Well, I'm hearing a rapidly growing choir of voices like Bob Prechter's concluding that we're not out of this thing just yet. I had a wake up call last night when I went to a medical clinic owned by Sutter Health. They were supposed to be building a large facility on the east side of San Carlos, California -- one they petitioned for, for many years. One they spent goodness knows how much money on for design, planning, lobbying, etc. The current status, according to the doctor who attended to me last night? On hold, due to the economic climate. The last time I checked, more people are getting older, fatter and sicker. On hold. Not good.
Personal Finance
August 11, 2009
March 02, 2009
January 16, 2009
It's Just a Paper Loss
I have come to realize this has to be one of the dumbest phrases...one of the biggest illusions that we who invest in stocks conjure up to make ourselves feel better. Tell me, when you've got a big gain on a stock and that gain is "unrealized," you feel pretty good, right? And you treat that gain like it's your money, right? I mean after all, most stocks are fairly liquid investments -- plenty of buyers and sellers.
And yet, when one is way down in the chips on a stock or basket of stocks, it's just a "paper loss." It's not real, unless you sell the stock. Interesting. Isn't it your money that's invested in the stock? And isn't the current price of the stock reflective of how much that investment is worth? Sure there are normal cycles, highs and lows, price swings due to the "beta" of an individual stock, etc. But I wonder if we lull ourselves into dangerously ignorant complacency with this term "paper loss."
Last Fall I sold a bunch of stocks -- among them Bank of America. Over a brief amount of time I had purchased 400 shares averaging about $40 and change per share. When I dumped the stock I "realized" a loss of just over $8150 -- or around 50% of my investment. But I think "realized" is a term for the IRS. They "realize" money when you take a gain, and you "realize" a deduction when you take a loss. The point of my story: in the last couple of days we've seen BofA sink further. Now it seems they paid too much for Merrill Lynch, they may have solvency issues, and so they need $20 billion more money on top of the $25 billion already received from the government. The stock price today slid to a multi-year low and BofA slashed its formerly stratospheric dividend to one cent per share.
Had I held onto BofA stock until today, my "unrealized" and/or "realized" loss would have been nearly $5,100 greater -- a loss of nearly $13,250 in total. In percentage terms the loss on my original investment would have been more than 82%.
"Paper loss?" I don't think so. OK, enough babbling. I've got to get myself over to Circuit City to figure out how to spend that $5,100.
December 15, 2008
Social Networking Can Make You Poor
That is, if you're either unsavvy or dare I say, greedy enough to not practice good old fashioned asset allocation. Yes, if you blindly follow the advice of the yapsters at the country club, you could get taken to the cleaners.
In case you haven't already been reading about this, the rapidly emerging Bernard Madoff story is truly stranger than fiction. So make yourself your first New Year's resolution: if it's not a good old fashioned general purpose and broad mutual fund like a total stock market or S&P 500 fund, then no more than 5% of your assets go into it.
I mean...I'm not losing sleep that he'll be living in a cardboard box anytime soon, but Mort Zuckerman got taken? Wow.
November 11, 2008
March 02, 2008
'Big Oil' is Evil!
Umm....not necessarily so, says Ben Stein. In a column in today's New York Times, Mr. Stein provides a lesson for our two Democratic presidential hopefuls -- that attacking the profitability of Big Oil ignores the fact that regular Americans like you and I benefit from their profits. We already own much of these companies through our holdings in index funds and actively traded mutual funds, which likely constitute the bulk of our 401K plan or defined benefit (i.e., pension) fund assets. Case in point: according to Morningstar, the #1 holding of the Vanguard Total Stock Market Index (Ticker: VTSMX) is ExxonMobil. A good read.
January 22, 2008
B-B-B-Booyah! I've Lost a B--B-Buttload o' Dough!
Time to pull out the "Mad Money" Soundboard and amuse myself.
October 24, 2007
Who Is This Guy?
Come on...you don't recognize him?! His name is Jonathan Clements, and he's a personal finance columnist at the Wall Street Journal. Mr. Clements writes for that paper every Wednesday and also contributes an article for the Sunday edition that runs in many newspapers across the country, plus you can snag it if you subscribe to www.wsj.com. He is somewhat boring (although I like his dry sense of humor), and his advice is beyond middle-of-the-road conservative. Also, if you read his columns every week--as I do--and have read his books--the most recent of which I did, you'll notice he is fairly repetitive. Keep investment costs down, most people can't beat the market so don't bother and buy index funds, consistent adherence to an asset allocation strategy is more important than anything else. Yadda yadda yadda. And this is why I love this guy. He sticks to his guns year in and year out, and if you followed his advice, you'd probably be meeting the market...that's right, meeting the market. And what the hell is wrong with that when most investors, and most portfolio managers DON'T consistently beat or even meet the market over the long haul. I can't imagine the folks trying to sell WSJ advertising into the financial services sector care for Mr. Clements very much, but I sure like him. I've told my family to read his articles, my friends to read his articles, and now I'm telling you, the three readers of my blog, to read Jonathan Clements' articles. Buy his books. Send him a Starbucks card. Send John Bogle of Vanguard Investments a Starbucks card. OK...let's not get carried away. Whew!
