Credit Card Debt problem "pile on" top of Housing Refinance Debt problem.....what next?

Why is it that my person BLOG (Journal) is fairly upbeat, and my personal finance BLOG can be so worried and negative.

Well, there are plenty of troubling signs in the economy....and this is yet another. Credit card debt is mounting as noted in this article.

Apparently as the home refinance crisis clamped down on home mortage refi's, and as house prices fall (making pulling money out impossible) people seem to go to the NEXT well (albeit a high interest source) their credit card! (do you suppose the next stop will be the corner loan-shark?)

This was sort of outlined in Warren Brussee's book about the Depression of 2007.....and then in his BLOG. But while the economy seems to be slowing and sputtering at times, the stock markets seem to stay high.....which makes me think a little about March 2001.....remember the High Tech NASDAQ bubble?

Oh well, there I am being negative again.

What to do, what to do......the ride up over the last year has actually been pretty good......I did go from 70% Stocks/ 30% bonds down to a 50/50 split.....so I did pull-back a little.....but should I pull even further into safer investments? I just don't know.....

Interesting post on the US Economy....

Ok, most of you know I have worries and opinions on the state of the US economy. I suppose I am looking forward more than a couple of years to my retirement and wondering how my self-saved nest-egg will survive it.

So I have been on a quest to try and educate myself on our economy, and how to benefit from whatever happens .

Before you get upset...I don't mean benefit at the expense of others. I'm talking simply about knowing when to Zig and Zag to get the best return for my own investments. Totally above board.....nothing criminal or taking advantage of ANYONE.

Well...the old rule about buying investment property is probably no longer true....and buy and hold might be a horrible thing if you pick the wrong stocks. (we all know that the stock market can go down as well as up these days)

So I found another web discussion of our economy that is interesting. I'm not sure how accurate it ism but it seems quite plausible. Check this one out and see what you think.

Simple Investment Ideas and Concepts for Friends

A friend of mine and I were talking about investing of retirement money this weekend, and they asked me for some advice.

They wondered if I could look at their investment portfolio and give them some an assessment of their mutual fund choices.

My first reaction was:

"Gee...I might have a few bucks in my retirement account, but I don't think I'm an expert."

Well, I still agree with not bring an expert, but I have to say that I might be selling myself short with regard to not knowing something about investing.....yes, my knowledge is simple, but I think it is always useful. (I didn't make it up, so don't let me make you think I created a special set of investment rules)

No, I thought about what I might suggest, and my first rule of thumb would be to diversified.

Simple enough.....

The my second rule of thumb.....set it and forget it. (sort of....at least try to do your homework and pick long term investments and only monkey with those investments once a year, or should the bottom fall out. Oh, if things crash, certainly then it is time to GET OUT ahead of the others while there is still a "bottom" to the market)

My friend told me they initially put their money into a socially responsible fund....and I noted that this actually might not be such a bad place....you just have to do a bit of homework to see what that particular set of funds is doing and if it invests in good growth areas, or things that are under stess. (and of course, past performance is no indication of future performance....but you have to look at something if you don't have a crystal ball.....at least try to look at and assess its more long term potential.)

So I suppose I will look at their portfolio and see if anything "pops out at me".

Will there be an Economic Tipping Point?

I read in Warren Brussees BLOG that he thinks is theory about a depression in 2007 is coming closer into view. He admits that he might be as much as a year off, but he is still seeing his prediction from his book unfolding.

His BLOG seems to imply a sort of economic "tipping point"....a point in time where one characteristic of the economy changes past a sort of inflection point whereby any further change in that parameter causes a much larger change (an avalanch of sorts) in another response.

He sees the credit crisis, and crashing cost of the housing market as the catalyst for a fast decline in consumer spending, which kills our GDP quite quickly (since it accounts for 70% of it) and sets off a series of chain reactions which further closes down credit....etc....etc.....we have a closed loop cycle that now feedsback on itself.

Is he right?

Who knows....all I know is that it seems to me that the death of an economy is probably much like that of a human, and I hope you don't get grossed out by this, but I witnessed someone very close to me pass away, and they did not go easily.

No, they obviously loved life, and wanted so much to keep it....and their struggle was very long and hard. They eventually were overcome and passed on, but thei very last breaths were not easy and I could sense their final struggle to stay with us.

I see the economy in the same way.....it isn't going to go easily. It is going to try every way it can to survive and grow healthy again. It is probabably not as dynamic or resourcefull as the human body, but it surely isn't any more willing to roll over and die either.

But I'm thinking that the death throws of an economy will be no less violent than that of a human holding on to their last breath.....for our economy is after all still driven by humans. There are enough of us who don't give up easy...so I expect any downturn to be perhaps fast.

Like the depression in 1929....or even some of the other market crashes and panics before and after.

Let's hope Warren is wrong....let's hope he is WAY OFF and in his assesment.

And if he is right....let's hope all of us have the common sense to know that money doesn't make the world go around, and that there is still so much more to live for. Many people didn't know that around 1929....I'd like to think we can learn from the past.

I think I have entered the Investment Twilight Zone.....

I was looking at the news flash of the past few days and instantly said to myself.....

"Eeek, our economy is slowing way down. Perhaps I should be worried."

What am I talking about you ask.....

• It started with this report that mortgage foreclosures were way up.
• Then there was this report that the federal government is stepping in to protect us from the increases of forclosure.
• Then there was this news that producer prices have dipped because of a poor outlook for sales and home builders are gloomy.
• Then...I see the Federal Reserve making a bigger then expected rate cut.....ouch, the economy seems to be on the slide to me. They are normally very slow, deliberate and conservative.....this worries me.

So at this point I'm thinking.....yikes, slowing economy, recession.....what do I do with my stock and bond investments?

• But what happens instead......first I see this report where Wall Street seems to love this news with the Dow going up a record amount....the highest single day increase in 5 years!
• But if housing loans are a problem.....we must be stressed for credit, right.....YET, this report shows that credit card stocks are on the rise!
• Maybe I have my mental model wrong....surely housing stocks can't be up, right? WRONG....check out this report as they too seem to have risen today.

How does all of this work? Is this the twilight zone?

What am I doing wrong here? Where can I go to learn how to read the market?

People say the market is the best judge of things.....am I missing something?

----- CONFUSED and WORRIED -----

I've made my Vonage Losses Back!

I had initially invested $3000 in Vonage because I thought the idea of VoiP was a great one, and I thought they had real name recognition and an advanced lead in the market.

Boy was I wrong....and the world began to crash in on my $3000 investment. I sold half of it about half way down and then by the time I sold the second half, my $3000 had turned into a nice small $2000.
(which was easier to fit into my pocket for sure....but that's hardly a GOOD thing when it comes to investments)

So I set along to make my money back.

I decided that I needed to invest in a higher risk item, and that a Chinese stock would be just the ticket.

Well, I chose CHU (Chinese Unicom) and FXI (a Chinese IShare of 25 stocks).

Well, I am happy to say that the value of my investment as of today is $3032.95....so I am back in the money again! in fact, on about July 23rd, my investments here were worth $3436.....so I actually missed a nice high about a month ago. (But then I am more of a buy and hold investor with small reassessments every 6 months or so)

So I am sitting here reassessing once again....it is time. Should I sell? (or do I actually have much bigger fish to fry in my ever larger retirement account.....yes, I think I do. I will "let it ride" for now!)

It still feels good to make money.....

Market Maps from SmartMoney.COM

Check out this cool and very visual representation of the various stocks in he market. It is sometimes a lot easier to understand the various attributes of a companies finances when you see them in a graphical format.

From the website:

The market at a glance The map lets you watch more than 500 stocks at once, with data updated every 15 minutes. Each colored rectangle in the map represents an individual company. The rectangle's size reflects the company's market cap and the color shows price performance. (Green means the stock price is up; red means it's down. Dark colors are neutral). Move the mouse over a company rectangle and a little panel will pop up with more information.

Check out this page for the market shown this way, and then there is this page that shows the ETF market in a similar manner.

Also, check out this cool website that is a cool way to search for stocks by selecting various parameters to separate what you consider the wheat from the chaff. It looks like a really great tool.

The only problem with these tools is that for analytical people like me, they are addictive!

I've adjusted from 80/20% Stocks to bonds/cash to a 50/50 mix!

I was thinking about all the recent data coming out and worrying about the softening economy. I have been very happy with my portfolio's performance for the past year, and have only made minor adjustments perhaps once in the last 16 months.

But I was just feeling too uncomfortable with the trends these days. You name it, it seems all the numbers are coming out negative.

Also I felt that the ever weakening dollar is a sign that the signs I am looking at are being seen by investors across the world....why the stock market constinues t go up, I am not sure....but I decided that my 80/20 stock to bond mix was just way too aggressive for such a conservative risk-averse investor as me.

I called my financial advisor and talked to him about changing the mix. Given my risk tolorance, he liked the way I was thinking and agreed.

He suggested a 60/40 mix, but I then suggested 50/50 and without hesitation he agreed. He noted that we had made a great gain over the year and it was wise to take some off the table at this point.

Quite honestly, I am a bit worried at 50%, but much less so than 80%. I am going to look at some other alternatives that might be a bit more stable, but for now I am happy.

More to come as the "soft-patch" is approached.

How I investment, and an update on my own "Mad Money" account

I guess I sometimes wonder how to let people into my head as far as my investment ideas. It is a tough one, and a balance between a full and open discussion of the whole investment portfolio, or something less.

Well, I'm not exactly ready for the full disclosure....mainly because it is not just my money, but my wife and family and because I'm not sure exactly how that would benefit me.

So I took a small bit if stock I had with Vonage and moved it to a separate account where I will try to invest it in directions I think make sense.

Let me say right now though that this is NOT what I have EVER done. Even back in the boom-boom '90's, I was never a day trader. In fact, I very rarely owned individual stocks. I was always a stock and bond fund buyer....and except for some company stock and a few government bonds, I have never wanted to own individual securities.

Too risky...too volitile, too much work. (I'm the slow and steady saver type)

My investment philosophy is one of diversification because I am a very risk adverse person. In fact, when I finally went to an investment advisor, I wanted to make sure they were not only suggesting diversification across funds, but also fund familes! (I didn't go so far as to diversify across advisors....we just don't have enough money for that :-)

So this small portfolio is not at all a model for my own investments. It might be what Jim Cramer calls "Mad Money"....but even so, I am not chasing risky investments. I might be a bit more of a market timer, but I'm not in it for the quick buck. I want to try and do the homework to pick good solid companies in solid markets that investors will look favorable on. (and buy their stock)

Because my investment amount is small, I am probably going to limit this to 2 to 4 stocks at any one time. (the sales commission is just too pricey for any more)

So I went from 300 shares of Vonage a few months ago (sold at a loss...ouch! I hate losing money!!!) to the current mix of 99 shares of CHINA UNICOM LTD and 11 shares of ISHARES FTSE/XINHUA CHINA 25 INDEX FUND.

These together with $3.01 in cash are currently valued at $2,262.30. (I had initially bought the Vonage at about $3000...and sold it for about $2100) I'm clawing my way back from the Vonage loss....but I think these shares will give me a good steady climb for at least the next 3 months.

I think my last accounting here was when I bought the FXI, and I had $2202.27 in the account...so todays reporting is a net plus of anout $62.03 or about 3%. (yes, there were some down days in between, but I have confidence in these picks overall)

We shall see how things progress....probably not with a weekly report, but perhaps every month or so.

Wish me luck!

Putting the ca$h in my Scottrade account to work!

I think I mentioned that I had this small account in which I would trade. It started out as about $3000 about a year or so ago when I bought 100 shares of Vonage (VG) at $10 per share. (I thought it was a great buy at that price)

Well, the bad news about Vonage just kept coming out and it took a nose dive.....I dumped out of half of it a while back and noted here that I bought 99 shares of China Unicom (CHU) and about two weeks ago I dumped the other half of the VG at just over $7.00 per share and I was just holding it as cash.

Well, I was thinking of buying China Mobile (CHL) which has been doing pretty well...but I decided instead to buy a ETF called FTSE/Xinhua China 25 Index (FXI). It turns out this fund holds CHL as it's largest holding....about 9.78% of it's total holdings....so I still get good exposure to CHL after all.

I'm not sure how long it is going to take me to get back up to my initial investment in VG. Today my total Scottrade balance stands at $2,202.27. (including $2.49 in cash) I started with about $3000....so I'm still digging out!

Wish me luck.....

Update on my small individual stock portfolio

I have been playing with a pretend stock portfolio on CAPS.FOOL.COM, trying to see how well I do.

My rating over the last month looks like the graph on the left, and I have only been marginally succesful. I chose my stocks based on some knowlege and a bit of "feeling"....one way or the other. Since I didn't really have any skin in this game, I figured I could worry less about facts and go more with general feeling.

The investments I chose include FXI (a Hong Kong ETF fund) to go up, SKS (Saks Fifth Avenue) to go down, USB (US Bancorp) to go up, SSRI (Silver Commodities) to go up, CHU (China Unicom) to go up, VG (Vonage) to go down, CHL (China Mobile Limited) to go up, and SUNW (Sun Microsystems) to go down.

I am winning overall with only SKS, USB and SUNW not performing as planned. (I'm glad Sun is going up since I actually own Sun stock as an employee....I only bet against it for the game)

But all of this is great......what about the actual stock I own?

Well, I think I mentioned before that the majority of my investment money is NOT in individual stocks, but in a variety of funds and bonds. I do have a small cache of cash that I play with.....and at this point I have about 50% of it in CHU and the other half in cash. (I sold that VG stock a couple of weeks ago at just over $7.00 at a fair loss from $9.00)

The CHU has been a little rough going in the last two weeks, but it has never gone below what I own it for, and it is back on the rise again now. I'm looking for an opportunity to put that cash money into...any ideas?

As I noted before, I also own a number of shares of Sun Microsystems stock, being an employee. I don't plan on selling that any time soon because the company is doing well and the stock price seems to be on the mend.

But I have to put my mind to where I am going to place that cash!!!

Sold the other half of my VG....

I have a small Scottrade account with a bit of money in it that I thought I would try my hand at "trading" with.

I have never been a trader.....as I am more of a "saver" that invests with more of a buy and hold approach. I try to scope out long term investments, and quite heavily diversified. (so I skipped all the day trading of the '90s.....)

Anyways, a number of months ago I took the plunge buying 300 shares of Vonage at about $9.00 per share. I thought that was a GREAT buy because I use Vonage.....I think it is a GREAT product, and I thought the stock's fall from $14 was only a short term glitch.

Well, then the trouble started for Vonage.....from their poor handling of stockholders "revolt" after their IPO to their being taken to court for a patent violation....all of which they seemed totally unprepared for. They ended up on the stock "black list" pretty quickly.

Even while I say that, I still think they have a great product, and urge people to consider them for their phone service...but in terms of their stock, it seems to be a non-starter right now.

So I started out by selling half of it about 2 weeks ago, and then last Friday I sold the rest at $7.02 per share.

Two weeks ago I took the first half I sold and put the money into China Unicom LTD (CHU) (the small Mobile Phone company in China which started out going gangbusters but has now fallen back about to where I bought it) So this past Friday, I sold the second half of my VG and now my second chunk of money is sitting in cash waiting for the right investment.

How will I figure out that that will be...at this point I am not sure. More analysis is needed!

Interesting site with plenty of useful tools

Just a quick post to tell you about a site http://moneychimp.com that has quite a number of great calculator and tools on it to help people make their money and investment decisions.

For those of you who have an interest in Economics, they have a page that describes some of the economic indicators and when they are posted. This page also links you to the official government website that discusses that particular statistic.

Here is a page they put together to help people understand the value of a particular stock.

How about a page the describes Index Funds and some of the plusses and minuses in your using them.

The list of tools goes on and on.... (Roth IRA info, Capital Gains Calculators, Inflation Calculators, etc....)

Check it out.

Does the National Association of Home Builders Buyers Confidence index measure future Stock Market Pricing?

I just read this article in Yahoo Finance that references the graph here. This graph was created by Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. It is a comparison graph of the National Association of Home Builders' Housing Market index (a monthly measure of builder confidence) against the S & P 500 stock market index, with a one-year delay.

It is an amazing fit, at least since about 1994. (I wonder why the start of the line before '94 was not a good fit at all?) Anyways, as you can see, the start of 2006 shows a severe slide of confidence, and according to this article, the worst slide in housing ever.

According to Warren Brussey's (who wrote the book "The Second Great Depression") November Amazon BLOG entry:

"To keep selling homes, builders have reduced prices nearly 10% in the last year, the largest drop in 35 years. Existing home prices have dropped 2.5%, the largest drop in history; but they still are not selling."

The one year delay may make some sense, not only because (as the Yahoo Article notes):

"Housing downturns happen in a fairly slow-motion way, and I really think we're just at the beginning of the impact on the market and the economy."

Another interesting comment I came across in this Merriman Capital Podcast dated November 3rd was that there was a lot of money fleeing the housing market right now, and going into stocks. They wondered if this might might be what is currently driving the market up right now and if this rise might continue just a little longer until either the money is all in play, or housing gets better. (this might be the reason for the typical 1 year "delay")

In searching for others who might have beat me to this story, I found two people who already BLOGGED about this very thing. Larry Nusbaum's BLOG describes a 79% correlation between the two plots since 1994.....but even Larry references WCW's BLOG that shows that before 1994, there was very little correlation. (so who knows what kind of connection there really is.....or what other factors are also involved)

Just as a somwhat related aside, here is another page guy (Nouriel Roubini is a professor of economics at the Stern School of Business at NYU and chairman of Roubini Global Economics, an economic consultant group.) who believes the rise in prices since about 1997 have had no economic reason behind them....except perhaps a speculative run-up. He notes that this bubble is now popping.