Archive for March, 2013

Weekend Readings

By: ispeculatornew | Date posted: 03.29.2013 (3:00 am)

california-golden-gate-bridgeI’m not a huge baseball fan but I’m happy to see the season being just around the corner, I’m hoping to get to see some action this year before the NFL season kicks in:) I hope all of you are doing well, have a great weekend!!

General Readings

Stock Picking…Just do it @ StockTwits
Calpers considering going all passive? @ BusinessInsider
The wealth tax contagion is spreading @ ZeroHedge
Transaction tax is not the solution to HFT’s @ PointsandFigures

Dividend and Passive Income Readings

You are poorer than you think @ TheDividendGuyBlog
How to invest when the market is at all time highs @ DividendGrowthInvestor

Tech Stock Readings

Walmart (WMT) follows Amazon’s (AMZN) lead @ TechCrunch
You’re doing it wrong Blackberry (BBRY) @ TechCrunch
iTunes store is becoming wildly profitable @ Asymco
Is buying math the next bubble? @ NPR

Do You Keep A Stash Of Cash In Your Portfolio?

By: ispeculatornew | Date posted: 03.28.2013 (3:00 am)

cashIn all of the talk that goes on about asset allocation, I always feel like one asset class is often forgotten: “Cash”. The fact that it is a boring, extremely low return asset should not be enough to stop you. I think any individual, no matter how rich or poor should hold part of its assets in cash. Why?

Capability to capture opportunities: When markets suffer major losses as has happened in 2001, 2008 and in many other instances, many investors panic. That means they need or want to get out as quickly as possible with no regards for the price that they get. In some cases, they are leveraged and have no choice but in many others, it’s a matter of stopping the pain that they feel over big losses. When such events happen, many assets become very attractive for those that have free liquidity. It’s not about trying to capture the absolute bottom but rather about buying assets at cheap prices when others panic. This has certainly happened in the real estate markets lately and in the stock market in general following the 2008 credit crisis.

Liquidity: As human beings, we are able to act much more rationally if we have some level of reserves. This mostly means less stress about losing our job, our insurance, taxes, about running into liquidity problems, etc. For the same reason, having enough space to withstand margin calls or other needs related to investments is also critical.

Resist The Urge Of Reaching For Yield

In this low rate environment, it can be very tempting to buy products that carry a bit more risk in order to get some kind of return. That”s fine but it should only be used for a part of a portfolio and in no way should be considered an alternative for carrying cash. When $hit hits the fans, assets that were considered fairly safe can lose their value because no one is trying to buy them.

How Much Cash To Hold

As you can imagine, there is no clear answer to that answer. Every person would probably have a different opinion. I personally feel like having about 1 year worth of cash available would be ideal. That being said, I have no intention of putting all of my assets into cash. It would mean an opportunity cost that would be too important. What I have been doing is simply increasing the amount of cash that I hold gradually over the years, making it feel almost seamless while still being in a better position every year.

How?

-I guess it all depends on how much you actually hold. The first few hundreds can be owned in cash at home (maybe not under your mattress though). Then you’d start adding money to your bank account and after reaching a certain level of assets, you can add more cash to short term CD’s for example. If I have $10,000 available then I wouldn’t mind having any residual cash in CD’s that are invested for 30 or 90 days knowing that I’ll be able to get those proceeds at most 90 days after starting to tap into the reserves held at the bank. Holding too much cash in a bank account can turn out to be a bad idea as Cyprus depositors found out in recent days…

What are your thoughts? Do you hold cash? 

Book Review: More Money Than God

By: ispeculatornew | Date posted: 03.27.2013 (3:00 am)

In my most recent vacations, I was able to read a very interesting book about Hedge Funds;  More Money Than God by Sebastian Mallaby

It gave a very interesting point of view on the history of hedge funds, why they were created and how they worked initially. It gave a very unique point of view on the hedge fund industry and especially on the more known collapses such as Long Term Capital Management, Amaranth, etc. A lot of good insight into how such crisis are lived out from the inside of these firms and portrays a more human side to hedge funds than we are used to seeing.

Also very interesting is how the author slowly makes his point that hedge funds should NOT be regulated, a point of view that is not so common. Even less common is finding someone that is able to make such a strong case for regulators to stay away from hedge funds.

You could probably (rightfully) say that I’m not the toughest guy to convince because I do very much believe in the benefits of having hedge funds in our system even though leaving them entirely free is not the solution in my opinion either.

All in all, a very interesting read. The one thing I would have liked to see more is more discussion regarding some of the arguments of those in favor of hedge fund legislation. I think insider trading will become a huge issue in the coming decade. I will have to write more about this at some point but it makes it very difficult for others like you and I to compete. I think that hedge funds have became more powerful over the years and it’s unclear to me how that should be managed. Having absolutely no regulation seems a bit unlikely and while I thought it was very informative to hear a well explained view from the other side, the argument seemed to go a bit too far.

In the end, still a great read and I highly recommend anyone interested in hedge funds get a copy:)

Are Wearable Devices The Next Big Thing?

By: ispeculatornew | Date posted: 03.26.2013 (3:00 am)
fitbitYou’ve probably seen some of the headlines in recent months. Clearly, after mobile, the next big trend seems to be in wearable devices. It’s certainly early too call who will end up winning but it might not be too early to start investing into players that do seem to be off to a good start., Here is what I was able to find so far:
Fitbit (private company currently valued at $300M): Certainly one of the leaders, Fitbit sells a few different wearable devices that gather data about steps made, floors, sleep quality, your weight, to which you can also add information about food you eat, activities, etc. With all of that data, Fitbit makes it possible to get a better understanding of your lifestyle and make improvements to them. I’m actually a Fitbit user and love what they’ve been up to.
Jawbone (private company): Jawbone sells products that are very similar to Fitbit and also provide data to users concerning users activites and also has nifty features such as waking you up in the optimal phase of your sleep, etc.
Nike (NKE): Nike was one of the original players in the space with its Nike+ running program. That has recently expanded to Nike fuel which has a much broader scope but I do think that Nike had an incredibly opportunity a few years ago and has probably screwed up. Time will tell but its once dominant product is now usually rated behind competitors such as Fitbit and Jawbone.
iwatch2Samsung: In the most recent announcement of its S4 phone, Samsung also unveiled a S-Health initiative where it will be tracking a lot of user data through the phone but also by selling compatible devices such as a wireless scale, etc. Samsung continues to try to differentiate itself from other Android phones and is trying to make it easier for user to get this data without buying additional devices which certainly does make sense. The product has yet to be launched though so time will tell.
Apple  (AAPL):  The rumors are more and more persistent that Apple is working on an iWatch. What will it do? What will track? It’s not clear and there’s very little info to work on but most experts that this would be a tracking device among other things and could certainly compete with existing products.
Google (GOOG): By now, you’ve probably all seen the news of the upcoming Google Glasses and how they’ll reportedly transform our lives. The goal is to make data so easy to access and to integrate the mobile experience much better. There are so many possibilities but most people think this is either a genius project or will prove to be a total failure.

Does The Ecosystem Rule?

Most of you are probably familiar with my views on the importance of ecosystems and if that ends up being a critical part of the success of these devices, it will be very difficult for smaller players such as Fitbit and Jawbone to compete. Even Nike and Samsung do not really own these mobile ecosystems so it seems awfully difficult to assume they will come out on top competing against dominant products from Google and Apple which will completely integrated into their ecosystems. Time will tell and I’m certainly hopeful it will happen

It’s Only Getting Started

The most amazing thing is that we’re only seeing the first step of these products. I’ve read about basketballs that will have tracking and provide analysis of what was done right and wrong after shooting practice. I hear some of these companies have looked at tracking for golf and other sports as well. There is a ton of potential really. The problem is that right now, the main companies involved are either private or this is a tiny part of what they do so it’s difficult to make a bet on wearable devices. I will certainly be tracking this though as I personally believe there is a ton of potential

What are your thoughts? Do you own or expect to buy any of these devices? Who do you think will win this battle?

Tools That I Use To Trade And Blog – 2013 Edition

By: ispeculatornew | Date posted: 03.25.2013 (3:00 am)

multiscreenOne of the big requests that I use is for information about how I trade, what tools and services that I use and believe in. I have to start off by saying that it would be nearly impossible for me to list everything that I use because there are simply too many. I will give information about the main ones though and hopefully that will help you. I would also love to hear about anything that you use and might be useful for either myself or other readers:)

Hardware

-No big secret here, I simply use a laptop for most of my stuff although I am in the process of setting myself up with a new computer with multiple screens, similar to what I have at work which is much more efficient.

Financial Data

Google finance (finance.google.com) – free – I use it to get info such as P/E ratios, news, etc
Yahoo finance – (finane.yahoo.com) free – this is a secondary source for Google finance which
Ycharts – (ycharts.com) free – great source for historical data, for dividends, financial ratios, etc
StockCharts – (stockcharts.com) free – I personally use a paid version because I am able to store charts for all of the stocks that I personally track, these charts are what I use in all of my stock pick posts
Trend Analysis – free trial (ino.com) – I have written about the fact that I use some technical analysis not to determine which trades to do but rather to avoid picking bad entry points.

Web-based Tools

Google RSS Reader – If you do not know about RSS, it is simply a quicker and more efficient way to read news from several websites. I personally track about 50-60 stocks which helps me keep updated without spending my entire days browsing these sites… if you have not subscribed to IntelligentSpeculator RSS yet, do so now:) You might have heard that Google was going to kill its RSS Reader soon… I’m so bummed. Still looking at alternatives but so far the top one is Newsblur which I’ll soon be trying out.

Google Docs – As you can see here, google docs is a very good, easy and free way to monitor trades and positions and I have been using it more and more.

Newsletters

-I subscribe to many different newsletters but the one that I get the most out of is John Mauldin’s newsletter. It is free and does discuss more of the macroeconomic issues than anything about specific stocks but the information is very valuable. And yes, it is free to join.

-I’ve also been very happy with another free one that I joined a few months ago, Cognitive Accord which is a macroeconomy etc.

Favorite Investment Blogs/Sites

Other than the sites which my online company owns (including TheDividendGuyBlog, DividendStockAnalysis, etc)

The Big Picture

I’d also like to say that these ones are ours but also highly useful ones:

-Darwin’s Money
TechCrunch
Hacker News
Zero Hedge

Broker

I am still looking to compare brokers and am not yet decided so I’ll wait before going out publicly on this one:)

Investment Philosophy

I am a strong believer in the buckets approach and that is exactly what I use, I am in the process of writing a much more detailed analysis of how I get it done, so stay tuned for that.

What About You?

I’d love to hear what tools you use, which ones you think I’d like to try, etc:)

Weekend Readings

By: ispeculatornew | Date posted: 03.22.2013 (3:00 am)

cherry-blossomsSpring is almost upon us and that makes me think of Japan every single time, I truly hope i can get back there in the near future… anyway, no more time to be nostalgic, here are some great readings for this weekend, have a great one:)

General Readings

Diamonds are bullshit @ Priceonomics
There are 2 federal budgets, one is growing, one is shrinking @ TheAtlantic
True cost of the Iraw war @ TheBigPicture

Passive Income/Dividend Readings

Technical analysis, is it good or bad? @ TheDividendGuyBlog
Are these high yields sustainable @ DividendGrowthInvestor

Tech Stock Readings

Still a believer in eBay (EBAY) @ SeekingAlpha
Samsung to launch a competing product to iWatch? @ TechCrunch
Nexus 5 to have Nikon camera? @ TechCrunch
Google is eating the internet @ Philpearlman

TripAdvisor…Significant Upside Potential?

By: ispeculatornew | Date posted: 03.21.2013 (3:00 am)

tripThe online travel industry is one of the most competitive ones because there are several established players fighting together (Expedia, Travelocity, Orbitz, Priceline, etc) along with some newer ones such as Google and some local players like Facebook, Square, etc. Some of you have doubts about the importance of the “social layer”. As anyone who has read my opinions Facebook (FB) knows, I’m not part of that group. I have a firm belief that players like Facebook bring tremendous value.

At some point, Tripadvisor started leading the way in terms of bringing social to travel. How does it work?

At first, visitors looking to book a hotel probably would have looked to websites such as:

Priceline.com (PCLN)
Kayak.com (recently acquired by PCLN)
Expedia
Hotels.com
Travelzoo
Etc

That behavior has started to change. Instead, users go to Tripadvisor as their starting point. Why? Because they can find great reviews by fellow travelers as well as friends and family (through TRIP’s Facebook integration). Then, they are able to look for a rates at all of those sites at a click of a button. The new model looks something more like this:

TRIP_model

In the end, it’s better for users because they have better knowledge of the top hotels that fit what they’re looking for. For TripAdvisor, it’s an amazing business as they can basically auction off the sites that they offer to their users. In a way they are sending visitors away to competitors, making money out of the process. The great thing about it though is that those visitors will go right back to TripAdvisor the next time they’re looking for a trip. I’m actually a good example. In the past few weeks, I’ve booked a few trips and about a dozen hotels. I could have gone directly to Kayak because that is where I usually end up booking my hotels. Instead, every time I went to TripAdvisor, looked through hotels for the perfect hotel (in terms of location, reviews, facilities, etc). Then, I would click on the booking links and get prices for 3 or 4 websites. At each instance, those sites paid out money to TripAdvisor.

In an ideal world, companies like Priceline and Expedia would be able to build a competing service in order to stop paying for visitors over and over and have guys like me start off their booking tours on their websites instead of TripAdvisor’s.

It’s Not That Easy

The fact is that TripAdvisor has the community and it’s something that is incredibly difficult to replicate. Just ask all of those companies, including Google, that have tried competing with Facebook. It might happen at some point but I would put my money on TRIP for now. You won’t be surprised to see that traffic has been growing much faster at TripAdvisor than for its competitors, just look at these charts:

trip-traffic

I would argue that because of all of these reasons, and how unique TripAdvisor is, it deserves a premium valuation. Look at these numbers..I personally think TRIP could end up going significantly higher over 1-2 years:

[table “502” not found /]

TRIP-stock

I’d love to hear your thoughts on TripAdvisor (TRIP)

Disclaimer: Long TripAdvisor

What % Of Your Income Are You Saving Away?

By: ispeculatornew | Date posted: 03.20.2013 (3:00 am)

savings-piggybankIn 2008, 51% of US workers said they had $25,000 in total household savings (house included)… that’s bad. But wait, it gets worse. The most recent report is that there are now 57% of workers with less than that amount. In a world where we can’t depend on the government and private companies for our pensions and where even counting on banks preserving our capital is no longer a given, how most workers could approach retirement without any savings is beyond me.

I’ve said it over and over. The key to building a massive portfolio is not the asset allocation or even stock picks but rather how much money is put in and for how long. It’s not rocket science. I understand that when you make $20,000 per year, it can be very challenging to save much. But most of us make more than that and while it’s easy to increase spending levels by buying houses, cars and other “stuff”.

There Is No Right Amount

Some say you should set aside 10% of your salary. Others say it should be 5% or 20%. I don’t think there is one right answer. Here is my method. Early on, when I started working, I set up an automatic savings process where on every payday, an amount gets sent over to my brokerage accounts. It was a fairly small amount. What I did then was key. Since that day, every time I get some kind of raise, I increase the amount that I’m saving by that % or more. It’s been a very gradual process but it’s worked incredibly well.

Obviously.. this is not sustainable, especially in a world where we live longer and get less contributions from the government:

DynanGraph

Some of us have special circumstances such as being unemployed but for others, I can’t think of a good excuse to not be saving a significant part of your income…

I’m curious, what are your thoughts on the current savings rate?

One Annoying Thing About Some Dividend Investors…

By: ispeculatornew | Date posted: 03.19.2013 (3:00 am)

em-high-yieldI am a big believer in passive income and obviously, dividend investing is a critical part of my strategy and will likely be in the future. It’s an approach that I believe in because of the methodology that’s involved and long history of success. If you’ve been active to any extent on the internet, you’ll know that I’m not exactly alone. Looking for yield is now an incredibly popular idea not for smaller investors but also institutional clients, pension funds, etc. A big part of it is the fact that interest rate yields are close to 0% and that most of us do plan on living on our investments at some point.

There is one very annoying thing though that I keep getting upset about…

“It’s Not All About The Yield”

So many investors buy stocks like Frontier Communications Corp (FTR) because its 10% dividend yield is the top one in the S&P500 of they buy high yield bond ETF’s like JNK, HYG or PHB. I’m not saying those are bad investments but I’ll say that they are terrible if they are made solely on the basis of their yield. Let me put it this way…

Would you rather own a bond ETF composted of high quality stocks such as Apple (AAPL), Google (GOOG), Microsoft (MSFT), etc that pays 3% or owning high yield/distressed debt that pays 5-6%? You might say the high yield stuff. What if the difference diminishes a bit more? At what point would you go for the safer alternative? Because as we’ve seen not so long ago, when things go downhill, those high yield bonds will be the first to drop their payouts and to go under.

And yes, FTR is paying 10%… but very quarter, the company is paying out more than it’s making. Do you think that money is coming out of thin air? Hint: No, it’s not. Every quarter, shareholders equity is becoming less valuable.

High Yield Can Still Work

I’m not saying that investing in higher yield instruments is stupid. In fact, I’m currently working on a higher yield portfolio. But there is much more to it than just looking at the dividend yield. It’s about defining what you’re looking for in your portfolio. In my USDP portfolio, it’s about finding stocks with a safe yield that will increase dividends at a faster pace than inflation no matter how the economy performs. Obviously, if you’re willing to sacrifice some growth, higher yields will be within reach. But yield is not free, it comes at a cost.

What are your thoughts?

One More Reason To Distrust Governments….

By: ispeculatornew | Date posted: 03.18.2013 (3:00 am)

cyprus-presidentEvery month, I discuss my retirement strategy which is based on building diversified and solid streams of passive income. Two of my core principles are seen by many as being overly cautious.

I’ve mentioned how I choose to not include pensions from the government in my expectations. I simply struggle with the idea of depending on a promise when governments in most Western countries continue to kick the can down the road which will eventually lead to major issues and some tough choices. A lot of countries such as Greece, Italy and Spain have already started breaking some promises. This weekend, we had another example. You have probably heard this by now, but the Government of Cyprus, a small European country was only able to secure a package for its banks by agreeing to terms where every bank depositor will lose 6.6% of its deposits and close to 10% for any amount over 100,000. How in the world did this happen? What is the difference between this and just robbing its own citizens? The Cyprus government explained that it was given no other choice by Germany and that is certainly possible but at some point, every country will end up depending on another if they don’t get their act together. You can imagine what came next. Before the law passed, everyone ran to the banks to get their money out. ATM’s ran out of money and there is now a serious crisis going on. How will this end? Tough to say at this point but this is just one more sign. In a world where the entire system depends on trust, it’s not a good sign to see institutions and governments go ahead with such a measure. It’s certainly not the depositor’s fault that those banks made risky bets.

Being diversified. I’ve talked about how I want to depend on many different sources, to have a portfolio that has strong international exposure and in the ebook that I’m currently working on, I also mention having reserves in foreign countries & banks, as well as physical goods such as gold and silver. It’s a fast moving world and I’d hate to depend on one currency, one bank or one government for my retirement and long term financial future.

Do you trust that your retirement plan will be safe? Or do you think European-style changes will end up affecting you as well?