Earn, save and protect your money

Archive for November, 2008

Do not market your products to our children

Sunday, November 30th, 2008

This is what parents are telling to the toy companies. “Just back off, we don’t have money to buy your expensive toys” – This is the message given to toy companies by Boston-based Campaign for a Commercial-Free Childhood.

Economic crisis is hurting every household in U.S. It’s really difficult to say “No” to the kids when they want the special gift for Christmas. Parents feel guilty when they do that. However, writing the letters to toy companies is not going to stop them from aggressive marketing.

Everyone is looking after their own interest. Parents don’t want to say no because they can’t afford. Toy companies can’t stop the aggressive marketing because they have to survive this crisis. Richard Gottlieb, a New York-based consultant to the toy industry gave a blunt reply “Delivering disappointment goes with the job of parenting” in his blog. Mean people.

You don’t need to say “No” to the kids. But, you can scale down your expenses. If you usually buy two gifts, try to make that one this year. Instead of buying an expensive iPod Touch for your teenage children, you can get iPod Shuffle. Kids don’t have lot of monetary desire like adults. They just want to feel the love and affection from you. It doesn’t matter whether you gift them “Thomas and Friends Bounce Around” that costs $170 or “Tickle Me Elmo” that costs $12.

Thomas and FriendsTickle Me Elmo

Related Link: Meltdown fallout: some parents rethink toy-buying

Go thrifty this holiday season

Saturday, November 29th, 2008

Many of you likely already know that the economic picture for the United States and the world as a whole have gotten very negative. There is very little doubt that we are in the midst of a recession. Most economists say a recession is assured and a severe recession or even a depression remain a possibility. This kind of economic outlook is obviously unsettling for consumers, and quite frankly it should be.

What does this mean you should do this holiday season? First of all you should still enjoy the holiday season just as you always, don’t let the economy turn your season upside down. It does mean that every consumer should do everything humanly possible to save money and be thrifty this holiday season. With the current state of the consumer and lower than expected Black Friday sales, retail companies are certainly going to have to be marking down items a large amount, so take advantage of these great deals when you can. Decorating the home for the holidays? Try deocrating it on the cheap and not making things so extravagant.

Going thrifty for the holiday season doesn’t have to mean sacrificing an enjoyable holiday season. Go thrifty on the holiday spending with the understanding that none of us knows exactly what is ahead for the economy and we all should be very careful to save whenever it is possible. As a wise investor you must know that when the path ahead of you is an uncertain one it is your responsibility to take precautions, and the holiday season is one in which each wise consumer and investor should count every penny.

Related Link: Cyber Monday Deals

Thanksgiving Day Special – 50% off commission!

Thursday, November 27th, 2008

I have never seen a stock brokerage company that offers discount in commission on the eve of Thanksgiving day! Folks at OptionsXpress offers 50% off commission on all sell orders on Friday, November 28th.

This offer is available only for sell orders, not for buy orders. I don’t think it’s a wise thing to sell the stocks/options just to gain $7. If you really want to get rid of something in your portfolio and your account is with optionsxpress, this may be a good idea. Personally, I think the time is ripe to buy good stocks. I won’t sell anything now.

Time Value of Money

Thursday, November 27th, 2008

We know that time has a value. Most of us still choose to ignore that and don’t watch where we spend time. MBA students have fun calculating time value of money for various courses. It’s fun to some extent. Beyond that, it’s a real headache. If you have a financial calculator, that would make life little easier. Otherwise, Microsoft Excel can save you lot of time and money.

Dr. Timothy R. Mayes has a neat site that has all the sexy tools to calculate the time value of money, bond valuation, loan amortization, etc., In most cases, you don’t need financial calculator. Excel alone would help you with most of the financial analysis.

Related Link: Daily Dose of Excel

Volatility isn’t a good sign, until it gets ahead of itself

Tuesday, November 25th, 2008

While the word volatility doesn’t necessarily mean prices are moving in any one direction, the history of the stock market tells us that when the volatility index is on the rise, the stock market is typically not faring very well. Why is this? The basic answer to this is that the stock market does not like any kind of uncertainty and when there is a significant amount of uncertainty there is often a large amount of volatility as well. Uncertainty tends to lead to volatility and volatility tends to lead to lower prices in the stock market because of the fear of holding stocks as an asset class.

When is high volatility a good sign? High volatility in the stock market as measured by the VIX Index can also be the sign of a market bottom. When the VIX reaches level that were previously never thought to be possible it is one sign that the fear in the markets may be reaching the point where the bottom could be in quite soon. Fear in the market isn’t a good thing, but excess fear can lead to capitulation which washes out the system and helps set stocks up for a positive run.

What is the bottom line with volatility and the stock market? The bottom line is that typically volatility lends itself to lower stock prices because investors would rather be in a safer asset class, but when volatilty levels reach new highs an investor would be wise to expect at least a short term change in the trend of the market. As volatilty rises be prepared to take some money off the table, but as volatility levels skyrocket be prepared to dip your toe back in the water!

How to find the market bottom?

Tuesday, November 25th, 2008

Every investor is waiting for the market bottom. No one knows if and when it would arrive. Yahoo Finance interviewed three investment officers and wrote an article about how to spot the market bottom. All experts agreed that no one can spot the bottom. However, they detailed some pointers that would ultimately signal the bottom. Read the article here.

Use the gasoline prices savings wisely

Monday, November 24th, 2008

Across the nation gasoline prices have been dropping like a rock of late. Just a month ago the average price at the pumps was about 80 cents higher than it is today, and about six months ago the average price per gallon of unleaded fuel was more than double today’s national average price of $1.89. It is basically the tiny glimmer of good news that consumers have gotten in the last few months as our economy seemingly comes crashing down right before our eyes.

Why have gas prices gone down so much? The reason crude oil and gasoline prices have come down so much is one of the main reasons the stock market has dropped so much, the fears of a massive global recession. Oil is far from immune to a large scale global recession and at this point it seems that oil traders are fearing the worst.

As you walk around the streets of America today you will hear a lot of people talking about the economy that normally would talk very little about the topic. It clearly is the in topic of the current time, and for good reason. The talk of gasoline prices plunging lower is spreading and many Americans are now faced with what to do with this new savings they are receiving each time they fill up at the pump. I suggest to you to be extremely conservative with the money that you save at the fuel pumps in the coming weeks and months. The fact that gas prices are coming down are comforting to consumers, but the real reason gas prices are coming down are truly not good for the overall economy and our nation’s economic well-being. American consumers would be far better off saving up that money and investing it into something simple like a savings account or cd rather than deciding this is the all clear to go back to driving much farther distances and not saving conserving fuel. Keep conserving the fuel and reaping the rewards of those savings, with the economic picture currently in place you can’t afford not to!

How to fix the global financial crisis – Solution from India

Monday, November 24th, 2008

A small village in Gujarat State, India is conducting a religious ritual in which 3,000 priests have begun chanting hymns to invoke divine intervention to fix the global financial crisis.

Bizarre, isn’t it? This ritual was started 15 days ago. Priests are sitting around 109 sacrificial fires and chanting hymns to appease goddess Meldi, urging her to restore prosperity.

Well, if this succeeds, we can ask our new secretary of state Hillary to conduct similar rituals to restore world peace.

Indian ritual is expected to last 2 years. The global crisis will end well before Indian priests’ two-year time frame whether these guys perform the rituals or not.

Is it the time to get back in the market?

Saturday, November 22nd, 2008

If you take a look at the action of savvy investors like Prem Watsa, this may be the right time to get back in the market. Prem Watsa was born in Hyderabad, India. He is the CEO of Fairfax financial holdings based in Toronto, Ontario. He is a graduate of the prestigious Indian Institute of Technology with a degree in Chemical Engineering and a holder of an MBA from the Richard Ivey School of Business of the University of Western Ontario. He correctly predicted the current credit crisis one year ago. In November 2007, he said that global credit squeeze was in its early days. He moved bulk of his investment portfolio to safe government bonds. He made bet against CDO like instruments that are the basic reason for global credit crisis that bankrupted many financial institutions all over the world.

His bet succeeded and made him handsome returns. Recently, he removed hedges on equity portfolio investments which typically mean that he thinks the worst is over. It appears that he is not afraid of losing money on the investments anymore. He might also think that the stock prices can’t fall too much below the current level. Whatever it is, it’s good to see an optimistic person that yield wide influence in the finance community. Hopefully this gesture would encourage other money managers to invest more in the market.

Related Links: He has never been more bearish | The Canadian Buffett Turns Bullish

Lock in those CD rates while you have a chance

Friday, November 21st, 2008

If you are like many investors you have at least taken a peak at a Certificate of Deposit, or a CD, in the past few weeks. A CD is a great way to earn some interest on your investment while being backed fully by the FDIC. Currently the FDIC is insuring up to $250,000 worth of bank deposits at any one banking institution. This guarantee applies to things like CD’s as well as money market savings accounts, but not things like stocks or mutual funds.

Many people are looking to get a little bit extra out of the hard earned money that they have saved up, but they are unwilling to put any in the market because of its dreadful performance. A CD is a great place to look, but I suggest that you go ahead and get those CD’s taken care of now, before the yields go even lower. The best way to check the average yield for CD’s is to head over to Bankrate.com, where they have an excellent tool that tracks the overnight averages for CD rates nationwide. Today the nationwide average for a one year CD is 3.42%, a week ago it was 3.46%. The trend is for CD rates to go lower and I do not expect that trend to turn anytime soon, at least until the economy turns around from the severe downturn it is currently in.

With the Federal Reserve expected to cut rates even further, possibly to as low as 0%, banks simply won’t be able to offer CD’s yielding the amounts they are right now. I highly suggest looking around for some of the best CD rates in your area and lock in your investment in a high-yielding CD that looks attractive to you. Chances are, the rates you are seeing right now are the best you will see for quite some time!

Related Link: Putting cash under the mattress isn’t the right idea

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