direct deposit is required. If it's not established within 60 days, the rate may be reduced. Like the $100 bonus, this also requires a branch visit.

This 2% promo doesn't seem to be listed at Flagstar's website. It was advertised in yesterday's Fort Wayne Newspaper (6/13/09). The ad is available online here. A reader also saw it advertised in a Michigan newspaper.

According to the ad, there's a limit of one promotion per customer. So it appears you can't do both promotions.

Readers have reported a hard credit inquiry when applying for new Flagstar checking or savings accounts.

Branches are located in Michigan, Indiana and Georgia. The bank is a member FDIC (FDIC Certificate # 32541).

Gazprom and Nigeria create "Nigaz"

Russia's energy giant Gazprom has signed a $2.5bn (£1.53bn) deal with Nigeria's state operated NNPC, to invest in a new joint venture. The new firm, to be called Nigaz, is set to build refineries, pipelines and gas power stations in Nigeria.

Analysts say the move could further strengthen Russia's role in supplying natural gas to Europe. Sergei Novikov, a spokesman for Rosatom, Russia's state-run civil nuclear energy agency, said the Nigaz deal would lay the foundations for building nuclear power reactors in Nigeria.

Nigeria has previously said it would like to develop a nuclear power plant to address its energy shortages.

Hopefully, this joint venture will benefit both partners equally, however that is usually never the case. Here is the link link to the BBC article. With $2.5 billion you think someone involved would mention the implications of the name of the joint venture.

Sideways Market

I am looking through my positions to reevaluate my strategy. My long term view is weak dollar (which should stimulate exports), short treasuries (because of increased yields) and a rise in inflation. However, until markets feel confidence in banks and employment increases inflation is no where to be found. While the stock market receives 90% of all media attention, investors can better gauge sentiment by which bond indices like: IG, HVOL, XO and HY. Credit expansion will be the sign of a true recovery not over exuberant optimism. Enjoy the weekend!

Jim Cramer

I have no doubt in my mind that Jim Cramer is a great financial mind. However, I would not recommend watching his show for stock picks. 3 picks a day with 3 more in the lighting round. That is 30 picks a weeks and 120 a month. Investor might as well buy the SPY if they plan to purchase that many equities. If Jim Cramer is your pro bono financial adviser, stop trading and put you money if government debt. I would recommend reading his books but the television show is for entertainment. Viewers flock to CNBC because it is more entertaining and avoid Bloomberg which in my opinion is less exciting but more informative. Trading or investing for excitement is gambling, the market has no regards to your hopes, feelings or wants.
Therefore, cut losses short and run winners regardless of how you feel and watch Jessie James Must Die instead.

Bank of America Merrill Lynch REIT

Here is Merrill's List of their REIT Recommendations. Let this be a starting point not your decision maker. Personally, I like depressed property areas like: LA, Las Vegas and Florida. I would also avoid stock dividends unless there is a discount. Printing new equity every quarter will slowly dilute shareholders' equity but will save the company cash. Thanks to Zero Hedge for the chart, and I would recommend reading his post and also,Goldman engineers Financial Crisis.

Next Bank Closure?

There is no better short position than a bank that the FDIC takes over, equity is wiped out but usually the bonds of the parent company hold some value. So my new favorite website is FDIC Institution Directory, keep in mind that many of the seized banks where not traded on public exchanges, but you might have been lucky to have shorted IndyMac or WAMU. But I am focused banks chartered in Georgia, Illinois and California. Happy Hunting!

The Face of Terror: The Persian Empire

I hate to diverge from my money making thoughts into an area I have no expertise in, but I need to vent. Oil has remained higher than I expected maybe due to geopolitical issues, whatever the reason weakening demand should push down oil service providers I can go purchase some particularly PBR and SLB. But I am very upset at the media's coverage of the aftermath of the Iranian elections. I have seen protest pictures and in no way do I condone violence against peaceful protesters. When the results were announced, I was not shocked to hear that the incumbent president won. Listening to NPR, I heard Iranians who supported him and felt that falling oil and the United States were the culprits of the weakened economy. however, my outrage comes as politicians voice there disgust and anger about how protesters are being attacked by government forces. I can recall other countries where government forces attacked their citizens peacefully protesting. To keep my post shorter I will focus on the United States. Throughout the Civil Rights movement, African Americans were hosed, beaten, attacked by dogs and jailed for peacefully protesting. So, while I hear journalist and politicians scream they have never seen any human rights violations this egregious, they quickly forget that for more than a decade the same violence was taking place in their backyard.

Penny Stocks

I have been asked about investing in penny stocks quite a few times. Keep in mind this is my opinion based on personal experience and I do not have any quantitative figures to support my argument, honestly I would like to hear from those with a different take on the issue. My posts are not meant to confirm my beliefs or ideas, but to find falsification in my theories or hypothesis. I do not look for penny stocks to purchase but if I see an opportunity (real or perceived) I would be willing. Usually when a stock trades under $1 it deserves to be there. When the stock trades below a penny, I am less likely to make a purchase. There are many exceptions of stocks going from under $1 to $4 (Citi) but many penny stocks do not have the analyst coverage of Citi or the daily volume of Citigroup. I would rather short a falling penny stock if I see weakness in cash flow and more debt than cash. Right now, I do not use debt to assets because in a deflationary environment fixed assets might not sell for book value and inventory may be sold at a steep discount. I know it is easy to own 100k shares of ABC because it trades at 5 cents compared to 10 shares of XYZ because it trades at $500. But again my experience has shown me greater profit from XYZ, when in a bull market or fundamental events are occurring. Happy hunting, I do not know which way we are headed but the best advice I can give is to stay flexible.

Goldman Sach Conviction List

Here is a copy of Goldman Sachs Conviction List . I do not agree with all recommendations, however Goldman does provide a target time frame, so intraday movement may not reflect their target prices. Information and facts change constantly so never use outdated data to make decisions without considering the changing micro and macro environment.

Pull Back Heaven

In the next couple weeks if equities are still declining, I like oil service providers, agricultural companies and I will take a short position on long term treasuries. Like the previous post I like REITs but I am selective in this group. I do not want to name particular issues because it will influence or make your research bias. Good hunting and if you do not like prices, you could wait or pyramid. Pyramiding a losing position is not recommended but in my experience it can make money even though I would recommend pyramiding only winning positions.

Commerical Real Estate

This is the next shoe to drop. That has been the comment spoken since late March and I continuously hear it everyday. Unlike residential real estate, commercial buildings were not built as frequently a single family homes however there may be an over supply. Also, one lessee missing a payment does not ruin an owner (hopefully not the anchor tenant) unlike a single family household. While I do not doubt there is still trouble in the credit environment, the one thing that makes me uncomfortable about this trade is it is oversubscribed. I am not claustrophobic in real life, but I am in markets. Crowded trades bother me, because when the fire alarm goes off I might get trampled on or burned alive. So, I will rather stand by the exit and wait patiently. I am not saying there is no problem or that there will not be large CMBS defaults, however in my experience when general consensus is reached it is sometimes a collection of misconceptions.

Dissecting the Past

If you are not a student of history you are bound to repeat it. I have no doubt that this is a true statement, however time after time society goes into recessions, fights wars and struggles with problems that plagued our planet thousands of years ago. One book every market participant should read or listen to is "Reminiscences of a Stock Operator". The narrator states, Another lesson I learned early is that there is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market to-day has happened before and will happen again.. I believe that the problem occurs with the fact the humans overestimate their understanding of what occurred in the past and underestimate the probability of making the same foolish mistakes. Humans are still involved with markets, therefore whether the NYSE goes all electronic or the NASDAQ goes virtual reality markets will still propel up and crash down.

Where is the Smart Money?

With more than 70% of US equities being held by institutional investors, why do guest of CNBC start recommendations with "Well, Erin most of the smart money is moving into....". Therefore the viewer at home should run to the phone or Internet and follow this wise shepherds into 50% market declines. CDOs was a rich man's game, however if I had the capital I might have followed my peers into the Labyrinth of write downs. But the problem is this group is subject to the same delusion, however they control your pension, 401k and life insurance policy. To make matters worst, they come on television and give recommendations that influence viewers' selection. This week, I am conducting a self experiment by not watching, listening or reading any news other than AP bulletins that are mostly subjective and deal with securities. I do not think I will make a tremendous leap into enlightenment by blocking out the noise but I want to see how much my decision making is influenced by the media.

The Reflectionary Theory

I spent yesterday listening to work by one of the greatest hedge fund managers, George Soros. He spent the first 2 hours of his book discussing philosophy. Soros bases his strategy not on financial or economic theory but on philosophical and behavioral study. I might not be doing Mr. Soros justice but I want to give a brief summation of his theory which will be helpful for all those trading overseas today and domestically tomorrow. Markets are inefficient due to participant manipulation. These participants influence prices based their perceptions, rationalizations (sometimes deluded) and biases. Most market panics and crashes are a return to reality. In essence individual participants turn objective facts into subjective actions. Rising prices can reaffirm a participant's rationalization of the valuation of a security. However, general consensus is sometimes a growing collection of misconceptions.
Bottom Line: You are your portfolios worst enemy. But you just have to give yourself a margin of error for the market participants skewing prices either upward or downward.