The Watch List

I’m still trying to find a way to post this is a readable manner that doesn’t require I manually enter 35 stocks worth of info every 3 hours. No luck as of yet, but I have some ideas. Hopefully later today I will have something together.
  -D

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Musings From the Weekend

I wanted to start today with a thanks and shout-out to the folks at Provident Metals. After a previous post about Copper as an investment metal, they replied back with a blog postman their own on why copper works the way it does. You can (and should) read that here:
http://www.blog.providentmetals.com/gold-and-silver-bullion-investing/why-are-premiums-for-copper-bullion-so-high.htm

That of course brings me to my next point, it is clear to me, and probably some of you, I am still in the learning process. I don’t think that is bad or should be read as an admission of idiocy, but it does mean that I can only do so much research in a day. With the copper scenario I am still going to stick to my guns that it is a bad investment, but now I know a little more about the why, which is very important.

Now on to my main topic which I failed to finish last night as my word editor kept not saving my documents. Basically, I had a thought after watching a number of videos on the state of the state of the U.S. currency debacle. My posed question is, Would a stop to QE (quantitative easing) even matter at the point? There are basically two modes of reasoning for this question which I’ll explore in more detail.
Mode 1: The amount of currency in circulation has gone from approximately 500 billion to 1.2 trillion since 2004 as you can see in the chart below.

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      This borderline hyper-inflation of the currency supply has already done a significant amount of damage to the value of the dollar. Currently there is an obscenly large amount of cash bills being printed every month (currently 85 Billion/month according to demonocracy.info) so a cut back in that number would be meaningless. But if we were to cease the printing altogether, wouldn’t the damage still be done? We still have way more cash in circulation than we should, inflation is still much higher than it out to be, etc. Put in other terms, the damage is done, so who cares? Stopping QE won’t remove inflation, or strengthen the dollar, it will simply keep it all at current levels as well as introduce some negative effects. which leads to mode 2.

Mode 2: If you’re already chest deep in water, what really is the difference in going neck deep? Or, do the potential consequences of stopping QE now outweigh the benefits? Since the dollar is already in the tubes and inflation is up, stopping QE now would only decrease market confidence, and possibly pop the bubble that is currently forming. Some may argue this is a band-aid situation and we need to just rip it off and begin the correction. I don’t think it’s that easy. We currently assume Bernake is either stupid or malicious (maybe even both) but I have to imagine there exists a long term strategy to  these problems.

Now before people start assuming I blindly trust my government and assume they can do no wrong, I feel it necessary to say that is not the case. What I do believe however is that greed is a very powerful motivator and is mostly unyielding once it gets going. My reason for assuming there is a plan is that the people in charge are greedy. Noone purposely makes their money worthless or damages their wealth without it being part of a larger plan. Perhaps they are trying to inflate away our national debt, or print a bunch of money to buy out a reserve of various world currencies at a fraction of their value, maybe there is some evil borderline illegal plan to steal a bunch of money from us. Whatever it is, thereis a plan, so maybe we ought to ride it out. In all fairness the only plan that sucks is that last one, but even then, that’s why you invest your money instead of leaving it in a bank account somewhere.

All in all, I’m I suppose, surprisingly not too worried about all this. Maybe it’s because I have money in things like Silver, and a bubble (or just QE) in general is good for that investment. It also doesn’t seem to be hurting my other stock investments either, and I’d really rather they put off a market crash till I have the extra money to invest in some seriously discounted stocks. Till next time remember: “If you do it, it’s a crime. When they do it, it’s a matter of national security.”
-D

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Quick Update

I was working on a post for tonight, but I’ve had my word processor delete the whole shebang on at least three separate occasions so far. I’ve opted to take it as a sign that I need to just go to bed. I’ll make sure to get it together tomorrow and have it up for you guys and gals in the afternoon most likely. If you’re curious I have some thoughts about the current state of QE, and figured I’d pose my questions to the world for some insight. Nonetheless, I’ll be back to business tomorrow.
     -D

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Is Copper a Viable Investment Metal?

One of the many hobbies I have is buying and selling antiques. I don’t make a whole a lot of money doing, it’s more about testing my ability to find a good deal or determine how well I can read people and markets. Which of course is why it’s a hobby and not a job. Recently when exploring a few antique shops, I kept seeing copper bullion in 1oz rounds and 1lb bars. The prices on them were outrageous. In most cases the 1lb bar would sell from $18-$20 a piece. Naturally I had to explore this.
Currently copper trades at a little over $3/lb, which makes that mark up all the more ludicrous. I figured if I wanted to invest in copper I should look online and see what is happening there as these local prices are surely mistaken. Lo and behold, they are, but sadly not by much. On average you pay almost two times the value of a copper bar, which makes little sense to me. If you don’t believe me (you should, but I won’t judge) here are a few screen captures from various sites including ebay.

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I must say the ebay image is the most surprising. Since it is an open market I expect the price on these to match spot plus ebay fees with maybe a 3-5% markup, making them around 4.00/lb at the highest. Nope, 8.50. Same as all the online retailers. Also oddly enough, if you are in the market for copper bullion, Provident Metals seems to have the most reasonable prices available online at 5.70/lb.
So what is it that makes copper so high? Is there a shortage? Is there some major conspiracy I missed out on about the price of copper blowing up? Not surprisingly the answer to both of those questions is no. Turns out there is more copper available to us than we would ever need (which explains the price), and while it serves as an industrial metal, its uses are limited which also keeps the price down.
At this point I am still at a loss for the outrageous hikes in prices for copper bullion which for me means this is not so much an investment as it is a money sink. When looking at the five year chart on it the highest it has reached is around 4.50/lb which means in the best case scenario you’re only paying double its worth. More likely than not you would lose 2/3 of your investment immediately after purchase with very little hope of getting it back. That’s basically worse than buying a new car. As far a I can see, this seems to be one of the worst investments someone could make. But here again, I’m still new to this, maybe I am missing something after all.
-D

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A Quick Update on Where I’ve Been

I know I haven’t posted in a day or so and I felt it is a good time to catch everyone up on where I’ve been the last few days. Since around the beginning of last week I have been going quite “hard in the paint” researching mutual funds. Not necessarily how I can invest in them or which ones are a good option (that may be a good post for a later time) but rather what I would need to create my own mutual fund. I must admit I’m having a hard time finding the information I want, but some of that may be me not asking the right questions. I’m confident that over the next few years, I will have everything in place to move forward with this, but for now we’re still in the research phase.
So that is what is going on in my neck of the woods. If you read this and know a thing or two about what I’m looking for please feel free to find me on Facebook or Google+ as I’d love to chat. Till next time.
-D

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A thought experiment on Diversity

For today I wanted to step outside my usual types of writing and have a discussion on a common investing tip that is often overlooked. Traditionally, it has been said that “diversity” is having your stocks split amongst varying sectors and it can prevent huge amounts of damage to your portfolio in the event one of them suffers a setback. I agree with this wholeheartedly as it seems exceptionally reasonable. Having all tech stocks would have lead to you being broke during the dot com bubble. Having all bank stocks in 2008 would have made you contemplate killing yourself I’m sure. So having a solid spread seems like a fine way to prevent that from happening.

     So why if this is such common knowledge (and it seems to be) why should I bother discussing it? Well, as you know I enjoy watching Mad Money as it has lots of lights and sounds and keeps my attention. A while back Jim Cramer discussed a new method of diversity which he claims is better than the sector splitting. While I’m not entirely sure if that’s true or not, I do think it is worth looking into. So what is his method? It’s to diversify by style of stock, such that no matter what kind of market we’re in, one of your picks is likely to be a winner. He then classifies his styles you need into:

1.       A Growth stock

2.       A foreign stock

3.       A high-yield dividend stock

4.       A speculative stock

5.       Gold

This all seems simple enough. So I thought to myself, why ought I to choose between whether or not one method is correct? I decided to just do both. And for bonus pseudo diversity, all my stocks are paying dividends so I get that extra level of market protection as well. Hot Damn! So combining the two it means I’m going to want the 5 stock types listed above, but also ensure that no two stocks are in the same sector or trade together. Seems easy enough right? So here’s what I’ve compiled (While I don’t own all of these yet, I will before too long I imagine).

1.       A Growth Stock – For this I chose Wal-mart as it runs its business regardless of economic booms/busts. Plus, Dividends!

2.       A Foreign Stock – On this one I am opting for Vodafone which is on my watch list. Being a telecom it doesn’t share a sector with Wal-mart and it also pays me cash. I  also still looking into Square Enix, although I won’t likely have any more information on that for a few days.

3.       A High-Yield Dividend Stock – For this one I am using my shares in Intel. Tech sector with a 4.2% yield seems good to me.

4.       A Speculative Stock – This for me was the hardest one as most spec stocks don’t pay a dividend so that really messes up my initial strategy. I do like Jet Blue as it’s an airline (different sector) who is up and coming with tons of projected growth. Plus if you check out their site and info (conference calls, etc.) this company and their planes just seem like a flyers dream come true. However the lack of dividend kills it for me. My backup option which sadly also doesn’t pay a dividend is SciClone Pharmaceuticals. They are working on some great new drugs to fight Cystic Fibrosis, as well as a multitude of cancer types.

5.       Gold – I am personally to poor to buy gold. So instead I just replaced this with Silver. I buy in bullion form since physical is better than every other option (it’s not even close) and while there is no dividend, well what can you expect?

So there is my hypothetical portfolio strategy (if I go the Cramer route, which I may try at some point) with my stocks consisting of a few great options and a pure gamble. If nothing else, this is an enjoyable thought experiment to get you as an investor to consider just how well diversified your portfolio is and what you could do to fix it if it isn’t. As far as I can tell, I seem to be on the right track with five stocks of which each will only hold a 20% total of my portfolio in five sectors and five different styles. So till next time, embrace diversity my friends! And not just in your portfolio!

                -D

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Are gaming companies a viable option?

In my quest to find great dividend paying stocks one of the groups of companies I have always overlooked has been the gaming industry. For whatever reason I never bother to look into any of their statistics and see if there was something there. I know I can’t be the only one so today I decided I’d go down that rabbit hole and see where it leads me.
I decided to start with a company I have seen be successful from the players side of things for as far back as I can remember. That company is Blizzard. Blizzard for those not in the know are makers of three of the most popular franchises in gaming history: Starcraft, Warcraft (including the MMO World of Warcraft), and Diablo. Each of these games has a dedicated fanbase willing to shell out cash at the mere mention of these names. Why? Blizzard is known amongst te gaming community for putting an abundance of effort and value into their games. You always get your money worth and probably a little extra.
What’s even better Blizzard had paired up with Activision not too long ago giving them an extra boost of gaming cred. Activision is known for being a more casual gaming company with famous titles such as Guitar Hero, and the new Call of Duty:Ghost. All of which sounds great, but what does that do for you the potential Investor? Let’s see the chart:

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This is a pretty good looking chart if you ask me. A bunch o f cash, no debt, pays a dividend, good growth, etc. At 17/share what a deal right? Well sort of. Activision is not likely to be the side of the company making the cash. A huge chunk of revenue comes from subscriptions to their MMO World of Warcraft, which charges players $15 a month to an average of 7.7million players worldwide.
The only foreseeable issue there is the new MMO dropped by Square Enix which is currently bogarting a pretty hefty number of players. For those who follow these things, this is not the first and definitely won’t be the last attempt to unseat the king of all multi-player games. Blizzard has fought through more established titles, newer upstarts and a dozen supposedly WoW killers. In all cases, Blizzard has survived and grown larger still. This is a company for all intents and purposes, not going anywhere anytime soon.

But what of the competition? Square Enix currently trades on the Japanese stock exchange for about 1500¥. The company which is best known for its series of games titled Final Fantasy, ha been going strong since the mid 90s. Unfortunately my usual methods and chart sites don’t give me any info on stocks that trade on the Tokyo exchange, so I’ll be sure to revist this once I have that analysis available. However with the release of a new and seemingly successful MMO which should bring in some steady revenue the $15 price tag may be low.

Well that is all for this one, as I need to hunt down some more information. Nonetheless, from what I can see Activision/Blizzard may not be a bad long term play in my attempt to “game” the market.
-D

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