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Investors seem to be optimistic about Jones Soda this week after the company released that they would be announcing earnings earlier than usual for the most recent quarter. Their announcement will come tomorrow May 1st, 2008. According to BusinessWire.com, you can listen to the earnings report at either jonessoda.com or earnings.com.

One must go back to last quarter to understand why this earlier earnings release is so important. The earnings announcement for last quarter was given almost as late as possible, and it was delayed a few times along the way as well. I guess maybe Jones was attempting to rerun the numbers a few more times because the couldn’t believe that they could have possibly lost $39 million dollars for the quarter. Analysts were expecting the company to only lose a few million dollars (-$.03/share). The company also admitted that they would not be profitable again until sometime in 2009.

This early announcement may indicate that the company had a better than expected quarter. The announcement of the early reports sent shares of JSDA up over 13% for the day yesterday. In early trading this morning they were up over 3%. I imagine that the stock will end up neutral for the day in anticipation for the announcement tomorrow. The announcement will occur at 4:30 Eastern Time, so any major reactions to the news will have to wait for Friday.

Based on the early announcement, I am predicting better than expected earnings, but based on what I have seen from Jones in stores shows that they still have a ways to go. I think that the new management is on the fast track to turn the company around. I like their long-term outlook.

PS: I currently own shares of JSDA and have owned them on and off over the past year or two.

As I was surfing the internet tonight I came across an issue that I had briefly read about earlier in the election system. What I came across was the official website for the “Fair Tax.” If my memory is correct, I recall a president candidate or two running with a major part of their platform being the “Fair Tax” system. According to the site, John Cox, Alan Keyes, Ron Paul and Mike Gravel all supported the Fair Tax. John McCain did not support the Fair Tax. Barack Obama and Hillary Clinton did not give and official answer one way or another. The official website can be found here.

Here is my official view of this proposed tax policy.

Under the Fair Tax system, there is no income tax. If you make $10/hour and work 80 hours during your pay period you will get a paycheck for $800, instead of the tax adjusted amount. The government has to get their money from somewhere though, and the Fair Tax system suggests that they should get it from sales taxes. The Fair Tax systems is actually entirely consumption based. Those who like to spend a lot of money will pay the most in taxes. Those who are savers will be rewarded by paying less in taxes. Compared to the current income tax based system, the Fair Tax would be the equivalent of a 23% income tax. Compared to a sales tax, the Fair Tax system would have a 30% sales tax.

Fairtax.org makes some compelling arguments for why a switch to this kind of system would be a good idea. Their main arguments are:

• Enables workers to keep entire paychecks
• Enables retirees to keep entire pensions
• Refunds in advance the tax on purchases of basic necessities
• Allows American products to compete fairly
• Brings transparency and accountability to tax policy
• Ensures Medicare and Social Security funding
• Closes all loopholes and brings fairness to taxation
• Abolishes the IRS

The people in favor of the Fair Tax feel that too much time money and confusion is spent each year attempting to file taxes. With a flat rate sales tax, this would cover all government expenses without all the confusion.

Some critics argue that the Fair Tax system would eliminate the deduction that is taken on interest payments on a home. Fairtax.org argues that since you will have more take home income this would offset the deduction that you would normally take. They also claim that “With the fair tax, mortgage interest rates fall by about 25 percent (about 1.75 points) as bank overhead falls.” Homes also become more affordable since “first-time buyers save for that down payment much faster, as savings are not taxed.”

The Fair Tax system has created what they call a “prebate.” This is essentially a prepayment by the government to offset the estimated amount of taxes that one would pay on essential goods and services. For example, a household with two adults and two children would receive a prebate of $537/month. This is based on the assumption that they will spend $28,000 on essential goods and services. Hawaii and Alaska oddly enough have a different prebate table, which actually result them receiving a greater amount in prebate money.

Some people argue that the prebate is pointless, and food and medicine items should just not be taxed. FairTax.org responds to this by saying, “the wealthy spend much more on unprepared food, clothing, housing, and medical care than do the poor. Exempting these goods, as many state sales taxes do, actually gives the wealthy a disproportionate benefit.” They also feel that “exempting one product or service, but not another, opens the door to the army of lobbyists and special interest groups that plague and distort our taxation system today.”

Although the system was designed to be free of loopholes, there is one that really stands out to me. The Fair Tax only taxes new goods. The theory behind this is that the item was taxed already when it was first purchased and should not be taxed a second time as a used item. Therefore, people who purchase used goods will not have to pay the tax. This could could have a couple of benefits/drawbacks. Poor people are more likely to buy used than the rich, and therefore will be saving 30% automatically on all used goods. At the same token, used goods could be sold at a 30% premium because it is common knowledge that these items aren’t going to be taxed, and therefore the missing tax gets passed on to the business owner in the form of higher profits. Having no tax on used items is something that would make any environmentalist happy. With a automatic 30% markdown on all used items, it would encourage people to buy used rather that new and would help to reduce consumption and encourage reusing old items.

Having no tax on used goods could have a major negative impact on companies though. Imagine a car manufacturer like Ford. Why would someone want to pay a 30% tax on a new $30,000 car ($9000 in taxes added on). The $30,000 car would actually cost $39,000 after taxes. It is a common theory that vehicles lose 20-25% of their value as soon as you drive them off the lot. At 20% we could conservatively say that the $30,000 car would be worth $24,000 not long after it was first purchased. Let’s say that the value drops by 20% by the end of the first year of ownership. Why would someone want to pay a $15,000 premium for a car that is a year newer? Remember that the slightly used car would not be taxed and the new one would. This would not make any sense at all from a consumer’s standpoint. I think that this Fair Tax system would have a very negative impact on big ticket item manufacturers.

I think one major advantage of the Fair Tax system is that it would help to reduce tax evasion and illegal immigrants. People can definitely evade taxes in this system by buying used goods, but there are times when you have to buy new goods. Food, medicine, motor oil and gasoline are some major items that quickly come to mind. The Fair Tax system would increase the amount of money that is put into the tax system by illegal immigrants. The system would also give a large incentive for illegal immigrants to become citizens. The prebate is given out to “all valid Social Security cardholders who are U.S. residents.” Illegal immigrants would not fall into this category and would not qualify for the prebate. They would be forced to either qualify for citizenship, or pay the 30% tax for food without a prebate.

Overall I think that the Fair Tax system has the potential to be an effective system. It has a few issues with it that could use a little more ironing out, but as our current tax system becomes more an more confusing I could see an increasing movement towards this type of system. For those who are interested in reading more about the Fair Tax, there is a book dedicated to the subject written by Neal Boortz and John Linder.

For a link to the official Fair Tax Act of 2007 – HR 25/S 1025 plain English summary, click here.

A visit to the US Treasury website will show you a state by state breakdown of how the Economic Stimulus Act of 2008 will affect Americans. The US Treasury estimates that 131.8 million Americans will benefit from this act, with California being the state with the most affected at 14.7 million people. The US Treasury projects that the total reduction in income taxes paid will be $112 billion. This equates to $849 per affected person.

$849 per person seems a bit high, since each parent can get up to $600 with a $300 credit per child up to two. I guess these results suggest that there are quite a few single parents out there with two kids or more. The US Treasury gives a probable reason for this discrepancy on the report. They say that “The proposal extends tax benefits to significant numbers of tax units that did not file during calendar year 2007. The estimates for these units are based on the characteristics of filing units and are therefore subject to greater standard errors and bias.”

You can see the entire two-page pdf report here.

Many people may be wondering how much exactly they will be getting. The US Treasury has a nice five-page pdf file that shows how much money a person will receive under just about any imaginable scenario. You can view the report here.

I just finished up reading a very insightful book called “The Option of Urbanism: Investing in a New American Dream,” by Christopher B. Leinberger. The main focus of this book was that America will start to fall behind the rest of the world economically if we do not switch to a denser, walkable and transit based society.

In the book Leinberger starts out by saying that before the invention of the car cities were very compact and dense. One could only travel as far as they could walk, so this made it necessary for all things to be close by. Stores, work and home all needed to be located close to one another for the sake of convenience. Even when cars started being produced they weren’t something that was owned by every family.

It wasn’t until the World’s Fair of 1939 and 1940 in New York that the idea of owning a car became something that all Americans wanted. At the fair, General Motors set up a major exhibit called “Futurama.” This exhibit “showed radio-controlled, automated fourteen-lane highways crisscrossig the country with three speed limits (depending on the lane) of fifty, seventy-five, and one hundred miles per hour.” Over the course of the fair it was estimated that 27 million people saw this exhibit, and most were very impressed by it. The exhibit promised that this vision would become a reality by 1960.

According to the book, there were two major contributors to the massive expansion of the suburbs. The first was the end of World War II. Many soldiers came home and immediately started to have children. They started to look for a new kind of lifestyle, and the suburbs seemed to offer just that. The other major contributor was the passage of the Federal-Aid Highway Act of 1956. This act built the new 46,837 mile freeway system that currently covers the entire country. It was finally completed in 1991. This also helped make commuting from the suburbs to the city that much easier.

In this new society, only the rich could afford the suburbs, and the cities were filled with the poor. Many of the traditional downtown department stores left for the suburbs because business had become so bad in the city. As people moved to the suburbs and found out that they had much more space and privacy, they naturally told their friends about this paradise. After hearing such wonderful things, the friends moved out too.

Leinberger argues that while initially suburbs seemed to offer what was being promoted as the “American Dream,” it actually led to a lower quality of life. With sprawl, people are forced to drive until they qualify for a place to live. For the poor working class this can mean driving hours each way just to get to work. More time in the car means less time with family, and this would lead to a poorer quality of life.

Leinberger has suggested a rational solution to this problem. He essentially echoes what many have been saying for the past few years. We need to be more like the Europeans. He suggests having a central city that is linked to the outside suburbs via some sort of rail/transit line. In the suburbs, the transit center would be what the rest of the town was built around, thus making it convenient for all people to access it. He also suggests that instead of spending billions daily to fund a war that supports our sprawling and congested lifestyle, we should instead be using that money to create better mass transit systems. Until people have better transit options, they will continue to use their cars because that is the only way.

In conclusion, I think that it will take a number of things for the United States to switch into a more transit based society. Once gas prices reach certain heights, people will start to consider transit to be a more viable option and not something that is strictly used by the poor. With increased ridership numbers, the cities should recognize this pent up demand and will infuse more money into the public transit system. All in all I really enjoyed this book. I think that Leinberger made some excellent points on how to fix some of our transit problems. Unlike other books, Leinberger’s solutions actually seem feasible and quite likely to be implemented in the near future. I would highly suggest reading this book if you are at all interested in urban development or environmentalism.

The past few years there has been a lot of attention on the news about different ways to go green and make a difference in the environment. Even with all this focus on creating a greener way of life, large energy companies like ExxonMobil continue to make record profits. Something does not seem quite right here. As an environmentally conscious investor, one may focus the dilemma of choosing between a profitable company like ExxonMobil that will surely make them money, or searching high and low for some obscure environmentally friendly company. Once you do find that company, chances are they won’t even be profitable.

Portfolio 21 has taken the guesswork out of this for you. This investment company is based out of Portland, Oregon, which is the greenest city in the United States according to Popular Science Magazine. Simply put, Portfolio 21 only invests in companies that meet its stringent standards for being or working to become green companies.

The official strategy from their website reads, “Portfolio 21 invests in companies designing ecologically superior products, using renewable energy, and developing efficient production methods. Portfolio 21 companies seek to prosper in the 21st Century by recognizing environmental sustainability as a fundamental human challenge and a tremendous business opportunity.”

Besides looking for companies with strong balance sheets and income statements, Portfolio 21 also requires that companies have “ecologically superior product lines, . . . evolving product lines, investments in renewable energy, innovative transportation and distribution strategies, and efficient use of resources with respect to meeting human needs.” If a company starts to shy away from its green operations, Portfolio 21 will take action through what they call “Shareholder Activism.” Through this, they essentially file a complaint with the company to try to get them to return to their green ways. If this does not work, they will divest their funds. “If a company no longer meets our selection criteria, we divest. By divesting these companies we hope to send a clear signal to management regarding the importance of maintaining a focus on sustainable business strategies and improving performance in these areas on an ongoing basis.”

In the past year, Portfolio has rejected some very notable companies as investment opportunities based on their lack of greenness. Some companies of note are:

• UPS
• News Corp
• Royal Bank of Scotland
• Yahoo!
• Bank of America
• Texas Instruments
• Corning

As of 3/31/2008, the companies Top 5 holdings are

• Novartis (3.1%)
• Novo Nordisk (2.7%)
• Nokia (2.4%)
• Staples (2.3%)
• IBM (2%)

Some other noteworthy companies were Google, Siemens, Canon, HSBC Holdings, Intel, Nike, HP, Briston-Meyers Squibb, Dell, & Whole Foods.

The fund is currently trading at $34.34 under the symbol PORTX. If you invest directly through the company, the minimum investment is $5,000, or $1,000 if you choose to set up a retirement account. It is also offered through many brokers as well where the minimum may vary. As of 12/31/2008, the fund managed $266M allocated over 115 different positions. Its’ annual return has been 17.39% over the past 5 years. Another thing that I like about the fund is that the managers of it have been managing it since its’ inception.

If green investing is something that you would like to start doing, but lack the time or research capabilities to do it, a fund like this may be appropriate for you. As always, make sure to look over the entire funds past performance and investment objectives and always remember that past performance is never an indicator of future returns.

A market order is not the only type of stock trade available. Another common type of order is a “Stop-Loss.” With a stop-loss, the trader instructs their broker to sell a particular stock as a market order if its’ share price falls below a particular value.

Say for instance you own 100 shares of Washington Mutual (WM), which is currently trading at $11.89. You are afraid that some negative news may be coming out and would like to minimize your losses. In order to do this, you set a stop-loss trade to sell at $10/share. If the price of WM falls below $10/share, the stop-loss will trigger a market order for the shares. This will help to ensure that you liquidate your positions and avoid a major downturn.

While stop-loss orders may seem like a worry free solution, Jonathan Burton of Marketwatch.com has a differing opinion. He feels that they really aren’t all they are cracked up to be. While they do offer great downside protection, they can come back to haunt you as well. Going back to the Washington Mutual example, let’s say that WM drops to $9.85/share. Suddenly a market order for your shares take place and you no longer hold WM. Now let’s imagine that after it hits $9.85/share the stock bounces back up to $12/share over the next few days. Now you are stuck having sold out at $9.85, while you could still be holding on at $12/share.

According to the article, “Stop-loss orders are geared to traders and investment professionals who buy and sell shares frequently. They might lose 10% in a stock one day and make 25% the next. The stop-loss is a way to avoid a beating if they’re wrong.” Short term traders can easily just walk away from a stock and move on to the next. Longer term traders tend to have more of an emotional attachment to the company. This can be in part because of the amount of time spent trying to find the company, or financial roller coaster that the company has put them through. Long term traders are more likely to keep watching the stock after they sell and beat themselves up mentally saying, “if only I hadn’t…”

In an interesting statement, the article points out that “things often rebound very quickly and it’s very hard to recapture the stock at a good cost basis. It’s almost like ensuring that you will sell in irrational market panics.”  The market is not always right and is often subject to major corrections in times of volatility.

Jonathan does suggest an alternative to the stop-loss method. “The trailing stop is a stop-loss order that you adjust upward as a stock moves higher. If a stock rises 10%, raise your stop by 10% and so protect your profits. You still run the risk of being sold out earlier than you might like, but at least you’ll have something to show for it.”

As a final bit of wisdom, Jonathan states that “if you’re a long-term investor it doesn’t make a lot of sense (to use a stop loss), and if you’re a short-term trader you’d be better off watching the stock. Long-term investors should simply monitor the stock’s fundamentals.”

According to a Wall Street Journal article written by David Enrich, bank fees continue to rise even thought the economy slumps.

Many large national banks have begun to raise their fees across the board in order to boost revenues. Banks make money through two different sources. The traditional way they make money is by lending out money at a higher rate than they are paying to have access to it. The second way is through various fees. When a large number of loans start to default, it makes it so that the banks have to rely more on fees to make up for the lost profit.

“Earlier this month, for example, J.P. Morgan Chase & Co. started charging customers of other banks $3 nearly every time they use one of the bank’s 9,100 ATMs. Before that, the fee ranged from $1.50 to $2.” Assuming ATM use remains constant, J.P. Morgan Chase & Co. can raise their ATM income by 50-100%. There are not a lot of investments out there that earn those kinds of returns. $3 to use their ATM may seem high, but if you consider the cost of tracking down your own ATM it may end up being quite the bargain.

If gas costs $3 per gallon and your vehicle gets 20 MPG, the most you would be willing to travel to avoid the fee is 20 miles round trip, or a 10 mile radius from your current location. If you consider how much your time is worth to you, you would be willing to travel far less. This is one reason why banks can get away with these relatively high fees.

While some consumers may wonder if J.P. Morgan’s fees are a bit excessive, J.P. Morgan has an alternate viewpoint. They claim that “ATMs are a convenience for its customers. ‘If you’re not a customer, you have to pay for that convenience.’” Others say that the higher fees give consumers incentives to join that particular institution. J.P. Morgan does not charge its customers to use their ATMs, so joining their company would be a good way to avoid those obnoxious fees.

How high can bank fees go? They can go as high as the market will bear. Once consumers start to say that enough is enough, then fees should start to level out, but in the meantime they will continue to rise to offset their loan losses.

If you don’t want to join these fee happy institutions, but still need the cash, there are ways around the fees. For example, don’t spend $3 on fees to take $20 out of the ATM. Withdrawal up to your daily maximum, and live off that money until it is gone. You could also use the money that you need and then redeposit it at your institution when you have used all that you need. If you take $20 at a time, it will cost you $15 per $100 taken out. This is like paying a 15% tax on your withdrawals. Another way out of the ATM fees is to get a debit card and make all of your purchases on debit. Transactions on debit cards are typically free, and the transaction will also show up on your monthly statement. With cash, if you forgot what happened to $60 of that $200 that you took out, you will have to rely on your own receipts to find out.

While ATM fees are here to stay, there are ways to get around them and save some money. Remember, if you did only one ATM transaction per month, it would cost you $156 in ATM fees over the course of a year assuming the ATM fees were $3 per transaction.

I have been with Cingular/AT&T Wireless for about two years now and have never had any problems with them besides their service black hole in my girlfriend’s apartment. It is interesting though that I have suddenly run into a bunch of problems with them all at once.

This most recent weekend I found that all incoming calls were going straight to my voicemail. They weren’t ringing on the caller’s end, and my phone wasn’t ringing either. Even worse, my phone was not being notified about these missed calls or new voicemails in my inbox. I also could not receive text messages.

Initially I tried to troubleshoot the phone on my own by turning it off and then turning it back on again. This did not seem to help at all. My next course of action was to call the people at AT&T to see if they had any solutions. After spending about three minutes navigating the phone tree, I found out that I had to call from a different phone in order for them to troubleshoot my cell. Since my lunch break was almost over, I decided that I would just have to bring it in to my good friends at the local AT&T store.

When I brought in my phone, the AT&T rep initially powered down the phone and restarted it like I had and then tried calling it. No luck. Then he decided that it must be something with the SIM card. He popped open my phone and pulled out the SIM card. He left and then came out with a brand new SIM card. He put the two cards into this machine that looked very similar to a calculator and transferred the data from one SIM card to the other. After this he put the new SIM card in my phone and powered it back on. He gave my phone a call and it magically started ringing again.

Thanks AT&T!

As a final side note, they did not even charge me for the new SIM card.

This article is a follow up on the previous post on Car Mileage.

A common belief amongst people is that the value of a car declines more rapidly the newer it is. Some say your car loses 25% of its’ value when you drive it off the lot. I am about to put my Craigslist data to the test to help prove whether or not this theory actually works.

In my first example I used 2001 Jettas found on Craigslist. Based on those Jettas that came up in my search, only 26 of them were qualified to be entered into the data. I did not accept any VR6, TDI or wagon Jettas. I did this in order to keep the data the most consistent. The average 2001 Jetta had 82,312 miles and was selling for a price of $8,106. I found that for 2001 Jettas, they lost on average $.0342/mile driven. If this theory is to hold true, the 2003 Jettas should decline in value more per mile than the 2001 Jetta.

Let’s take a look at the data:

Listings with a negative difference are underpriced based on the data. Listings with a positive difference are overpriced based on the data.

I took the exact same approach as I did with the first test, except this time through I searched for “2003 Jetta” on the Craigslist site for Seattle. It returned 40 matches, and of those only 21 were qualified to put into the data. For the 2003 model, the average Jetta had 64,488 miles and was selling for $10,869.

After processing the data, I find that the regression of the data points has a coefficient of -.0328, meaning that for every mile that the car is driven, it loses 3.28 cents. It turns out that this is actually less than the 3.42 cent per mile loss for the 2001. The Y-intercept for the 2003 is $12,981.62 as opposed to $10,927.01 for the 2003.

You may recall that I calculated the value of a 2001 Jetta with 80,000 miles to be worth $8191.01 from the 2001 Jetta equation. Taking the 2003 Jetta equation, we shall find out what the value of an ‘03 Jetta with equal mileage should be. We can find this by subtracting from the intercept. So: $12,981.62 - (-.0328 x 80,000) = $10,357.62. This shows us that a buyer would pay $2166.61 for a model that is two years newer, even though it has identical mileage. In order for the consumer to pay the same amount for the 2003 as they would for the 2001 with 80,000 miles on it, the 2003 would have to be at 146,055 miles.

This data seems to find that the value of a car doesn’t seem to decline quicker the newer it is. Given the somewhat small sample sizes, it is possible that the data could be a bit skewed. It would also be interesting to see what the actual sales price of these cars are, because most won’t be sold for their asking price.

For those who must have the latest and greatest though, check out the 2008 Jetta.

This image comes from Autoblog.com

The new Jetta starts at $16,990 + taxes, licensing and all that other fun stuff.

Throughout the time that I have run this blog I have periodically chosen a few stocks and funds that I thought looked like winners. Now I am going to take the time to look and see how they have done since I first suggested them.

On 1/24 I chose Under Armour. On a 1-5 scale I gave them a 3.8. When I first recommended them they were trading at $35.66/share. The stock is currently trading at $35.48. Since I have recommended this company it has returned -.504%. During that same time period, the Dow Jones Industrial Average had a return of -.430%, and the S&P 500 has returned -1.42%.

On 1/28 I chose Generex Biotechnology. On a 1-5 scale I rated them a 2.5, right in the middle. When I first recommended them they were trading at $1.31/share. Since then, the stock has returned -12.2%. During the same time period, the Dow Jones Industrial Average returned -.472% and the S&P 500 has returned -1.56%.

On 2/4 I chose American Medical Alert Corporation. On a 1-5 scale I rated them a 3. When I first recommended them they were trading at $6.50/share. Since then they have returned 8.00%. During the same period, the Dow Jones Industrial Average has returned -2.45% and the S&P 500 has returned -3.48%.

On 2/9 I recommended Fidelity New Markets Income Fund. On a 1-5 scale I rated them a 4.5. When I first recommended them they were trading at $14.49/share. Since then they have returned .759%. In the same time period, the Dow Jones Industrial Average has returned 1.18% and the S&P 500 has returned .116%.

On 2/20 I chose Target. On a 1-5 scale I rated them a 3.2. When I first recommended the company they were trading at $53.40/share. Since then they have returned -2.68%. In the same time period, the Dow Jones Industrial Average has returned -.819% and the S&P 500 has returned -1.99%.

Based on this information, we can see that my stock picks mirrored the overall market fairly well. My two exceptions were Generex and American Medical Alert. Generex is an expecially risky company, while American Medical Alert has had some good things go their way over the past few months. I will try and update the performance every once in a while. The most important thing that this update shows is the value of a balanced portfolio.