My Wealth Journey

With the number of bank stocks at historic lows, a lot of friends are wondering if it’s a good time to invest in the bank stocks such as Bank of America or even Washington Mutual. Well, I personally don’t claim to be an expert at timing the market and would not dare to put any money into any banking stocks at this point. I thought very hard at investing in bank stocks, especially some of the higher dividend paying ones about 3 months ago. I actually bought 10% of the money I set aside to invest in financial stocks into BAC at about 40.

Fast forward now and the stock is about $20. Can it get any lower? Who knows. I will not make the foolish mistake of trying to time the bottom for the banking stocks until I see the stock start seeing some strong upward movement.

Imagine if you thought WAMU or WB was cheap 2 months ago? Look at their stocks now. Can it go lower? Sure, not much as change for the better since 2 months ago. Be careful investing in banking stocks! If you really must invest in these stocks, dip your feet a little and buy 10% first. Wait till the stock drops another 20% and buy another 10%. If the stock goes up, invest another 10% of the amount you want to put into the banking stocks. Of course, if you are only investing a few thousand, using 10% would not be cost efficient.

Consider buying 20-25% at a time. For example, if you had $5,000 to invest, 20% would be $1,000. You don’t want to just jump in all the way.

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I invested in a few single family properties in the state of Texas and Utah in 2006. When I got into the properties, I was not one of those investors expecting to make a 50% gain on my properties in less than a year. With my Texas properties, I was hoping for a steady 3-5% gain with either cashflow positive or close to cashflow positive on the properties factoring in depreciation tax savings. So far, they have performed just as expected. I had one home that was vacant for a few months which no landlord enjoys but it’s part of owning rental properties.

My Utah properties are a bit more negative monthly but the amount is not something I can’t live with. I originally had hope to hold on to the properties for about 2-3 years and then sell them. However, with the current state of the housing market nationwide, this is looking more and more unlikely if I’m looking to make anything. I may be able to break even and that’s it if I sell the home in a year. The market in Utah hasn’t gone bust yet like in Las Vegas or in Phoenix but has slowed down quite a bit. Most of Texas is still relatively flat in gains, although central Austin, closest to downtown is still experiencing low DOM stats.

Looking back, would I do the same? I would still have invested in the Texas properties (Austin and Fort Worth) since the numbers worked out, but would have passed on the Utah properties. I was about a year too late with Utah.

The problem now, is I’m looking to buy a home for my own personal residence within a year or two and realize it won’t be too easy to unload a home to free up some cash as it would be if I had simply invested in a CD or in the stock market.

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News just broke that JPMorgan is picking up Bear Stearns for $2 a share, a huge discount from the $50 a share just last Thursday. You don’t have to be a rocket scientist to see that those numbers are HUGE. Is Bear Stearns the only firm that made the poor choices in regards to the subprime loans? Don’t be surprise if any of the other big Wallstreet Firms come out and announce that they are in worst trouble than previously announced.

So the million dollar question for you average investors, is it time to get out of the market until everything settles down? The market has been down 15% since the all time high reached in October of 2007. Lots of investors have been betting the downward trend will continue.

I don’t think now is the time to be dumping in money into the market all at once thinking we have a bottom. However, if there are good companies out there trading at a huge discount for no reason, it may be wise to start putting in incremental amounts of money into the stock to lower your cost basis. A popular strategy is to buy more when a stock drops 10%. Just be careful you are not trying to catch a falling knife.

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The dollar is getting weaker and weaker by the day. Gold has crossed $1,000/ounce while oil has climbed to over $110/barrel with no end in sight! Meanwhile, the Fed almost has no choice but to continue to lower interest rates in an attempt to save the credit markets with the goal of hopefully making a speedier recovery for the housing market gone bust.

So how does an average person profit from all this? Well, if you believe Gold and Oil will continue to rise, the easiest way is to invest in the United States Oil Fun, ticker USO, and the streetTRACKS Gold Shares, ticker GLD. In laymans terms, both of these mirror the price of oil and gold. Some investors have invested in mining companies such as ABX, NEM, AEM and AUY with the expectation that as gold goes up, the mining companies’ profits will rise. This is generally the case, but the price of these stocks also depend on their management. Some would rather bet on the actual commodity than a company’s management team that I know nothing about.

I think oil will average about $95-$105 a barrell this year due to the weakness of the dollar. Gold should continue higher but is definitely due for a small pullback and should stay above $1,000 an ounce for at least a few months in the summer.

I personally have positions in these commodity stocks: AUY, SU, RIO, COP, XTO.

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With talks of the Feds probably going to lower the discount rate once again to help prevent the economy from going into recession, I’ve been trying to see how I can hedge against the dollar getting weaker.

Investing in gold and commodities is my current strategy. I’ve been wanting to start investing in foreign currency, specifically the Australian Dollar. I was doing some research and found that one way some people have been playing the currency market is through forex or by opening bank accounts through banks online such as Everbank.

However, the easiest way I’ve come across is to simply invest in Rydex’s ETF funds. The ETF funds seem to match the current currency exchange rates pretty closely. For example, as of right no, the Australian Dollar Trust (Symbol: FXA) is trading about $90.5, which is just about the exhange rate between the American dollar and the Australian dollar. Check out Rydex’s site for their other available ETFs to start hedging against a weak American dollar.

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The market took a huge plunge today. It happened steadily as the day went on. There were some small attempts at a rally but after the Dow started to gain 10 or 15 points, it went down another 20 points.

Why did it drop? I think it was a lot of people taking profits off the table along with bad economic news from banks with renewed worries about another credit crunch. What was surprising was that Google (GOOG) reported great profits and still barely gained 1% on the day. I did take the opportunity to buy a Google $640 Nov call.  BIDU and AAPL report next week, so it’ll be interesting to see if good news from those companies can get the market back on track. I do have positions in both of those stocks.

Is the world economy going to slow because of the US? There has been some talk about how vital the US economy is to the world economy. It’s not the center of the world economy as it was a number of years ago but any slowdown would definitely hurt the overall world economy. China exports to the US would slow.

I’m no economist but I’m still bullish on the overall economy. Housing and financials may suffer but overall, our economy should be chugging ahead.  I’m just fortunate that I did not invest or buy a personal residence in California. I still have some holdings in Texas and Utah, which I bought for cash flow. Any appreciation are bonuses for those properties. I do realize the chances of selling those homes right now are slim with the credit crunch so I am stuck with the properties.

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Have you ever wonder how much money franchises like Cold Stone, Jamba Juice, McDonalds, or other non-food related franchises made? Well, the answer is when done properly, it can provide a very nice lifestyle. Yesterday, I ran into an old friend who got into the franchise business with a restaurant a few years ago and we started chatting a bit about her business.

I learned that while it is very hard work and long hours, especially with a restaurant, the payoff and ROI is very attractive. She has already made all her money back and it is only her second year. Franchises usually require a start-up fee, which in this case was about 40K, an annual franchise fee based off gross income, and they typically require you to purchase supplies from them. In my friend’s case, she did not have to purchase supplies from them because the franchise is not too large and did not have it’s own supply chain just yet.

To learn more about franchise opportunities in business, check out this site here.

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Wow is all I can say from the new home sales for April. New home sales jumped 16.2 percent last month. After reading a little further in the news article, all of the sales increased came from one region; the northeast which saw home sales jumped 43.1 percent. I know a lot of housing bulls (a.k.a realtors) will jump on this and say the housing market has bottomed already and start promoting the hell out of this number. Sales were down in every other part of the country and median new home prices dropped over 11 percent. Prices are definitely coming down on new homes.

I still plan on waiting this out before buying a home in California to live in. The prices haven’t dropped that much yet as there are still people trying to sell homes at 2005 prices.

Yahoo New Homes Sales News Article

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Yahoo stock jumped up to over $33 at the time of this posting over news that Microsoft may buy the company. Is it really a good idea for Microsoft? Yahoo’s stock jumped close to 20% already just over the news that it will be bought out. So the purchase price would probably be close to $40 or so a share. Additionally, Yahoo’s P/E earnings is already higher than Google, even though investors are making a big stink about Panama.

I don’t think its a good idea for Microsoft to buy the company outright, maybe setup some kind of partnership instead. The deal would be great for Yahoo investors.

I do wonder what kind of affect this would have on SEO. MSN’s search engine results are more spammy and are a lot easier to get into which does benefit me. It’d be nice to keep their separate algorithm and to keep their brands different.

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I just received the notice of appraisal value for my Austin property and am glad to see the taxes went down by a little.  I have a property in the Manor ISD that had a 2006 tax rate of 1.768% that looks like it has been cut to 1.535%. A savings of roughly $200-$250 a year which definitely helps cashflow a little. The other estimated tax rate are the same. The proposed appraisal value also went down by a thousand. I was expecting the value to go up while the tax rate go down a little, neglecting any tax decrease.

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