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If you don’t keep a close eye on your checking accounts, you could be in for some major overdraft charges. Financial institutions typically tack on a hefty fee for drawing your account negative.

There are typically two different types of overdraft options. Knowing the difference between the two can be very important to your financial well being.

The first type of overdraft “solution” is typically an overdraft transfer. What happens is that if you were to overdraw your checking account below zero, the financial institution would take funds from another specified account to cover the difference. Typically a small fee between $2 - $5 is charged. This is the best option, and I would recommend that everyone sign up for it no matter how good your account balancing skills are. The reason for this is that if you don’t have this set up you will get an NSF fee which is typically over $20.

The second type of overdraft protection acts like a line of credit. This product will allow you to overdraw your checking account up to a certain amount for a given fee. If you don’t have the funds the transaction will still go through, but it typically costs over $20 per occurrance. If you are getting low on funds and you know you are going to overdraw your checking while waiting for payday you have a few options (one much better than the other). Option one is that you can continue to weild your debit card and get charged the $20+ fee for each transaction. This will add up a lot quicker than you think. Your $4 coffee is now $24 or more.

Instead, you should take option B. If you know you are going to have to dip into the reserves, you should go into your bank and withdraw everything up to your limit in cash. This will give you the funds that you desparately need, but the best part is that you will only be charged the overwithdrawal fee once. Use cash for all of your purchases, and when you get the money bring your account back up to zero.

With interest rates near all time lows, one overwithdrawal will wipe out all of your interest earnings for the entire year. Even if interest rates were much higher, why pay more in bank fees than you really have to?

Stock Chart

This post is an addition to the my previous post on Generex Biotechnology on January 28th, 2008.

In the news today it was reported that major drug maker Pfizer “reported an increase of lung cancer among patients who used its discontinued inhaled insulin Exubera.” This news lowered the outlook of having an insulin treatment that could be administered via an inhaler. Other companies such as MannKind Corp and Nektar Therapeutics Inc were punished on the market today. MannKind dropped by about 60%, while Nektar fell by approximately 25%.

Generex is another such company who seeks to create an inhaled insulin product. Today their stock skyrocketed 12.15% on two and a half times the average volume. It added an additional 1.67% in after hours trading. The rise is partially due to the news that they released today in regards to the company commencing their screening process for potential testing candidates. Generex is currently in Phase III trials in North America. According to the press release, “the Phase III protocol includes a six-month trial, which is expected to enroll 750 patients with Type 1 diabetes mellitus.” The purpose of the testing is to “is to compare the efficacy of Generex Oral-lyn and the RapidMist diabetes management system with standard injectable insulin therapy.”

A second reason that GNBT rose so much today could be in response to the Pfizer news. Pfizer and Generex are in the process of creating somewhat similar products. One of the major differences between the two is that Generex’s product is designed to never enter the lungs. This feature should eliminate the possibility that a user would develop lung cancer. For Generex, this news means that they have a couple of competitors that are forced to pull their products from development. Fewer competitors means more market share when Generex can finally get through its’ trials.

Currently, “Generex Oral-lyn is approved in India and Ecuador. The company also is studying the product in the Ukraine.” Revenues of only $19,000 in Q2 ended January 31st, 2008 suggests that their product hasn’t exactly been flying off the shelves abroad. One positive is that the company has been steadily decreasing their losses over the past three quarters. In Q2 2008 they reported a net loss of $6.507M on their income statement.

In the short term I think that that stock price should increase a bit more over the next few days to a week in a half while investors have time to digest this information. In the more near future (1-2 months) I see the stock falling to its current resistance of $1.00/share in anticipation of more losses on the quarterly statement. Since Generex (GNBT) finances their operations through the sale of their own stock this will mean a dilution of shares for the shareholders, thus translating into a lower price per share.

In Q1 08 and Q2 08 net income rose by 6.4% and 9.9% respectively. While these gains seem promising, Q2 shows a different story over the past few years. Net losses increased 25.2% when comparing Q2 2007 to Q2 2008. If losses increase like that for Q3, which had the highest losses over the past four quarters, we should be expecting a net loss of about $9.662M. Given a projected stock price of $1/share, the company will need to issue 9.662M shares to pay off its debt. Currently, the company has 111.48M shares outstanding. At the $1/share mark, that would give Generex a $111.48M market capitalization. After the issuance of the new shares the company should have roughly 121.14M shares outstanding. If market capitalization is to be maintained, the price of the stock should fall to roughly $.92/share.

$.92/share is my price target for mid-July. FY 2008 ends July 31st, 2008. At this point, the stock price will be very dependent on what is released in the annual report. I think that these targets will hold barring any sort of groundbreaking news. If this company can someday make it through the Phase III trials it will be a major winner.

Update 8/27/2008:

I decided to check back to see how my prediction turned out. In my opinion I think I was just about spot on. I had predicted a price target of $.92/share by mid-July. On July 22nd and 23rd it closed at $.91/share. All the other days it was lower than that, but two of them were almost exactly what I had predicted. On April 9th when I made this prediction, the stock was trading at $1.20/share.  That is a prediction of a 24% decrease in price over a 3-month period. Looks like my bold prediction turned out right!

Do the number of miles on your car’s odometer have that much of an effect on its resale value? In this experiment I find the answer to this pressing question.

This stock photo was obtained from automotive.com

In order to find the answer to this common question, I went to Craigslist.com. There I did a search for a fairly common car, the 2001 Volkswagen Jetta. I chose this car because VWs tend to hold their value fairly well, and Jettas are a very popular model. I conducted this search under the Seattle-Tacoma Craigslist section. The search term that I used was “2001 Jetta.” This search returned 54 results for ads that were posted from 4/1/08 - 4/8/08. Of these 54 results only 26 qualified for my statistics.

There were a few major reasons that certain ads did not qualify:

• No mileage was given
• The car listed was not a Jetta or was not a 2001 model
• The Jetta was a TDI (Turbo Diesel) model. These typically have higher resale value.
• The Jetta was a VR6 model. These typically have higher resale value.

All other models including the Wolfsburg were included.

My research found some fairly predictable data. The Y-intercept was $10,927.01. This means that a 2001 Jetta with zero miles on it should have a value of $10,927.01 based on the data. The X-variable coefficient was -$.0342. This translates into a loss in value of 3.42 cents per mile driven from the initial $10,927.01.

Based on the above data, let us calculate how much a 2001 Jetta with 80,000 miles should be worth. We can find this from the following equation. $10,927.01 + (-$.0342 x 80,000). This Jetta should be worth roughly $8191.01 according to the equation that was derived from the data.

In the study, the average 2001 VW Jetta had 82,312 miles and was selling for a price of $8,106.

The following table shows the data that I collected. The miles and price were actual data from the Craigslist listings. The projected column shows what the equation projects that the price should be based on the data. The difference column shows the difference between the projected value and the asking price. Listings that have a negative number are priced under the market value for their mileage. Listing with a positive number could be said to be overpriced in comparison to the other cars in the market.

For a scatter plot of the data, click here.

As you can see from this study, you can find good deals on cars if you compare them across a broad range of listings. In a month I may redo this study on a new batch of 2001 Jettas on Craigslist to see if the data holds up or if it has drastically changed. In most cases the graph should have a negatively sloping trendline meaning that the vehicles are worth less as the accumulate more miles.

I know I wrote a review earlier about my trading account with Optionshouse.com, but I thought that I would add some screen shots to go along with the review.

Many of these screen shots will be too large to fit into the blog properly, so if you click on them you will be able to see the full size version.

This first screen shows the options chain view. In this view you can see the bid, ask, change, volume and open interest. If you click on any of the call or put prices a black box such as this one will pull up and allow you to choose many different trade options depending on what you want to do. The screen is actually much larger, but I wanted to just show a snippet to give an idea of what the chain view looks like. One nice feature of this view is that it refreshes every five seconds and flashes a different color for each option that changed in price during the last five seconds.

The second screen showes the options ticket. This is where you can initiate your trades. It also gives you the choice of either doing one trade at a time, or you can add different legs to the trade as well. A nice feature that is shown on the bottom of this image is that the total cost of the trade automatically updates each time you alter your trade.

In the third screen, you can see the watchlist which is located on one of the sidebar tabs. The watchlist is nice because it allows you to be able to see all of the stocks you are most interested in. One downfall of the watchlist is that it has to be refreshed manually. While this may be a nuisance if you need to have the most up to date quote, I can see how it would put a strain on the site’s bandwidth if it were in real time. Either way, it is still a nice feature.

I will admit to being a terrible options trader, but I can see how this site would be a great trading platform for an experienced trader, especially with the fixed commission structure.

An IRA (Traditional or Roth) is a great way to start saving for retirement. The beauty of the two IRAs is the tax benefits that each program offers.

With the Traditional IRA, your contributions are tax deferred, meaning you can deduct contributions from your earned income for the year. Your deposits also grow tax free until withdrawal. The only downside with a traditional is that withdrawals are taxed at the current rate. This may benefit you if you are in a high tax bracket now and expect to be in a lower bracket upon retirement.

With a Roth IRA your contributions are not tax deductible. Your funds grow tax free, and any earnings withdrawn after a certain age are not subject to income taxes. One advantage to the Roth is that you can withdraw your contributions without penalty. This can be great if you need funds for an emergency and don’t want to have the added burden of additional fees. A drawback is that you cannot deduct your contributions from your taxes.

As you can see, each has its own unique set of advantages and disadvantages. To read the official IRS rules and regulations for each type of account, click here.

One important thing that you should be aware of though is that you are only allowed to contribute a certain amount each year. If you are under 50, the 2007 contribution is $4,000 and the 2008 contribution limit is $5000. If you are 50 or older you can contribute up to $5,000 in 2007 and $6,000 in 2008. I included the 2007 tax values because you can actually make contributions to your IRA for the previous tax year all the way up until taxes are due on April 15th, 2008. By making a 2007 contribution you are giving yourself the opportunity to maximize your total allowable contributions.

Over the past half year or so the Dow Jones Industrial average has been steadily falling. Typically when this happens most mutual funds tend to mirror this pattern. Investors who just like to stick their money in mutual funds instead hand picking stocks may be in for a bit of a fall as well. For those mutual fund only investors you may feel like you are stuck without many options to pull your portfolio out of this downward spiral. There are a few mutual fund options out there though.

One option that I have recently discovered are Bear Market funds. These funds specialize in shorting stocks that they feel are headed in a negative price direction. By shorting stocks, they are selling shares that they do not own in hopes of buying them back later at a lower price. Funds like these tend have a pattern that is inverse of the market as a whole.

My favorite pick out of these types of funds is the Prudent Bear (BEARX) fund. Of the 39 such funds that Fidelity offered, it was the only one that had a positive return over the last 10 years. That return was 3.62%. Not incredibly impressive, but considering that the market was working against it during the majority of that time period it isn’t anything to scoff about.

The official goal of this fund per the Fidelity website is: “The investment seeks capital appreciation. The fund seeks capital appreciation primarily through short sales of equity securities when overall market valuations are high and through long positions in equity securities when overall market valuations are low. It may hold more short equity positions than long equity positions when the dividend yield for the aggregate stock market is low relative to its historic range.”

Here are the vital return statistics:

As you can clearly see, when the market has been doing poorly, this fund has excelled. To further back up this claim, the beta of the fund as of 2/29/2008 was -.68.

The funds three largest holdings as of 12/31/2007 were: Cash offset for short futures, SPDRs, and Capstone Mining Corp. The fund’s top ten holding account for 38% of it’s total holdings.

Some negatives for the fund is that it has a decent amount of fees associated with it. Here is a rundown:

• Management Fee: 1.25%
• 12b-1 Fees: .25%
• Expense Ratio: 2.33%

These types of funds may not be the greatest long-term investment given the markets traditionally upward price movement. It can provide a nice hedge against pullbacks and mini-recessions like we may be currently be facing today. I would recommend this as a solid fund for the next six months to one year, but definitely not as a long-term investment.

So today my girlfriend and I went to the AT&T store at the local mall and inquired about the fee that had been assessed on my account. For those of you who don’t remember, I was charged an $18 “change of account responsibility fee.” The fee seemed pretty ridiculous, especially since we were not informed of this prior to making the switch. The AT&T customer representative went back and presumably talked to the manager to get the go-ahead and came back a few minutes later. She said that I would receive a credit to my account either on this bill or the next bill. She said that she had to send an email out to make it effective. Hopefully this low-tech way of applying a credit to my account actually goes through, or else I will have to make yet another trip down to the store.

So the customer may not always be right, but I guess in this case they are. So if you get charged with this totally out of line fee, please make your way down to your local AT&T store to right their wrongs.

A few days ago I mentioned that I was going to purchase Host Hotels and Resorts (HST). This company operates hotels such as the Marriott, Ritz-Carlton, Hyatt, Four Seasons, Fairmont, Hilton, and Westin. Well this morning I made the purchase on the stock. When I first put the order in a few days ago, the stock was trading at $16.53/share. I put a $.47 trailing stop loss on it. Since I put that order in, the stop price dropped down to just above $16.50. This means that once the share price reached $16.50 my trade would be executed. This morning it was trading in the low $16s and I felt that it would be a good idea to just get in now instead of waiting for it to rise to the stop price. I put in a market order that was completed at a price of $16.11/share. After commissions were factored in, the weighted average cost was $16.31/share. At market close today it is sitting at $17.01/share. That is a 5.59% increase off the initial price, and a 4.29% increase off the weighted average price.

In order for me to break even on this trade, I must sell above $16.51/share. The reason for this $.40 increase in price above the initial buy price is because of commissions on the buy and sell. I am thinking about creating a trailing stop loss that starts at $15/share so that the most I can lose on the trade is 9%. As it stands now, I have made a 2.93% return for one day (1054% annualized) after all commissions have been factored in. According to Bankrate.com, the average one-year CD is yielding 2.90%. Looks like I beat the one-year national average in one day. Too bad I can trade like this everyday. Of course now that I have written this, the stock will tank down to $14 over the next week. Let’s hope not.

So why was the price up today? There are two reasons for this. The first reason is fairly obvious. The Dow was up 3.19% today, so one can say that the stock was just trending with the market today. That is a pretty easy statement to agree with. The other reason that may have caused the stock to rise today is that the company announced the date of their earnings call. They announced that they will be reporting on April 23rd. Perhaps the market is expecting better than expected news. I know I am. According to Yahoo! Finance, “The company has elected to be taxed as a REIT under the Internal Revenue Code. As a REIT, it would not be subject to federal income tax provided it distributes at least 90% of its taxable income to its shareholders.” What this means is that the higher the income, the higher the dividend. Typically the higher the dividend the higher the share price is. This move could be in anticipation of higher dividends. I guess we will all find out here in a few months.

Apparently my blog program only lets me type so much before it starts to freak out, so here is the rest of my post…

… I guess the main issue I had with the book was the writing style. The book didn’t seem to fully captivate my interest like a book on this topic should have. I suppose some of it could be attributed to the fact that I read it 15 pages at a time on the bus on the way home from work.

In short, the Virsnieks plan is to essentially buy low, sell high, and use the rent from your tenants to pay the mortgate. To seasoned real estate investors this probably seem like a no brainer. If you fall into this category I would not suggest this book to read. If this seems like a groundbreaking idea, then this book would probably be a great read for you. Personally, I had a teacher in high school of all places enlighten me on this idea first, so the majority of the ideas covered in the book weren’t really much of a surprise to me. I felt that I got some good words of wisdom from the book, but not enough to justify the amount of time invested in it. I wish I would have just read a few choice chapters and been done with it.

As I mentioned a few posts back I read a book called “How to invest in Condominiums” by Andris Virsnieks. I did not finish this book entirely, but this is mainly because the book did not fully captivate my attention. Mind you that I read this book because I have been very interested in investing in real estate in one form or another for quite some time.

According to the title of the book, it covers such topics like:

• Select the right condo
• Make the real estate market work for you
• Attain positive cash flow
• Reduce your tax basis through depreciation
• Live rent-free and retire early

Judging by the cover it seemed like an interesting read. After getting a ways into the book it seemed to cover the same stuff over and over again. I guess that since I had been thinking about investing in real estate for so long I had already thought about many of the strategies that Virsnieks covers in the book.

The basic investment plan suggested by Virsnieks essentially goes a bit like this. First you must select a brand new condo. A remodel or apartment conversion just will not do. He does not believe in buying an older unit to upgrade into a more valuable one. Not only must the condo be new, but it also must have high demand for the units. If there is not high demand for them, then it may be harder to sell them later. The other main point that the author reiterates throughout the book is the value of hiring a property management company to take care of all the dirty work for you. Virsnieks claims that the management company typically takes about 9% of the rent for their services, but it is well worth not dealing with all of the hassles. He says that by purchasing a new condo and hiring a property manager, then you will only have to spend about 40 minutes a month on your investment. That 40 minutes will be spend going over the property management statement and depositing the check in the bank.

Virsnieks makes the whole process sound quite easy in the book, and indeed it should be. There are a few problems that I have with how the book is set up though. The majority of his purchases were made back in the 1970s, so it is somewhat hard to wrap my head around the purchase of a $23,950 condo in Seattle that rents for $265/month. These days a cheap livable condo in Seattle goes for about $175,000 or more. He also makes mention of mortgage payments in the 13%+ range, which is unheard of these days. If you applied everything on a strict percentage basis, it would all probably match up about the same, although in Seattle I believe that condo prices have increased more than rents have.