Thursday, July 29, 2010

New Kindle to Arrive on August 27, Only $139 !!! - Wife says: We're Buying

Can you feel the excitement?

New wireless Kindle, $139!!!

Interesting points I noticed:
  • Wifi, instead of cellular wireless
  • Integrated twitter and facebook
  • Audio-books, blogs and FREE 1.8 million out of copyright books
  • Battery life: 3 weeks to a month! (depending on wireless usage)
  • Wikipedia

Sharing passages on twitter/facebook...

A quick tip: If you don't yet have an Amazon credit card - you can order the new Kindle for just 99$ when you open a new account.

Sounds like a winner to me. I wonder if the rest of the internet is accessible too - or will become available.


Monday, July 26, 2010

Lifelock CEO published SSN on billboards, claiming his is secured; Identity stolen 13 times and fined for false advertising

Some people might find this amusing. It is certainly ironic. However, it bears bad news for most of us and the following article just piles on the depressing: we aren't protected, and our identity has probably already been stolen but not used yet. Hackers broke to most financial and big online outlets where most of us store credit card information. I know my credit card was used by thieves - I can only hope to never have worse things happen to my identity. To be sure, I have no intention publishing my social security on a billboard...

Do Identity-Theft Protection Services Work?
at least 13 times. The controversy over LifeLock's advertising ultimately cost the company $12 million in fines.

Granted, most of us won't plaster our Social Security numbers all over billboards. But real threats exist out there, and it is important to protect your identity. Are online identity-protection services worth the cost? Can you trust them? Are there more-effective ways to protect your personal information without the services of a specialized company? We did some digging, and here’s what we found.


Worth reading the entire thing, an important link to be found is where you can get your credit reports for free:

Unlike the scammers with that annoying singing commercial on TV who have been known to sell your personal details down the line...


Thursday, July 22, 2010

Netflix and Amazon beat market expectations, stocks get crushed while market rallies

Not a good day if you own both NFLX and AMZN ...

CNN-Money: Amazon shares tumble despite 41% sales growth
Amazon shares plunged 13% in after-hours trading Thursday after the company's second-quarter earnings came up far short of analyst expectations.

Amazon's sales are still growing fast: The company had revenue of $6.6 billion in the quarter ended June 30, up 41% from a year ago. Amazon's profit also rose, increasing 45% to $207 million.

But analysts hoped for better, and are keeping a close eye on Amazon's bottom line to see if intensifying competitive pressures knock the e-commerce giant off its game.

Forced by Barnes & Noble (BN) into an e-reader price war, slashed the price of its flagship Kindle to $189 last month. It later cut its high-end Kindle DX price tag by more than $100, to $379. Meanwile, Apple's (AAPL, Fortune 500) popular iPad -- which can store thousands of e-books -- could obliterate the entire stand-alone e-reader market within the next year or two.

Amazon tried earlier this week to draw attention to its bright spots. The company announced that sales of e-books for its popular Kindle reader now outnumber Amazon's sales of hardcover books. The company also said Kindle sales have picked up since last month's price cut, though it once again refused to disclose how many Kindles it has actually sold.

Amazon (AMZN, Fortune 500) said it expects third-quarter revenue to come in between $6.9 billion and $7.63 billion in revenue this quarter, in line with analyst estimates

Seriously, Amazon is in more markets than just E-Readers... the analysts and funds are going wild these days.

Let's divert our attention back to Netflix:
Barron online:Netflix Customers Love Streaming; Investors, Not So Much
The catch phrase of the day for Netflix (NFLX) analysts today was “priced for perfection” - at least three of them today used those precise words in their research notes to explain that the sell-off in the stock that started after-hours yesterday was simply a reflection of the fact that the company’s ethereal market cap left little room for anything other than super-human Q2 results. And they note that the numbers, while impressive generally, had a few blemishes; ergo, the stock is sliding.

The initial takeaway was that revenues were a little light of expectations, but there was more going on here than that. Average revenue per subscriber was down 5% sequentially, and 8% from a year ago; subscriber acquisition costs were up 13% sequentially and 2% year over year; and churn was up 20 basis points sequentially. On the other hand gross margins jumped 530 basis points from a year ago.

What seems to be happening here is that customers simply love the company’s streaming service - you can see it in the numbers.

* The lower ARPU reflects more and more customers choosing the low-end one-DVD-at-a-time $8.99-a-month plan in order to access the streaming service…
* …driving strong subscriber growth from new customers who want to join the all-you-can-eat streaming fun…
* …while customers are requesting fewer DVDs per month, thus cutting postal costs and boosting gross margins…
* …and driving EPS above estimates…
* …But the company also is seeing increased churn and higher subscriber acquisition costs.

Bottom line, investors believe that while there's room for growth in number of subscriptions, the earnings growth (which is what really matters for investment purposes) shows worrisome signals. Still - despite rising costs, imagine Netflix doubles it's customer base and maintains subscribers within a year - would the market still punish Netflix for costs?


When markets make no sense - the rallying side

10:39AM, 7/22/2010 - S&P500 up 2.48% hmmm, let's check the headlines:

Existing Home Sales Fall 5.1 Percent
Most Americans think economy yet to hit bottom
Job seekers' latest hurdle: Credit checks
Fed ready to ease if economy weakens: Bernanke
Jobless claims jump in latest week

Meanwhile, netflix beats expectations and falls 11%... (reasons found: analyst downgraded - increased cost of doing business)

Investing is synonym with putting your money in risk, and continuing recognition that you don't understand why things go up or down. To recap, at end of April the only headlines you'd find were overly optimistic - followed by a 15% correction in May June. By the end of June - the news cycle focused on a double dip recession and a long term depression. Mid July - and here we go again... makes no sense.


Tuesday, July 13, 2010

Stocks rally as unemployment rate still crappy

The title you should be reading on financial sites if they allowed themselves to utilize the word 'crap'...

New York Times blogger notifies us that the situation in the US is still worse than many other developed world countries.

The Unemployment Rate Race
Among developed countries, the United States still has an above-average unemployment rate, according to data released today by the Organization for Economic Cooperation and Development.

The chart above shows the standardized unemployment rate across organization countries for May, though for a few countries (including the United States) more recent data are available.

In May, the average unemployment rate among industrialized countries was about 8.6 percent; it was lowest in South Korea, at 3.2 percent, and highest in Spain, at 19.9 percent.

In the United States, the rate was 9.7 percent in May, and fell to 9.5 percent in June.
Hopefully, some day - in the not so distant future - things will improve. Just hopes - not an outlook.


Foxnews yellow journalism website wants us to feel good about what time did to our looks

If you're above 30, you're as likely as I am to be over your looks-peak. Gaining weight seems to be more likely, loss of hair, turning gray - you know the deal. Enter the horrible site representing Rupert Murdoch's empire in the US: Fox-News.

A collection of random photos was collected to give us a 'then and now' presentation of some celebrities. Let me warn you in advance though - they got it totally wrong on more than one occasion. Johnny Depp and Misha Barton? Well... never mind. It's yellow and bottom feeding 'journalism'.

Stars Who Lost Their Looks

How lame and overdone - Cristy Ally. Please, like we haven't noticed the gazillion late-night jokes about this pretty much forgotten star.


Monday, July 5, 2010

Designing a portfolio using EzBacktest

Let's start by a simple question. Imagine that you (a) had money, (b) it's all in cash, (c) wish to invest it all. OK - what should you invest in? Well - it's frankly none of my business and will not advise you on what you should do in that regard. But for the sake of argument, let's say you choose out of the blue a few companies you know and trust, and wish to quickly review how investment in these companies over several years would look like. For example, let's pick a few:

McDonald's (MCD), Wallmart (WMT), Netflix (nflx), Intel (INTC), Apple (AAPL), Teva (TEVA)

That's a nice pack IMHO, somewhat diversified across industries, brings some dividends, has some growth, some staples and the best part as far as I'm concerned - these are all big companies I know and interact with on a daily basis. For most of you this is also true. You take lunch brakes at Mickey-D, shop on a budget at Wallmart, dumped the video store for Netflix, use a computer, talk on your iPhone and medicate yourself with Teva products. OK, enough justifying the picks. Let the pros sort fundamentals and the traders care about charts. This isn't my goal in this post.

Open EzBacktest and type each ticker, click the 'down' button to move to next line even if it isn't there, or tab/right button to fill in a percentage allocation:

Now click F8 to distribute the allocation equally (as shown above) and F5 to run a quick test. (you will need to wait for Yahoo quotes to download historical data for all equities in the portfolio)
Not a terrible result at all. To get a better big picture, go back to the portfolio editing window and change the 'Months to test' to 120. Click F5 again (or 'Back Test' button).

Wow Nelly - that's impressive. Click on 'Show declines' checkbox and uncheck 'Show Legend'
Note that the starting date is after the requested date. The software will truncate to the first available date for each equity in the portfolio. In this case, Netflix is the latest to go public.

OK, so now I'm looking at this portfolio and observing its bigger declines and I'm thinking - would I have held long during these scary days. Especially if I had bought at the highs and watched my savings shrink by 30%, 19.5%, or 35%. Ask yourself this question, would you? I'm pretty sure I wouldn't have. While on first glance this portfolio seems inviting, it is very volatile and risky. Sure the end result kicks the S&P 500 - but it is only in a back view mirror. One cannot tell where tomorrow may lead, and it is imprudent to wily-nilly play with graphs and buy risk with your life savings.

I'll go back to the portfolio editing window and will try to reduce my risk. To do so, I just add:

Intermediate term treasury bonds ETF (IEF), and least risky short ETF (SH).

I readjust the allocation manually this time to achieve:
MCD - 7, WMT - 7, NFLX - 7, INTC - 8, AAPL - 8, TEVA - 8, IEF - 40, SH - 15

Hedge and income in a second, click F5 and get the following graph:
Note this time the graph begins somewhere in 2006, when SH first became available. If you take a peek at the right side of the window you'll notice few statistics, pay attention to 'Sharpe Ratio'. In this case it is 2.24, compare it to the first graph at 1.24 (where no hedging was added and equity allocation was distributed equally). Over the last few years - most portfolios yielded much worse 'Sharpe Ratio' - which is a measurement of risk/return. In our case, an annualized return of 15.6% with risk of 6.4 standard deviation gives us an almost fictional risk return ratio of 2.24. I'm sure I'd be happy had I invested in this portfolio years ago - I didn't.

Let's save this portfolio quickly, first - type a title: 'hedged tutorial 1', now click the save toolbar icon. A save file dialog will appear - and will allow you to have different file name than title.

Let's continue our voyage here. From the menu, pick tools and select 'show status log'. As you can see, SH is preventing us from verifying our portfolio over a longer period of time. Since there aren't any ETF-s from earlier periods which provide 'short' opportunities, I'll switch SH to SHY. SHY is short term treasury ETF and will simulate cash for this tutorial. Instead of shorting, we will hold cash.

Change SH to SHY and click F5.

The resulting graph (not presented here), provides us with more history. The Sharpe ratio is 1.51, the annualized return is 15.0%. Not much worse. Declines are a bit steeper, at most 14.6% during the Lehman brothers crash.

Change the title to hedged tutorial 2, and from 'File' menu select 'Save As'. Save as a new file name as well.

Moving on, now we have at least two portfolio files in our documents folder. We can compare the two. From the 'Tools' Menu, select 'Compare Portfolios'. On the new screen, double click on portfolios you wish to compare, or select and click on the 'move to the right' UI button. Add the two tutorial portfolios and click 'Begin', or press F5.

Review the comparison tabs. Note that in 2008, the year of the crash, the 'short' hedged tutorial portfolio returned 4%, while the cash-hedge portfolio lost -0.1% .

Hope this was useful, enjoy - spread the word and don't be shy to reciprocate at the tip jar.

Download EzBacktest here.

Friday, July 2, 2010

Mixture of scholarly theoretical economics with hard line politics is deadly, Krugman wants to punch critics

This is getting ridiculous. Talk about emotionally vested. Either he's right, or he's wrong - the problem that most critics have with Krugman is that he's highly suspected of being politically motivated. As such - a highly crucial debate regarding where the economy is headed and what ought to be done is becoming a circus show.

Great depression or not - debate continues.
Angry Keynesian: Krugman Threatens to 'Punch' Detractors 'In the Kisser'
Paul Krugman is known for throwing a bomb or two from his platform in the New York Times, but it's really tough to take him for a violent fellow.

In his July 2 blog post, "I'm Gonna Haul Out The Next Guy Who Calls Me ‘Crude' And Punch Him In the Kisser," Krugman lamented criticism of his support for more stimulus spending. A July 1 editorial in The Economist noted that the economy needs more private spending, not more government spending.

"Mr Krugman's crude Keynesianism underplays the link between firms' and households' behaviour and their expectations of future tax and spending policy," the editorial said. "For example, firms across the rich world are hoarding cash. Their reluctance to invest may have more to do with regulatory, financial and fiscal uncertainty than weak consumer demand (see article). If governments address those worries, businesspeople may start spending."

But Krugman argued he does get it, but disagrees - although he didn't seem to address this argument of long-term spending. Instead, he called for more Keynesian medicine.

"All through this debate, a recurring theme among anti-Keynesians has been that Keynesians like me or Brad [DeLong of Grasping Reality with Both Hands] are ignorant primitives who don't know anything about modern macro," Krugman wrote. "It's really hard to see where that comes from, since I've done plenty of intertemporal optimizing in my time. Part of the problem seems to be that the people saying this are taken aback by what we're saying because they don't actually understand the implications of their own models."

Over the past couple years, Krugman has been an outspoken advocate of government stimulus spending, criticized a $775 billion stimulus plan for being too small, called for a second stimulus, and even claimed in 2008 that "we probably have $10 trillion of running room" when asked how much the government could spend to turn the economy around.

But that begs the question - could a conservative economist get away with suggesting he wants to "haul out the next guy who calls me ‘crude' and punch him in the kisser? Doubtful.

Even if he'd get what he calls for - it would still create one massively dangerous market. I fail to see how the market can find upper momentum in the near term with all this absolutism regarding a second dip recession or depression. Merely raising this notions in every forum causes them to materialize. Spooky market to react accordingly IMHO.


Happy 4th with hopes for a better financial future

What are your plans for this nationally patriotic weekend? Some fireworks, some patriotic music played by bands, some grilling, some history channel viewing - I assume.

Here's a big cheers to America, the American spirit and to capitalism. May those who wish ill on any fail miserably again and again.

Let's watch some men in wigs.