stlplaceAs millions of American workers saw their 401k became 201k since last year, this 401k thing suddenly becomes a hot topic. CBS 60 minutes did an excellent report on this topic.
My thoughts
Dan Ariely (bio) is an expert in behavioral economics, and his recent book Predictably Irrational is well received. It is also quite relevant amid this financial market (and institutions) meltdown.
10 min audio (with slide show)
CNBC interviewed McDonald CEO Jim Skinner. My wife and I visited McDonald near my home (Creve Coeur, MO), and was very impressed by the setting of the new store (I remember about a year ago I visited it and here are some pictures).
Disclosure:
First saw Rosetta Stone at the mall couple years ago (the kiosk). More recently saw its Ads on the TV. Today comes a monumental day for the company (bloomberg news, IPOHome, Yahoo Finance), the IPO (as old Warren says IPO stands for its probably overpriced).
Fun and emotion aside, I think this language thing may stick. Before Rosetta Stone, the other public company does language training I know of is New Oriental (NYSE: EDU). New Oriental has harnessed the Chinese market in a very unique way, and it’s now the un-disputed leader in English test training in China. The main reason? Basically without the training from New Oriental, normal Chinese students can not score high in the TOEFL and GRE (notice I said normal, certainly I understand there are some exceptional Chinese students, and I happened to meet a few back in college). At the time I took TOEFL and GRE, New Oriental school has not existed in my city, so I took training from the best alternative: Qianjing college. Anyway, they serve similar purposes.
I have not used Rosetta Stone service yet. Nor do I plan to learn another foreign language (English is hard enough for me). But I know there is huge demand in this area. Chinese (mandarin) and Spanish are two popular ones. As matter of fact, my wife has been teaching madarin to some college students and little kids, and she has been enthusiatically studying Spanish and Cantonese these days. I joked with her why not learn Cantonese while at Hongkong (she studied there for one year).
This is typically what happens, shortly after I sold a stock, it becomes golden goose. This can be best exampified by the US Bank stock (NYSE: USB). I bought some yesterday afternoon shortly before close. But I kind got a buyer remorse, thought my $16.50 price is a bit high. More importantly, I don’t know how financial stocks will go up and down as the earnings started roll out (WFC, GS), and the stock offering of Goldman. I am also unsettled by the charts: by looking at USB/WFC/JPM etc. at stockcharts.com, it appears to me the bank stocks are topping (higher price, lower volume). So I became nervous and sold it this morning, at $16.78. Shortly after that, USB took off, it closed at $17.89. In other words, I missed the potential gain, again 🙁
(Video from Yahoo Tech-ticker)
Traders’ market
From gurufocus, we can see investor gurus like Buffett’s buy and sell actions, usually 45 after the close of a quarter. NRG Energy is an interesting one, because it’s going to build the first nuclear power plant in the US for 30 years, and the offer Exelon put up last Oct. (0.485 share of Exelon for each share of NRG). More interestingly, Buffett’s Berkshire started buying NRG since last year. Here is the transactions: http://www.gurufocus.com/StockBuy.php?action=buy&GuruName=Warren+Buffett
2Q 08: $42.40 * 3,280,100 = 139,076,240
3Q 08: $35.50 * (5,000,000 – 3,280,100) = 61,056,450
4Q 08: $21.50 * 2,200,000 = 47,300,000
By my calculation average cost Buffett paid for NRG is 247,432,690/7,200,000 = $34.3657
Buying a stock Buffett was buying gives one some comfort because Buffett usually did his homework, and adhere to his rules (business; moat; management; price etc). Buying a stock at discount of the price Buffett paid offers some margin of safety. BTW, NRG closed at $18.33 today, about 50% of the Buffett price 🙂
Downside
The main downside of NRG is more than 50% of shareholders already accepted the tend offer from Exelon (they surrendered). Exelon extends tend offer till June 26. So hold on the stocks, just like the Oralce of Omaha does.
(Update 23Apr09) It seems Obama administration is going to make credit card more consumer friendly (marketWatch). So are they going to socialize the credit card: I mean, you and me (i.e., honest guys) pay the credit cards on time each month, will bail out the deadbeats, after we bailed out the Wall Street ??? We know the credit card companies (the wall street) are not charities. This thing looks more like dumber and dumber.
(Original) Yesterday I mentioned credit card when talking about recurring revenue. Credit card is the live blood of our consumer society. Like commerical paper for business, we (consumers) use (more precisely borrow from) credit card for our daily purchases. At the end of each billing period, we either pay off the whole balance or pay the minimum payment (not recommended from personal finance perspective, but so many people do this nowadays. The customers who carry balance (and pay >10% interest) also contribute the profit of credit card companies. But it appears now credit card companies started to upset their best customrers, amid the credit crisis.
Business
American Express (NYSE: AXP) and Citibank (NYSE: C) pay customer to go away
JP Morgan Chase (NYSE: JPM) charged monthly fee to customers, then gave refund under pressure from NY AG Cuomo (CNN Money story).
(Update 02-03-2025) Google finance stock screener has been gone for a while. Robinhood App has a screener one may be able to use. I haven’t used their desktop version yet though (it’s called Robinhood Legend, I think).
(Update 20Apr09) Found this trick in google finance (chart), hold on mouse “up” or “down”, the time frame of stock chart extends or contracts.
Stock Screener
Here is an example: market cap $5 b to 25 b; PE ratio 10 to 20; dividend yield 2% to 5%; return on equity 15% to 25% (last 5 years). You can also sort the results by “52 week price change” etc (in ascending or descending order).
Customization: you can add other criteria such as “Return on equity (ave. last 5 years)”. The reason I like return on equity is that it means real return for shareholders. Ideally I am more intereted in the free cash flow yield (definition at investopedia).
Range: Google provides default. You can see the price change for all the stocks: -99.86% to 5,094% (52 weeks). Interesting. I left it here so I can see the range (in other words, I am not filtering out any stocks using this criteria).
Chinese solar stocks are on the fire these days, mostly due to the Chinese goverment subsidy news (like this one). For me, this solar thing is ONS, not for long term investments at this time. The most worrisome thing for solar, is not the over-supply (competition), is not the volatility of raw material cost (as I understand, the supply polysilicon is way too much down the road), not even the cost of eletricity generated by solar compared to cost of other traditional energy (fossil, and nuclear).
Pfizer (NYSE: PFE) agreed to buy Wyeth (NYSE: WYE) on Jan 26 2009 (forbes). Quote Forbes:
According to the terms of the deal, each outstanding share of Wyeth will be converted into $33.00 in cash and 0.985 of a share of Pfizer stock, valued at$15.57 per share, based on Pfizer’s current price.
Last I checked: $33.00 + $13.60 * 0.985 = $ 46.40 vs. Wyeth current price $42.53.
Hmm, 9% return in how long (one source says the deal could close in Q4 2009).
Potential risk:
0) Pfizer stock drops, because WYE stock is now tied to PFE stock (0.985 correlation);
1) The close could not close by Q4 due to financing or anti-trust issue;
2) Another bidder emerges (whch is a good thing);
Reference: arbitrage explained in Wiki.