prancingbull.com

There are many different investment services out there to choose from. Most tend to be geared towards the experienced trader who wants to use limits and stops in their trades. Well Sharebuilder.com is one of the few sites that is geared to a more novice audience. Sharebuilder, which I believe has recently joined forces with ING Direct offers investors to set up up automatic investments that allow them to purchase stocks in whole dollar amounts instead of individual shares. By doing this, beginning investors can invest in partial shares of Google or Apple instead of having to throw down a bunch of cash for a single share.

Through the program, you schedule Sharebuilder to make regular investments in a given stock on a certain day each month or week. One negative thing about this system is that you cannot specify an exact time to initiate a trade. At some point in time during the trading day, Sharebuilder will acquire the shares for you. A good thing about this plan though is that it allows you to make regular investments in a given security. This will allow you to be able to smooth out price fluctuations since you will be investing over a wide range of times.

Sharebuilder also offers some standard brokerage features as well. For an additional price you can make trades in real time just like you would with a more “full-service” broker. They also offer options trading and margin accounts as well.

Don’t you hate it when you find this great stock to invest in only to find out that your available cash balance is too low to make the trade worth it? Well Sharebuilder has a great feature that will easily solve this problem. What they have created is called Express Funding. With Express Funding, you can “place Real-time Trade orders with cash directly from your checking/savings account, eliminating the wait to process your deposit.” It costs $5 to do this, but if you have an Electric Orange account set up through ING Direct the fee is waived.

Sharebuilder has set up three different account types depending on what kind of trader you are:

As you can see, with the advantage plan you are essentially getting trades at $1/trade assuming that you make 20 investments per month. To my knowledge that tops most other brokers out there.

If trading at regular intervals for a cheap price sounds good to you, I would highly advise you to give Sharebuilder a closer look. For a direct link to the site, click here.

Now that I have sold my stake in MakeMusic (MMUS), I am on the search for my next investment. After doing a few screens through Fidelity I came across a company that could be poised to make some nice gains. The company is Host Hotels and Resorts (HST). In the past year the stock has seen about a 35% drop in share price from around $26/share to its current rate of $16/share. Since the first of the year it has been trading in a solid consolidation pattern between $17.30 and $15.50/share. I think that if the price gains 5% above or below these two benchmarks then it has reached a breakout stage and will post large gains or losses.

One thing that I really like about the company is that their profit margin has continued to expand each year since FY 2003.

Even as the company has continued to grow sales, they have also increased their efficiency. This is always a good sign that things are going well for a company. Another good sign for a company is the payment of dividends. Currently the company boasts a $.20/share quarterly dividend. At current prices, and assuming that the dividend will remain at $.20/share the company will be paying a 4.86% dividend. Try finding a CD that will pay you that much these days! A final positive indicator for the stock is that it’s P/E is only at 16.3 right now. In comparison, it’s TTM 5-year P/E average is right around 40. Given historical P/E levels, this stock should really be trading in the high 30s and low 40s.Another convincing factor is that 3 accurate analysts rate HST as a buy, one as an outperform, and one as a neutral. Analysts can’t necessarily predict the future, but given the fact that none rate it as a sell makes me feel even more confident in the company.

Also, compared to other companies in its industry, it is doing much better. Its net margin is 13.4% compared to the industry average of only 3.8%. Return on equity is sitting at 13.1% compared to 7.1% in its industry. Finally, it has a debt to capital ratio of 51% compared to the industry average of 62.9%. In this statistic more is not better.

With all the fundamentals going right for this company, I feel comfortable making this stock a buy. This morning I placed a $.50 stop loss on the security. If it hit’s $16 I may play the $16-17 game for as long as I can and hopefully rack up a few profits while I’m at it. One thing that troubles me is that since the US economy is starting to head in the wrong direction, it might mean that people will be taking fewer vacations, and therefore using hotels much less.

It has come time for me to reconsider my holdings in Make Music (MMUS). I initially purchased this stock on 10/29/2007 at the averaged price of $9.07. This averaged price factors in the commission as well. It initially dropped down to $8 right away, but I held on and soon thereafter it reached $10.75/share on 12/24/2007 which also happens to be its’ 52-week high. Isn’t that convenient. Since that high, it has dropped 17.2% to its’ current price of $8.90/share.

After reading my most recent book on technical analysis, I have started to analyze charts in a much different way. Yesterday morning I was looking at the chart for MMUS, and I noticed that a descending triangle had been forming over the past three months. This triangle has a support of $9 which has been tested about six times depending on your definition of what a test is. During the time that this support price was being tested, the new highs on the bounce backs were becoming lower and lower.

Based on what I read in the book, this is generally seen as a very bearish signal. Typically once it fails to get a bounce back from the support it takes a large drop down once the support gives way. After that, the previous support level tends to act at the new resistance point.

Using this chart read combined with the fact that MMUS is trading at a P/E of 82.74 I have decided to sell my holdings in MMUS. My only concern with this sale is that MMUS is a very thinly traded security and I may not be able to get top dollar for my sale. I will be happy though to say that I got out of it before I lose a bunch of money on a big drop.

I have decided to adopt the common strategy of accepting a lot of small losses in order to get some large gainers. This is the first stock that I have consciously taken that approach on. In the past I was never able to sell a stock before it lost a ton of money because I would always get far too caught up in it. I would always talk myself into believing that it was poised for a big rally if I just hung on a bit longer. One of my worst trades like this was with Sirius Satellite Radio (SIRI), although I think many others shared the same outlook as I did.

So now that I have cut my losses on this security it is time to start looking for something new. Stay tuned to see what my latest bold pick will be.

When I went to return my most recent book to the library I decided to pick up a new one while I was there. The one that I chose is called “How to invest in Condominiums,” by Andris Virsneiks. I am only 19 pages into it so far, but I have a good feel for it so far. It appears that it will be fairly informative while keeping at a level that will be easy enough for anyone to understand the basic concepts. The author makes is very clear in the first few pages that investing in condominiums is not a difficult task if done correctly.

The sweet thing about this book is that it is a signed copy. That kind of surprises me for a library copy. Maybe someone was bored and decided to forge his signature into the book. The book was written in 2002, conveniently at the beginning of the real estate boom but I’m sure that the majority of this information can be applicable in any market environment. I also found it interesting that the author did his condominium investing in Seattle, which is the area that I am from.

When going into make a deposit or a withdrawal at your financial institution, there is one thing that I ask that you do not do. Please do not come in with a hat pulled down with large sunglasses. There are a few rational reasons that I make this small request.

First of all, I know the large stunner shades are the cool thing to wear, but seriously. I sometimes have a hard time recognizing my own friends who are wearing these oversized sunglasses. If I find this difficult, how easy do you think it will be for me to properly identify a stranger? Probably not very easy. So please, help me make my job a bit easier so that I don’t have to try and imagine what is behind those bug-eyed shades. As an added bonus, it will probably make the line move a bit faster as well. At least most of the girls don’t wear hats along with their stunner shades.

This is a bit of an extreme example, but if you don’t know this person, can you really tell? This picture was taken from the following website.

Guys are actually even worse offenders of these banking no-no’s. Like I said before, when anyone wears sunglasses into a financial institution, it makes it that much harder for us to identify you. It makes it even harder when you come in wearing a baseball hat pulled all the way down to the tops of your glasses. This makes it extremely difficult to identify you. This whole identification complaint is just peanuts compared to the real reason why I don’t like it when guys wear sunglasses and a low hat into the bank.

The bank teller is at the front of the bank and is the only one in the bank with a drawer full of cash. This naturally makes them a prime target for robberies. When someone comes in wearing a low hat and sunglasses into a bank, we automatically assume that you are either a bank robber, or trying to pull some fraudulent transaction past us. Many fraudulent transactions are not caught until days or weeks after the fact and often rely on video evidence to verify the criminal. Hats, glasses and other disguises are often used to hide from the many cameras located inside of a bank. So by you wearing a hat and sunglasses into a bank makes the teller ten times more suspicious of you. This will cause them to examine your transaction much more closely than usual, and will often make them this much more picky and stingy over what you plan on doing.

Ignore the FBI logo on this guy’s coat, and he looks pretty suspicious to me. Heck, even with the FBI logo he looks pretty suspicious. Imagine how you would feel if you had someone dressed like this (criminal or not) standing in front of you while you have tons of cash sitting right in front of you. Not a very good feeling now is it? This picture was taken from the following site.

So please, for the sake of my sanity, take off at least your sunglasses when you come into your financial institution. It will make us feel a lot safer and will make your transaction run a whole lot smoother.

A few weeks ago I mentioned that I had checked out a few finance books from the library. Well my checkout period is over now, and since I will be returning my book tomorrow I thought that I would take the time to write a brief review of the book.

I checked out two books, but I only ended up reading one of them. The one I chose to read was called “How Technical Analysis Works” by Bruce M. Kamich. I will admit that i didn’t make it through the whole thing, but I did make it through all of the topics that I was interested in.

In this book, Kamich does an excellent job putting the mysterious world of technical analysis into easy to understand terms that can be useful to both beginning and experienced traders. An experienced trader may want to read something a bit more advanced though.

Coming into this book I knew a little bit about technical analysis like moving averages and certain volume indicators. The book introduced me to a few new strategies that I have already started to use when analyzing different companies. The three strategies that I found most useful were trendlines, triangles, and areas of resistance and support. A few weeks ago I wrote an article about trendlines from what I had read in this book.

One great thing about this book is that Kamich does not simply tell you what a strategy means, but he also tells you how he uses them to trade. I found that to be very useful, because knowing what certain indicators are will only get you so far. Knowing when, where and why to trade is where your success will come from.

For me I found this book very helpful for the advancement of my trading strategies. The important thing to realize is that technical analysis is not the golden ticket to investment success, but is just one of many tools to use when analyzing a company.

Overall, I would highly recommend this book to someone who wants to know more about using technical analysis as an additional trading strategy.

Do you ever have those arguments where you know you are right, but it is not worth arguing your point because either the person is too hard-headed to admit they are wrong, or the concept is so far beyond their knowledge they won’t understand? A situation like this occurred to me today in the lunchroom. We were having a discussion on the price of gas. Gas prices in Seattle are much higher than in the rest of the country. Currently a gallon of regular costs about $3.51 a gallon.

A co-worker was discussing how he used to have a diesel car that got around 50 miles to the gallon and now drives a different car that gets only 35 MPG. He also talked about an SUV he had that got around 14 MPG. He started to go off about how he loved his SUV so much and didn’t care that it got such poor mileage and would be happy to pay even $5.00/gallon because it was worth it to drive that car.

Here comes the good part now. He then started to lecture the whole table that gas prices have been rising because demand has been dropping because of the higher prices. He claimed that when demand for gas dropped, stations would raise their prices so that they could increase their margins so that they can make the same amount of profit on less gas. Part of this is true. If a station increased prices while their costs remained the same, their margin would increase. If gallons purchased decreased by more than the increase in price, then the gas station will be losing money by taking this tactic.

Fortunately there are a few rules of economics that will prevail in a dense city environment such as Seattle. One of the main and most basic economic principles is the law of supply and demand. For instance, if you have a large supply and little demand you can generally conclude one of two things. The first could be that people just don’t want the product. With gas that is not the case since it is a necessity. The other could be that the price is just too high for people to want it. The other important principle is perfect knowledge of market prices. Sometimes stores will buy too much of a certain item. They notice that it is not selling very quickly and need to make room for a new shipment of the latest product. If they can’t get the old item sold, there will be no room for the new item. This is why stores often put items on sale. They have typically bought too much of the good because they anticipated more demand for it, and need to clear out the current inventory for new ones.

Another important economic principle is that all market participants have perfect knowledge of the market prices. This is especially true with gas stations. When a consumer sees two or three stations near each other, they can quickly gather all the price data and make a rational choice of what station will provide them with the best product for the money. If three stations are all near each other, they will tend to all have the same prices so that the consumer will just pick whichever one is the easiest to get to. When companies compete for attractive prices, they lower prices instead of raising them. If Shell is priced at $3.45/gallon and Chevron is priced at $3.51/gallon, people are going to go to Shell all day long because it gives them the best price. The Chevron will not gain by this increase because they will not have any customers. It we assume all consumers make rational decisions, we can assume that all consumers will choose to fill up at Shell.

In order for a station to raise prices in order to improve margins, all satations would have to be in on this pricing scheme in order for it to work. Remember, prices changes demand, and demand changes prices. This endless balancing act will continue until the product supplied is equal to the product demanded.

This post is a follow-up to the article I wrote a few weeks ago about the Government Rebate Checks. Yesterday I, as well as millions of other Americans, received a letter in the mail from the IRS outlining the Economic Stimulus Act of 2008. It stated that the government would start sending these one time payments out in May. The great thing about this rebate is that you don’t have to fill out any additional paperwork. All you have to do is submit your yearly tax return, and the IRS will determine your payment from that.

A single person is eligible for up to $600, and a married couple is eligible for up to $1,200. Up to two dependants can be claimed for $300 each. The largest payoff would be to a married couple with two dependants. They would be eligible to receive $1800. Depending on your income levels and other deciding factors you may not be eligible for the full amount. The IRS has created a refund calculator on their website and can be found here.

There are a few people that the government will be leaving out in the cold though.

• If your adjusted gross income is over $75,000 (or more that $150,000 if married filing jointly), the payment will be reduced or phased out completely.
• You must have a valid Social Security Number to qualify for the rebate.
• Individuals who can be claimed as a dependant of another taxpayer cannot receive the payment.
• Taxpayers who filed a 2007 form1040NR, 1040NR-EZ, 1040-PR or 1040-SS will not be eligible.
• A dependant over the age of 17 will not qualify for the additional $300.

One thing that frustrates me about this plan is that is does not consider college students. First of all, the parents who are most likely supporting the student (and claim them as a dependant) will not be receiving the $300 bonus. Also, college students (many who work during the school year) also will not be able to qualify to receive the $600 check. I’m sure there are quite a few people who are with me on this one.

For all the nitty gritty details that only the IRS can provide, click here for the official IRS page for the Economic Stimulus Act of 2008!

A recent article from Reuters states that “the U.S. Federal Reserve is expected to slash interest rates by as much as a whole percentage point at its policy meeting on Tuesday.” Currently this rate is at 3% and the cut would lower it down to 2%. This is yet another bold move by the federal reserve in an attempt to prevent a recession in the U.S. economy. Since September, “the Fed has cut overnight rates by 2.25 percentage points.”

If Bernanke goes ahead with this 1% cut that is rumored, he is not giving himself a whole lot of wiggle room for later. Once the rate is down to zero, he can’t exactly go into the negative numbers. If I were him I would have taken a more gradual step-down approach instead of these large cuts. Personally I believe that large cuts and hikes tend to scare the markets. People like to be able to predict the future. Remember when Greenspan had his usual .25% hike every meeting? The markets loved that. They knew exactly what was going to happen each time there was a meeting. There were not a whole lot of surprises. It seems like now every time there is a Fed meeting there is a large speculation over what is going to happen. I don’t think that this is a good thing for the health of the market.

This photo was obtained from the following site

Consumers can feel the effects of Bernanke’s cuts though. I had a money market account with VirtualBank that was paying 4.65% no more than 6 months ago. Now it is paying only 3%. CD rates at the credit union that I work at have dropped steadily as well. If I remember, a CD was about 5.05% only about five months ago. Now I believe it is paying 3.65%. Every day I hear grumblings from the CD savers who rely on CD rates as a main source of their income. Many complain that if rates continue to drop they will not have the interest income that they need to sustain their lifestyle.

If this cut were to be 1% as predicted, it would be the “biggest rate cut since 1982.” If anyone remembers correctly, 1982 was a time of rampant inflation and economic uncertainty. Hopefully we will not end up in the same boat. According to the article, “the Fed is expected to announce its decision around 2:15 p.m. EDT.” This will be right in the middle of the trading day. I predict that the cut will go through as predicted. I also predict that the markets will be down tomorrow, as people are starting to lose faith that rate cuts are a viable solution to our current economic dilemma.

Gas prices continue to rise across the country. Here in Seattle, a gallon of regular costs $3.51 at the local Shell station. Seems crazy to think that about a year ago the price was about a dollar less. We have a few factors that are contributing to this rapid increase in price.

First of all is the obvious. Refining capacities can only go so high, and the demand for oil continues to rise each day. Using the classic model of supply and demand it is very easy to see why prices have risen. If we put more fuel efficient cars out on the roads we would theoretically demand less gas because we would be using less of it. I think that when people have vehicles that get better mileage they will drive more. They will use the better mileage as an excuse to drive more and make more unnecessary trips, causing them to demand exactly the same amount of fuel.

The second main reason that gas prices have risen is because the dollar has decreased in value in comparison to other world currencies. Think about it for a minute. Most of the gas that we consume we import from other countries. When we buy foreign oil, we must convert our currency into theirs to make the transaction. If we assume that the price of oil remains constant in a foreign currency, and our currency is losing strength to the foreign one, it is easy to see why the price of oil would greatly increase for us.

Imagine that in 2007 $1 was worth $5 in a foreign currency. If a barrel of oil cost $100 in the foreign currency, it would cost us $20 USD to buy the barrel. Suddenly in 2008 our $1 is only worth $4 in the foreign currency. That same barrel of oil still costs $100 though. Because of the change in the exchange rate, it now costs us $25 to buy that same barrel although the price in the foreign country has remained the same.

It is interesting to see how supply and demand are not the only controlling factors on the price of gas in the United States.