First Time Investor

Wow. What a Gesture. Now I have a Gesture for You.

2011-12-07T17:41:00.000-05:00

Effective immediately, all employees from 2^nd level management down will be taking a 10% pay cut. This amounts to about $5000 a year per employee. To show that there is indeed sympathy from Upper Management, I myself hereby volunteer to take a $5000 pay cut as well.

Where Will it End??

2010-12-04T10:36:00.001-05:00

The title of this post is facetious, of course, as the market never "ends," but the point is, precious metals prices have been going through the roof lately. I recently bought a bunch of silver at $19 an ounce. Several weeks later, I see that silver was trading at $29 an oz. That's like, what, a 50% yield? I'm all about that, I'll have you know.

Anyway, to see more of my posts about my experiences with precious metals, including my trading with a bullion trader with reasonable fees, Kitco.com, click the links below.

Happy investing!

Schwartz "R" Us

2009-05-29T07:53:00.001-04:00

Toys giant FAO Schwartz has just been purchased by Toys "R" Us.

Depressed Much?

2009-04-17T07:15:00.007-04:00

So, you think the economy is bad today? Think this generation can "feel the pain" of their grandparents/great grandparents suffering during The Great Depression?

Think again.

According to a recent article in The News & Observer, Not Your Grandfather's Depression,

"it is at this point dangerous to link [today with the Great Depression] too quickly or too closely, for today's economic problems, however serious, pale in comparison to those the U.S. experienced in the 1930s."

Take a look at this chart gleaned from the data in that article:

Measure	Now	Then
Duration	17 months to date	12 years
Gross Domestic Product	Slight fall	30% drop between 1929 and 1933
Unemployment	8.5%	25%
Living Beneath Poverty Line	>13%	51%
Bank Failures	50	5,755
Mortgages in default or one month behind	10%	43%-54%

Still think we've got it rough?

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POWERBALL LUMP SUM!

2009-04-17T06:40:00.002-04:00

Wow! With the economy as it is today, I think I'll spend nearly all my extra money buying Powerball tickets! Now, if I win, should I take the Lump Sum, or Annual Payments??

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Sick II

2009-03-28T08:34:00.002-04:00

Wow. When I wrote this post in August of 2007, who would have thought that we'd be where we are today? Five percent. Ahhh, those were the days.
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A Pool of Precious Metals

2009-03-09T07:19:00.002-04:00

Precious metal prices have been taking off lately. To see my experiences with metals, including info about KITCO's Pool Accounts, read my brief series beginning here.
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Five Hundred Thousand Dollars

2009-02-05T06:48:00.002-05:00

$500,000. That's the cap President Obama has proposed for exec salary for companies assisted by the bailout. Five Hundred Thousand Dollars. I wish they capped MY salary at that amount - then I'd have something to shoot for.

For that matter, I'd be happy if someone capped my salary at $50,000.

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Looks like a Cyclone hit it

2009-01-31T06:13:00.002-05:00

A Riddle for you:

Question: What's the difference between a tornado and the U.S. Economy?

Answer: One leaves a path of destruction as it brings down homes and takes away cars and other prized possessions and personal belongings and the other is a wind storm.
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WMT

2008-12-02T19:34:00.002-05:00

Sure glad I have stock in Walmart.

Where Are They Now?

2008-11-16T16:17:00.009-05:00

As of 2008, Chrysler has been in business 83 years. General Motors? 100 years. And The Ford Motor Company, 105 years.

288 combined years of producing American iron for American highways.

After the controversial Bank Bailout of 2008, today there is talk about bailing out The Big Three, America's current big name automobile manufacturers, Ford, GM, and Chrysler. Two hundred eighty-eight years of service to the public is a lot to throw away if we don't, isn't it?

But before you break out the crying towel, take a look at some statistics.

A Little Automaking History

What do the following companies have in common - Rambler (1958-1969), LaSalle (1927-1940) and Rolls Royce (1921-1935)? They are American automobile manufacturers having been in business 10-15 years that are now defunct.

American Motors (aka AMC) (1966-1987) and Duesenberg (1913-1937) - gone after 20-25 years in business.

Stanley Steamer (1897-1927), DeSoto (1928-1961), Pierce-Arrow (1900-1938), Nash (1917-1957), Willys-Overland (1912-1953) and Hudson (1909-1957) - no sign of them after 30-50 years of automobile manufacture.

Packard (1899-1958), Studebaker (1902-1966), Checker (1922-1982) and International Harvester (1907-1975) never to make autos for the US again, after 50-70 years of doing so.

And finally, REO (1905-1975) and White (1902-1981) have put in 70-80 years of auto making - defunct.

Where Are They Today?

Are you familiar with any of those auto companies? Well, they're all gone. In fact, according to wikipedia article "List of defunct United States automobile manufacturers," over 1800 US auto makers are no longer in business, with more than a thousand having seven years or less in the auto industry.

The Big Three are not the first US automakers to face financial failure, and they won't be the last.

Maybe some of the 1800 automakers might still be here if the Gov't had "bailed them out?"
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Tongue Twister

2008-10-26T18:48:00.002-04:00

Try to say this three times really fast:

Shell-shocked Shareholders Shouldn't Shoulder a Shellacking.

Go ahead - I dare you to try.
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Day Trade Much?

2008-10-16T22:49:00.002-04:00

According to this article:

The gain of 401 points (Thursday) marked the 21st trading session out of the past 24 in which the Dow has finished with a triple-digit gain or loss, an unprecedented run of volatility.

I'll bet the day traders are having a field day with this.
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Wooden Arrows for Children?

2008-10-05T08:07:00.006-04:00

Wooden Arrows for Children? Last time I checked, children were not supposed to play with weapons, but if it will get our economy stable again ...

Or maybe they're talking about those bright, colorful wooden alphabet, number, and symbols characters they use to teach kindergartners - in this case, just the arrow symbol. Just the arrow?

So I searched the Internet for the actual text of a recent version of the Emergency Economic Stabilization Act of 2008. (By the way, beware, this PDF file is 451 pages, so if you have dial-up you may not want to click on the link.)

Here's the part about the arrows:

SEC. 503. EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS DESIGNED FOR USE BY CHILDREN.

(a) IN GENERAL.—Paragraph (2) of section 4161(b) is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting after subparagraph (A) the following new subparagraph: ‘‘(B) EXEMPTION FOR CERTAIN WOODEN ARROW SHAFTS.—Subparagraph (A) shall not apply to any shaft consisting of all natural wood with no laminations or artificial means of enhancing the spine of such shaft (whether sold separately or incorporated as part of a finished or unfinished product) of a type used in the manufacture of any arrow which after its assembly— ‘‘(i) measures 5⁄16 of an inch or less in diameter, and‘‘(ii) is not suitable for use with a bow described in paragraph (1)(A).’’

I'm sorry I asked.
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You Got Yourself Into This Mess, ...

2008-09-30T07:20:00.006-04:00

"Daddy?" the young lady cried, "I'm in trouble!"

"What's wrong, sweetie?" the father asked of his college aged child.

"I'm maxed out on my credit cards and my rent is due! Can I borrow $500 from you and Mom?"

"Too bad, honey," he began, "You got yourself into this mess, so you get yourself out of it. Your mother and I have our own debt problems. Further, because of your poor decisions we feel the need to punish you, so we're taking away your car."

"But that's not fair!!" she cried.

So. What do you think of old Dad? Before you answer, consider some statements from a few letters to the editor of our local newspaper about the bailout, paraphrased here:

"We're already $10T in debt. It is like trying to dig yourself out of a hole to go further into debt to solve this problem." "Instead, how about punishing the creditors for their poor decisions."

Apples and Oranges?
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KITCO & My Experiences with Gold and other Precious Metals

2008-09-13T07:05:00.017-04:00

It is said that metals are a hedge against inflation, so who knows how high the values of gold and other precious metals may become?

Here are my experiences with the volatile market of gold and other precious metals.

Read my post Go for the Gold to see how I got interested in the metals market about twenty years ago.
Read Selling Precious Metals to learn of my initial experiences in capitalizing on the increasing values of gold, platinum and silver by selling to a great precious metals supplier, KITCO.
Read Kitco's Pool Account to learn how I benefited from one of their valuable services: pooling resources to make buying and selling more efficient, which in turn keeps costs down and maximizes profits.

All in all, there are profits to be made in the metals market. If you are not investing in precious metals, what are you waiting for?

Note: I am neither a Kitco salesperson nor are otherwise affiliated with Kitco.com. I do, however, want to share my experiences with Kitco Minerals and Metals Inc, as I feel first time investors deserve first hand knowledge of good value in the metals market.

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Still No Regrets

2008-08-04T16:57:00.004-04:00

Some of you may have seen my post about regrets upon selling stock. In it, I ask if anyone has ever sold stock only to later regret it.

Anyway, I sold some stock last month in order to buy one of these.

I don't regret it. Probably never will.
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Estate Tax to be Repealed in 2011

2008-06-17T06:13:00.003-04:00

In 2011, the Estate Tax is to be repealed.

I can hear it now:

"Hey Sis! What do you say we buy Grandpa skydiving tickets for Christmas!"
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Credit scores gone wild

2008-06-15T09:14:00.002-04:00

Read this post and this post regarding credit scores gone wild.
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Stimulated much?

2008-05-12T18:40:00.003-04:00

May I be the three thousandth person to ask how you're planning on spending your IRS "stimulus check?"

S'funny. Where I come from, a stimulus check is when my wife looks down my skivvies to see if I am "ready."

But seriously, we just used ours to draw down our credit card debt. Now we're down to about $500.

What's in YOUR wallet?
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Disappearing From the Face

2008-02-26T16:29:00.001-05:00

For those who may be interested, here's where I've been the past few months.
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Windfall

2007-09-13T21:22:00.001-04:00

Here's a dividend check I got this week. Any thoughts on how I should spend it? Any guesses on how much it cost the company to send it to me? I specially enjoyed the word ONLY in the amount.

CEO Bucks the Trend

2007-09-04T06:59:00.000-04:00

A Point of View in our local paper talks about executive pay and how, perhaps in some cases, high profile CEOs may actually be worth the big bucks they get.

In executive pay, you get what you pay for

Peter A. Coclanis - CHAPEL HILL, NC

"[N]umerous empirical studies have shown that most executives have earned big bucks in recent decades because the share prices of their companies have risen dramatically. In the vast majority of cases, prices rose not through corporate abuses, cooking of the books or financial chicanery, but at least in part because the possibility of high compensation motivated very talented people at the margin to assume top-management positions at a risky time, and because these people, generally speaking, managed in such a way as to add tremendous value to shareholders, much more value than top managers themselves received in compensation.

"In other words, top execs did good for themselves by doing well for those for whom they worked."

Basically what the article is saying is that sometimes the reason executive compensation seems excessive is because their "pay" is based largely on company stock. The greater the value of the stock, (presumably thanks to their hard work,) the greater the value of their take home pay.

It's the trend to complain about how high some CEO's salaries appear. But let's take a hard look at whether they worked to earn it by helping all shareholders of that company in the process.
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Sick

2007-08-20T16:06:00.000-04:00

Anyone else sick of the recent stock market slide? Whooo-weee. One of my 401(k) lost five percent over just one month and my IRA's at an all time low. I can hardly believe this is all just because of sub-prime lending going sour.

The Customer is NOT Always Right

2007-07-11T06:56:00.000-04:00

In a recent article,

Sprint customers get the brush off
McClatchy Newspapers
Sprint Nextel told about 1,000 disgruntled cell-phone customers that they would be better off with someone else. ... Sprint executives decided to break up with a group of malcontents who called frequently with complaints. "While we have worked to resolve your issues and questions to the best of our ability, the number of inquiries you have made to us during this time has led us to determine that we are unable to meet your wireless needs," stated the letter Sprint recently sent to these soon-to-be former customers.

If you were a Sprint Nextel shareholder, how would you feel about how your company treats its customers? At first you may think that's pretty shoddy PR.

Some investors, on the other hand, may applaud Sprint Nextel for their good business sense. Sprint Nextel has the courage to recognize the fallacious statement The Customer Is Always Right and instead say, "We are expending too many resources trying to please a subset of users whose expectations may exceed the capabilities of our products."

We may see more companies becoming more selective in whom they will serve, and whom they will not.

Please see A Consumer Blacklist? for another example.

UPDATE:

Sprint has been asked to pay each of these customers $200 - "the amount the customers would have had to pay if they had prematurely ended their two-year contracts with the company."

What works for the goose ...
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Stock Sale Regrets

2007-07-04T22:19:00.000-04:00

Have you ever sold stock, and then later regretted it?

There can be any number of reasons why you might want to sell stock. I think one of the first times I sold was to put a down payment on a house. I sold to help pay for a cruise, sold to invest elsewhere, and most recently sold to help pay for our new kitchen.

In my mind, those are pretty good reasons to sell.

Of course, there are some not so good reasons to sell stock. Well, they might be good reasons, but you don't feel good afterwards because of the need that brought you to have to sell off assets.

Selling to pay off your daughter's credit card abuse. Selling to cover the wife's gambling debts. Selling to recover the costs of your son's wrecking his sports car. Selling to help pay for your lung transplant.

Every time you consider selling stock, there is, (or should be,) a bit of anxiety. After all, how do you KNOW that the stock is at or near a peak? Truth is, you don't. Do I NEED to sell? Is there another way I can come up with cash I feel I need?

Whether or not you sold high, sooner or later you will come to the realization that your portfolio is now that much smaller after the sale. You may have seller's regret after that. Kind of like postpartum depression. (Sorry Brooke Shields.) You may feel that there MUST have been a better or different way to cover expenses than to have had to sell off stock - specially when you see the values start to climb soon after.

The Story of Albert

This reminds me of the story of Albert. Albert was an investor of moderate means. He had a couple hundred grand in investments. Every month, Albert would track his net worth. He really enjoyed seeing how his money would grow over time. With few exceptions, every month would show a gain over the previous. He was in his glory.

One day, his wife suggested the two take a cruise to Alaska. She'd a friend who'd taken the cruise with her husband and they had a marvelous time.

At first, Albert sounded interested. When he asked his wife about how much such a cruise might cost, he nearly collapsed. This particular ten day cruise was twelve thousand dollars. Even though 12 grand only represented a small and containable portion of Albert's and his wife's total portfolio, the thought of seeing that Net Worth figure drop by so much troubled Albert. He just didn't want to accept such a dip in his nest egg for what seemed to him to be a luxury.

(Albert and his wife eventually got a divorce, and his wife went on the cruise with a girlfriend - on Albert.)

Regrets

What can we learn from the story of Albert? Any investment vehicle, be it stocks, a 401(k), an insurance policy, whatever, WILL eventually get spent - by somebody. There is not a dollar sitting around in any nest egg that won't, someday, be spent.

Hopefully you will get the chance to choose how most of your total portfolio will become consumed, and if you have luck on your side, it will get spent in a manner that will make you glad you had put it aside in the first place.

But don't be like Albert. Don't be afraid to sell off a few shares every once in a while to take in some of life's pleasures. Sure, your portfolio will take a hit, but consider why you even have a portfolio. Is it ONLY to provide for your offspring? Is it ONLY to cover exorbitant health care costs? Probably not.

Sell off shares in a reasonable manner, spend the cash wisely, and most important, have no regrets over spending a little cash on yourself every once in a while. And be glad you're in a position to do so.

One Night Stand?

2007-06-17T07:02:00.001-04:00

I just sold ten shares of my fave stock this morning to help pay for our new kitchen. While processing the on-line sale, two of the selections for payment included "check," and "overnight" (for a $20 extra fee.)

I have the luxury of waiting for the check, plus I didn't want to reduce my gain, so I selected "check." After the transaction, I saw this disclaimer:

If you have elected an overnight check, it will be mailed 3 business days from the trade date for delivery the following business day.

Can someone please tell me how mailing a check three days after a transaction qualifies as an overnight delivery??
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Max Stout?

2007-06-10T13:35:00.000-04:00

Can you guess what the following figures represent?

$589
$247
$263
$250
$378
$ 46
$296
$587
$259
$343
$440
$531

Give up? These are the last twelve monthly balances on our one and only credit card. This Platinum Plus card we've had since 1979 has a $24,000 credit limit on which we pay a rate of less than ten percent annual interest.

We also have a personal line of credit of $15,250 at 12.9% annual rate from a credit union. We haven't had a balance on that for years, but we've kept it open just in case.

In an age when American households' average credit card balances remain between seven and nine thousand, ours hasn't exceeded six hundred dollars in over a year.

With the exception of a few miscellaneous purchases, the majority of new charges each month are for gasoline. We try to pay off much of what we have charged each cycle - usually about three or four hundred a month.

How do we do it?

You might expect me to say that we were once like the typical American family - forehead deep in debt, or worse. Then perhaps you could take a pearl of wisdom to make changes in your own life to take a bite out of your own indebtedness.

I can't. That's not how it was for us. I don't remember in recent years feeling "saddled with debt," and have never maxed out that credit card. Far from it. As I'll explain below, we've rarely had the balance exceed $3000 and we get uncomfortable if the balance approaches a thousand dollars.

I guess I've just always felt that credit cards are little more than an expensive way of borrowing money in order to postpone the inevitable need to repay our debts.

Over the years, our credit rating has allowed our financial institutions to continually raise our limit and lower our interest rates - most likely in attempts to encourage us to charge more. But that hasn't changed our philosophy when it comes to borrowing - there's no free lunch.

Though the last year has found us with low balances, we do occasionally use the card for major purchases. We put a cruise on the card a few years ago. We bought a bedroom set on the card. We're planning a new kitchen, and we may put the appliances on the card. Many years ago, I even purchased a car on the charge card.

But for the cruise and the furniture, we made larger payments and paid them off in about six or eight months each. We plan the same for our new kitchen. The $7500 car was only on the card less than a month, during which time I refinanced at a lower rate through my credit union. So basically the large charges were more out of convenience.

I neglected to add that we can borrow from three IRAs at relatively good rates as well. And while we're on the subject, we have about a hundred grand in equity in our house against which we could borrow, I suppose, but I've been reluctant to borrow against our place of residence.

So basically we have a whole bunch of credit against which we can borrow, at arguably good interest rates, yet we choose not to.

Living within ones means

Before you write us off as miserly individuals who live in squalor in order to hoard our money, let me state that we are living quite comfortably. We have a house that's a little larger than we need in a great neighborhood. Our cars are somewhat modern and have been paid off for several years.

There's GOT to be a secret, you might think. Yet, there's not. I guess we've always been ones to try to live within our means. Maybe even beneath our means at times. I've always been somewhat of a saver. Put a little here and there for a rainy day. While some families look at raises and promotions as opportunities to add to their possessions, we would look at our life and ask, "do we need anything?" If things were stable, we might put much of our increases into savings or add to the contribution to our IRAs.

That said, we'd always make sure that we spend a couple grand on ourselves every year. After all, we need not pinch pennies. We regularly eat out, (and my Dr would probably like to see even less of that,) see shows, go on regular vacations, and so on.

A little history

If pressed to define some token life experience against which we might have drawn some of our financial tendencies, I might be inclined to say that it was watching our parents handle money. Few of ours had solid strategies when it came to handling money, and in some circumstances, the turnout was quite tragic.

So who says you can't teach your kids about money?
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A Golden Rule - Misdirected

2007-05-28T16:42:00.000-04:00

Do you know who Leon Leonwood Bean is? Perhaps you know him better as L. L. Bean, founder of the apparel and outdoor equipment retailer that bears his name.

A while back, I received a catalog in the mail from LL Bean. On the cover, in addition to photos of camping gear and clothing, was L.L.'s "Golden Rule" in large type.

"Sell good merchandise at a reasonable profit, treat your customers like human beings, and they will always come back for more." - Leon Leonwood Bean

Mr Bean penned that nearly a hundred years ago, and I'm sure he intended the Rule to inspire company employees for years to come, and certainly well beyond his own demise, to further his company's growth.

However, I am not as certain that he intended the Rule to be presented to the customer as a reason to shop at LL Bean.

Let's break down the Rule into phrases. "Sell good merchandise at a reasonable profit." Good merchandise speaks for itself, but is a company's profit margin a selling point? Do customers care if a store's profit is reasonable?

"Treat your customers like human beings." Wow. I don't know, maybe it's just me, but I think I'd kind of like to expect that anyway - not to have the founder have to explain it to me. This phrase is patronizing and doesn't make me want to shop there because they state, "Buy LL Bean gear and be treated like a Human Being!"

"and they will always come back for more." I think this phrase tops all for reasons why I should shop at LL Bean. "We make a profit, we patronize you, and yet you keep coming back for more."

LL Bean's Golden Rule has merit. Every employee should understand the history and importance of his Rule. But whichever advertising exec had the brainstorm to put the Golden Rule on customer-bound advertising material was misguided into thinking that such a move would boost sales given the employee-only nature of the message.

Apparently LL Bean's website agrees. They state his Golden Rule, but it's buried deep in the website under the retailer's background as a historical reference.
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Loyalty Card Madness

2007-05-09T20:53:00.000-04:00

So this woman is checking out her groceries and the checker says, "Do you have your loyalty card?"

"Sure!" the woman says cheerfully, and hands him her keys. He rifles through the myriad of teensy cards she has on her keychain till he finds the one for that store, scans the cards and hands the wad back to her.

"I wonder if you can tell me something..." she begins.

"I'll try my best," he offers.

"Can you see if I have updated my address to my new once since I have moved?"

"I cannot access that from here - you'd have to go to the Customer Service Counter and they will be able to help you. Just walk down this aisle and they're on your right."

"Thanks," she waved enthusiastically.

She goes to the counter where a pleasant woman greets her. "May I help you?"

"Yes. How can I tell if my address is current on my loyalty card? I've moved recently and can't remember if I've changed it yet."

"I'll be happy to check for you. May I see your card please?"

The woman hands over the pile of keys and cards and the counter person meanders through the stack until she locates the proper card. She scans the card and looks at the screen.

"We have you at 345 Elm St," she states.

"Oh, good!" the woman sighs, "I did change it. One less thing I need to worry about!"

"Glad to have been a help," says the lady, "and thanks for shopping with us today."

The woman leaves the store, hands the keys that she and her friends found in the parking lot to an accomplice, who then drives to the address the store gave the woman, where they proceed to rob the poor, hapless victim who was unfortunate enough to have lost her keys.

Keys that contained enough information to associate her address with her house key.

I suspect that most establishments have rules that prevent someone from walking into the store and asking what is the address that's connected to a loyalty card.

So perhaps in this case, these criminals needed to visit several of them, (the coffee shop, the ice cream shop, the library, the oil change shop, three gas stations, and three supermarkets,) before they found one who didn't know the rules.
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Interest-free Loans to the Gov't

2007-04-22T11:11:00.000-04:00

Have you gotten your tax refund check yet? How much did'ja get? Did you spend it wisely?

How many times have you heard this? "Don't let your tax refund check get too large, otherwise you're providing an interest-free loan to the government."

I understand the logic. Let's say your refund check is regularly about two grand. You paid into the system $2000 more than you owed over a twelve month period, so the IRS gives you your $2000 back at the end of the year, and nothing more - in other words, no interest. So in essence, you've "loaned" the Gov't $2000 - interest-free.

The regurgitators of that tired old cliché would have you believe that you are performing this huge disservice to yourself while benefiting our country's government by providing them with money to use as they see fit, without the compensation that other lenders enjoy, such as interest.

Never mind that when lenders loan the Gov't money, they charge a lot higher interest than the paltry less-than-one percent I get from my savings account. If I sent that two grand to my bank, I'd get what? About twenty bucks? Wheeee. Break out the GOOD beer.

The theory is great, but in practice, it can have the opposite effect. Let's put this scenario to two of my friends, Trudi Frugal and Joe Average.

Trudi and Joe both get about $2000 a year from their income tax. They both regularly use it to pay down their credit card debt. They also both hear, from multiple sources, the diatribe against "loaning the Gov't money without interest." Sounded like a reasonable argument.

So they both change their withholding so that they each get $150 a month in additional spending money, leaving a more reasonable $200 refund at the end of the year.

Trudi's Story

Trudi takes her $150 per month and invests it into her company's 401(k), which has an interesting effect of lowering her taxable income, thus further increasing her spending power. Let's see how that works out for her. At year's end, and after considering her employer's match of a portion of her contribution to her 401(k), her retirement portfolio has increased the value of what would have been her interest-free loan, to a respectable amount. She was pleased with her implementation of the advice she was given regarding her withholding allowance. When Trudi retires, she'll have more spending power thanks to her new strategy.

Joe's Story

Joe, on the other hand, sets a personal goal to apply the $150 a month extra he sees in his paycheck directly towards his credit card balance. Let's see how that works out for him. The first several months, he's right on target. He increased his regular $300 payment to $450, and he's happy seeing his debt balance decrease at a faster rate. But then, as the months go on, glitches in his plan appear. One month the car needed a new battery, so he only sent in $400. Another month, his wife's hospital bill left him with enough to only pay $350, and one month he couldn't pay any extra over the $300 he usually does. In the end, he found that he only used about half the $1800 he'd "saved," (over lending the Gov't interest-free,) to pay down his credit.

Worse, the next March when he and Trudi were used to getting that $2000 check to pay down credit, instead they both got about $200, while the interest on their card balance mounted.

They both couldn't justify changing their withholding allowances to pay more than they owed, so they sucked it up and made it work somehow. But they regretted taking the advice of friends who warned against loaning the Gov't money interest-free.

They also questioned what's so bad about helping our government, but that's another topic.

Summary

One could argue that there are as many ways to justify keeping tax refund checks high as there are taxpayers. Though Trudi will see a significant benefit when she retires, there are probably far more Joe Averages than there are Trudi Frugals. The facts are that in this country, savings rates are at an historic low, and credit card balances are at a significant high. For those whose only practical savings are that refund check, they may certainly feel that the interest they're paying on those cards is a lot higher than the interest they're "losing" by "loaning" the money to the government.

Work, if you must, to convince people that they should create better money management plans. By all means it is certainly a necessity. But please drop that "interest-free loan to the Gov't" spiel as part of your argument. It really has no practical or significant meaning.
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Someone paid off our mortgage

2007-04-09T17:52:00.000-04:00

We got two interesting pieces of mail this week from our credit union:

1) A waiver of all miscellaneous fees because our balance is greater than $100K.

That's right, our credit union states that because our cumulative balance is greater than a hundred thousand, they will now waive fees such as non-Credit Union ATM fees, stop-payment orders, overdraft service charges, etc. Cool! The only problem is that we don't have over $100,000 at the credit union. We don't even have over $20K there.

So I said to myself, OK, I am willing to let this ONE mistake slide, but the NEXT TIME this institution makes some kind of mistake on my account, Man! I am gonna be all over them!

2) A statement indicating the balance of our mortgage has been Paid In Full.

Yes, you read that right. We got our monthly statement that showed TWO payments instead the usual one. One with the regular monthly payment, and one showing a payment that equals the remaining balance on our mortgage, leaving a balance of zero dollars and zero cents. This represents a change of well over a hundred grand.

It occurred to me that I may have been a bit hasty in my resolve to jump on my credit union if they made more than that one mistake. I'm feeling more forgiving now, and I think I'll let this one slide, too.

But I swear, if they make THREE mistakes, they will definitely be hearing from me.

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UPDATE - 04/21/2007:

Here's what the original statement looked like. My first theory was that it was some kind of April Fool joke. Look at the Due Date!

Now look what we got in today's mail:

No offer of any kind of explanation - no apology, just a new statement. Oh, well, for a few weeks we had "documentation" that we paid off our mortgage. Such a relief! (Though only temporary - *sigh*)
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What would YOU do?

2007-03-22T17:00:00.000-04:00

OK, here's the circumstance. You tell a friend you're headed to Las Vegas for a week of fun and excitement. He pulls a dollar from his pocket and says, "Great! Will you put this into a slot machine for me and give me whatever winnings that slot pays for my dollar please?"

You say, Sure, why not, and put his dollar in a specific pocket of your wallet or purse.

You go to Vegas and have a great time. You see some shows, gamble a little, and eat way too much.

On your last day, you remember your promise. So you reach into the special pocket where you find the dollar your friend gave you and put it into a slot. You pull the handle, the wheels quickly turn, and one by one they stop as follows:

Cherry
Cherry
Cherry

Bing Bing Bing! Twenty thousand dollars. On your return, what would you do?

(For the purposes of this discussion, please disregard tax consequences.)

Would you ...

1. Hand your friend two dollars and say, "You doubled your money!"

2. Give him ten thousand and keep ten grand for yourself.

3. Give him some other amount and keep an amount for yourself. How much?

4. Tell him you won $20K with the dollar he gave you and declare how much he's getting. How much?

5. Tell him YOU won $20K while in Vegas and would like to share some with him, because he's been such a good friend. How much?

6. Give him the whole $20,000, but hint like crazy that he should give you some for the effort.

7. Give him the $20,000, and make no attempts to receive anything in return. (Bonus if you make a fuss over accepting such a gesture.)

8. Give him a heartfelt pat on the back, saying "better luck next time," and spend the entire wad on yourself. After all, who can prove who's dollar it was?

9. Another choice?
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Metrics, or the Art of Measuring Quality

2007-03-13T17:34:00.000-04:00

Those of you who are in big corporate business and may be interested in a story of how the boss's request to supply "metrics" (measurable, quantifiable data) to determine quality should visit the following link:

Metrics Anyone?

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Powerball Lump Sum, or Annual Payments?

2007-03-03T07:10:00.000-05:00

A woman in my home state of North Carolina won the Powerball recently. Seventy-four and a half million dollars. When given the choice between 29 annual payments totaling $74.5M or a lump sum, which, after taxes would yield about $24M, she said I want it now!!

I'm always amused by the sheer greediness of those who choose to discard two thirds of their winnings in order to have it all to spend right away.

Yeah, I know. Statistics have been run both ways and can prove whatever you want. Some say with proper investing one can turn the lump sum into more than the original total prize would have been. Somehow, though, I don't think that the folks who choose the lump sum are looking to become investors.

Nope. I think they're more interested in becoming consumers. BIG time consumers.

And who gets richer when these suddenly wealthy start spending their new found cash? The average Joe? Of course not. The true "winners" of the Powerball Lottery lump sum windfall are usually those that are already rich. Who owns the massive mansions the lump summers buy? Who owns the luxury European automobiles? Who's name appears on the pink slips of the yachts, the private jets, and the fine Italian sports cars these instant millionaires snap up? Why, the rich, of course.

Now, I'm certain that the newly "minted" could care less if the rich get richer and the poor get poorer after they cash that great big check. (Not the great big check in the publicity photo, the REAL check.) Most of them might say It's about time I got mine. The fact that they cannot hold onto what they "got" for very long just shows how such instant wealth can create short-sightedness.

The annuity

But let's look at the annuity for a bit. With the annuity, instead of getting 24 million in one shot, this "lucky" NC winner of the Powerball would have gotten about two million dollars a year after taxes. The winner quit her job as a corrections officer. Now according to the North Carolina Department of Correction, the salary range for a corrections officer is between about $26K and $40K. As she held this job for about fifteen years, even if she was at the top of her pay scale, a $2,000,000 per year lottery payout still exceeds her salary by a factor of fifty.

Imagine that. Take a look at your most recent paycheck. Now multiply that amount by fifty. Like what you see? Now imagine that this is what you'd get every month for the next twenty nine years. Oh, and by the way, you no longer have to do your current job to get this. You got it because you were lucky. Think of the things you could do with that money. Travel, go hunting, fishing, take up a sport you've always wanted to try. You could still get that mansion, the boat, the cars, the big screen TV, the swimming pool, and make payments just as you always have. You could even help friends and family members by tossing them ten or fifteen hundred per month for twenty-nine years. I'm sure they would appreciate that in the long run more than a $50,000 addition to their house. Really.

Or, you could even contribute to charity. Imagine what several hundred dollars a month to a few select charities would mean to them over that time period.

So picture that. Take the lump sum and the rich get richer. Take the annuity and the poor may find themselves a little better off at the end of the day.

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Jobs created, but for whom?

2007-02-21T07:27:00.000-05:00

Some critics defend luxurious spending by claiming that jobs are created to support such purchases. An example is the 1000 jobs needed to produce a $10 million yacht.

That claim may stand up for many extravagances, but not for all.

In some cases, fashion wear and diamonds come to mind, the money that was made can come on the backs of poor workers in foreign countries.

So the next time someone tries to justify their luxuries by telling you that many people make their living because of such purchases, look closely at that which they are buying. Try to determine if the ones who made the most money on the deal did much of the work.

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Modern Technology

2007-02-10T10:25:00.000-05:00

I was checking my credit card transactions on-line the other day and marveled at how fast they are posted after the fact. In the old days, you got your statement and it showed charges you made last month. The newest charge would still be about a week old, and any charges you made after that would be on the next month's statement.

Today, you can see the charges rack up on the same day you incurred them - maybe even within hours - I've never checked. This made me imagine the following scenario.

A man comes home from work and sees a note from his wife that she's gone shopping with a friend. He thinks, Oh, no - she always overspends when she shops with this particular friend. Later, while looking at the budget, he happens to sign onto his account at the bank and looks at his credit card transactions.

He sees a rather large charge from a department store, and sees that it was made that day. He sighs, and continues his work. Later on, he needs to go back to that account, and sees yet another somewhat expensive purchase, this time at a shoe store.

He thinks, Oh my god, my wife's going nuts with the credit card. He calls his wife's cell phone, but gets her voice mail, so she must be talking to someone. About a half hour later - another charge - this time at a hair salon. He calls again - instant voice mail - and leaves her a message.

Then he has a thought. It occurs to him he might be able to follow her path through the shopping mall by tracking her charge purchases. By plotting her activity, and considering her habits, he calculates that she should be right around the intimate apparel shop. So he calls there.

"How may I help you?"

"Yes, I'm looking for my wife. I'm wondering if you happened to have seen a woman - tall, blond, wearing a red leather jacket - probably talking on her cellphone?"

"Yes! She actually just left."

"Did she make a purchase?"

"She sure did! Two hundred and two dollars worth!"

"AAAAARGHHH!!"

This scenario may be far-fetched, but as modern-day technology improves, we may find more novel ways to use the real-time information that such technology can provide. In this case, a man tracking his wife's whereabouts by following her up-to-the-minute credit card purchases. How would YOU use new technology?

Kitco's Pool Account

2007-01-27T07:04:00.001-05:00

NOTE: This article about KITCO's Pool Account is part of a series of posts beginning here.

KITCO's Pool Account

As precious metals prices had been going north, and I found myself desiring to reap some gains, I found that my metals dealer of choice, Kitco.com, had a cool vehicle in place to allow me to sell off bullion conveniently.

Kitco's Pool Account first has you send in your coins, bars, or whatever. Then they apply the physical amount, in ounces, as a notational quantity into your account. The actual metal goes to a Fort Knox type of vault where it is "pooled" with other clients' holdings. Kitco deals with Gold, Silver, Platinum, Palladium, and Rhodium.

If you send them standard, "known" metal such as American Eagle Gold, they'll apply the weight stated on the coin, such as "One Ounce" (not to be confused with the monetary "value" on the coin, such as twenty dollars, which is meaningless in the bullion market.)

If you send them non-standard bullion, such as numismatic gold coins from another country, they will send it to one of their facilities to determine the coin's weight and apply that to your account.

You can add bullion at any time. The metal goes to the vault, and the weight gets added to your account.

When YOU determine that it's time to sell, you can just instruct Kitco how much you want to sell, either in ounces or a specific amount in currency, and they'll cut you a check. It is at that time that the prevailing metals prices comes into play. And I have found Kitco's transaction fees very reasonable.

Benefits

There are several advantages to using Kitco's Pool Account over the local dealer.

· You can sell off any amount when the market reaches a point you desire without worrying about delays. They already have your metal.

· You can sell off fractions of an ounce, say "two tenths of an ounce of platinum," rather than having to sell full coins or bars, and they will debit your account with the fractional amount. That way, you can preserve some of your holdings if the market climbs further. Try THAT with your local dealer and your 100 Oz Mega-bar.

· You can ask them to send you monetary amounts from each of your pools, for example, $150 from Gold and $200 from Silver, and Kitco will determine the physical quantities based on their payout charts and debit your account amounts for you.

· I have not yet tried this, but I imagine you may be able to transfer amounts between the various metals at reasonable transaction fees. For example, you may say, "please sell off $800 of my gold and buy an equivalent amount of silver." In that case, there is actually no physical movement of any metals - as I said, the actual bullion is sitting in a vault - it's just the notational amount in your account that changes.

· You can request Kitco to convert money in your account to actual metal and to send it to you. I have never done this, but I would assume you can instruct how you want the distribution, such as bars, or a specific bullion coin, etc.

The important thing to remember is that the prevailing prices only come into effect when you buy or sell. Kitco is keeping track of physical quantities. That said, whenever you check your account, they show you what your holdings are based on the current prices, but, like the stock market, that's only meaningful if you're thinking of buying or selling. It's a number "on paper."

You don't even have to own metals to get started with Kitco. Send them a check and tell them how much of each metal in which you want to invest and they will calculate how much to credit your account in physical quantities at their current rates. Then just follow the market and make transactions as you would with any other investment vehicle.

Is it a secure investment?

One concern one might have is whether funds are safe. It's easy to feel anxious about mailing a couple of grand in metals to an unknown entity. What if they get my coins and then go out of business? However, I read the information on their website and found their policies in line with what I'd expect from an on-line metals broker. I feel that my money is as safe as it would be using any conventional investment vehicle.

That said, I suppose I should add my own disclaimer. I am not a personal finance advisor and do not work for Kitco. The purpose of this entry is to illustrate how I used their services in hopes that it may benefit other readers. I have found Kitco's Pool Account one of the most valuable resources in my management of my precious metals portfolio.

See all my experiences with precious metals beginning here.

Losing funds on an expired account

2006-12-27T21:01:00.000-05:00

Yes, you read that right. I had a debit card on which I had lost ten dollars AFTER the card had expired.

Here's what happened. I went to one of our favorite sporting goods stores and bought myself a pair of athletic shoes. As my wife was also purchasing goods, she put the whole thing on her debit card.

The next day, I saw the shoes had gone on sale - $10 off. I figured the sporting goods store would most likely credit me the ten bucks since only one day had passed. What I never counted on was the hassle that was to come from the attempt.

I returned to the store and stated my goal at the customer service counter. The woman looked at the slip and asked for my debit card onto which she would apply the credit. Without thinking, I handed her my debit card, not knowing it is not simply a duplicate of my wife's card, (after all, it's the same bank,) but a separate entity in itself.

She swipes the card, presses a few buttons, and hands the card back, saying, "There you go!" I thanked her and left.

Over the next few days, I checked our balance online looking for the ten dollar credit. After about a week or so, I started to wonder, specially since there were several other transactions listed after the fact. I even investigated other accounts in case it somehow got applied to a different one.

Expired Card

I called the bank to see what they had to say. I wasn't expecting their response. They told me the card was deactivated as of several months ago. When I asked why, they stated it had been reported stolen. As I had the card in my hand at the time, that seemed somewhat implausible, and I told them so. Further research yielded some sort of "subcode" that indicated the card expired because of non-use. It seems like these should be two separate codes, but maybe that's just me.

A Credit Card?

One thing I found odd was that the receipt indicated the credit was applied to a charge card. Though we have an account on that listed charge card, it is not with the bank in question. Could my expired debit card actually have the same sixteen digits as somebody's credit card?? Stranger things have happened, I would imagine.

I returned to the store a THIRD time and once again confronted customer service. After a few minutes, she called a manager and acted as a liaison between me and her. Finally I asked if she could bring the manager down so we can get this settled since it was obvious we were getting nowhere.

The manager arrived after a few minutes and told me that this matter was out of the store's hands. She showed me their records which indicated a credit was applied to a credit card with the exact digits as the card I handed to the checkout, so there's nothing they can do.

Never mind the fact that a debit card is not a credit card, the card I handed the checkout was an EXPIRED card. A worthless piece of plastic that might as well have been a comb, for what the card was worth. How a famous, big name store can apply ten dollars to a comb is beyond me, but that's what they said "their records" told them, so they're off the hook.

When I suggested their records may be "wrong," they told me my only recourse may be with the bank. I told them I already spoke to the bank, and they pointed back to the store. I asked if they could speak to my bank directly, and oddly, they agreed.

Resolution - eventually

Turns out the store manager and the bank representative were former colleagues, which was quite a coincidence, but the bottom line was that they told me they both needed to do some research to figure out where the ten bucks went.

Several days later, I got a message from the bank telling me that my account would be credited $10 within seven to ten business days, and indeed that's what eventually happened.

A day or two later, curiosity got the better of me and I called the store manager and asked what they had figured out. She said something along the lines of, "You got your ten dollars, what makes the difference?"

I said, "I'm glad I finally got my money, but I would have assumed YOU would like to figure out what happened. Next time it may be for a thousand dollars and I'm betting that customer won't be as patient and understanding as I have been." She was unamused.

But apparently, neither this store nor my bank is ever expecting anyone to walk in and unknowingly present an expired debit card, which happens to have the same account number as someone's credit card somewhere in the world, and request a credit for a $1000 purchase originally made on their spouse's active debit card.

Afterthoughts

I was a little perturbed that nobody seemed to care about where the heck the money went. To me, it wasn't about the ten bucks, it was the principal. The other thing that got me was the attitude of the store manager. First because of her reluctance to believe the store could be at fault because "the store records show the credit was applied." Computers can't make mistakes? And second because she blew me off again when I called to find out what happened.

I think in the end, the bank just credited me the ten dollars, probably out of some miscellaneous "good faith" account, even though it is still my belief it should have come from the store. After all, their books would have come out ahead, wouldn't they?

Selling precious metals

2006-10-21T11:02:00.001-04:00

In a previous post, I talked about investing in precious metals, such as silver, gold, and platinum.

Unless you have been living under Chris Rock for the last year or so, you know that precious metals have gone through the roof lately. Gold and other metals have seen increases like no other investment and are at all time highs in recent months.

Several years ago, metals were starting to climb and I decided to sell off a bar of platinum. Having moved to another state since the silver "megabar" incident, I found the need to locate a dealer to whom I could sell this commodity. A search of the Yellow Pages yielded a dealer in the area who dealt with coins and bullion. As an independent proprietor, he worked by appointment only. I thought it somewhat formal to set up an appointment just to cash out a platinum ingot, but why not, so that's what I did.

Platinum was selling for about $625 an ounce, so I had the figure "six hundred or so" dancing in my head as I entered his "store," which was really just an office in a big old building in town. I knew there was a trading fee, as was true in my earlier transactions, but still I was somewhat disappointed when the quote he gave me was quite a bit less than $625. It was like $577 or so, or about a seven or eight percent fee for buying my ingot. Oh, well, I walked out with a check for over five and a half bucks more than I had walking in, so what the heck.

Anyway, I digress. In 2006, metals prices have come a long way since then, and it looked like it was time to sell again.

Only this time, I wanted to sell a little smarter. There was a website on which I had been following metals prices, Kitco, a precious metals retailer with offices in the United States and Canada. It occurred to me that I should look there to determine if and how one could sell bullion coins and ingots to them and at what costs.

Well, Kitco does indeed purchase bullion products, and at a great price over the little local independent dealers. I decided to try out their service by sending them a gold coin and a platinum bar. Though it took a little longer than I initially expected, (they later told me they were incredibly hit by the numbers of people wanting to sell off precious metals with the rising values,) eventually I got my check, and kept a sizable portion of what would have gone to trading fees to the local dealer.

That was for gold and platinum - metals that have great value for very small amounts of product. In other words, a single ounce of gold at over $600, or a single ounce of platinum for over $1200 was very "efficient" to ship and sell. Small shipping costs yielded a big check in return.

Silver, on the other hand, is not so efficient. With silver prices being about one fiftieth (1/50) the value of an equal amount of gold, or about a hundredth the value of platinum, you could see that the shipping costs could easily eat up some of the gain if sold by mail.

As circumstance would have it, I still had ninety ounces of silver left from the "change" of that megabar. I guessed it would be cost prohibitive to send such a large package to an online firm, (after all, 90 Oz weighs more than five and a half pounds!) so once again, I called my local "guy" to see what his silver buying prices were. Lo and behold, he was paying a price that made mailing the goods to Kitco seem downright reasonable. (He probably buys from the masses and sells to Kitco, I was beginning to believe.)

Long story short, I ended up sending the silver to Kitco, along with the remainder of my holdings in gold and platinum. Over time, I sold most of the precious metals I held and have walked away with a couple grand in proceeds.

Not a bad way to end the day, mind you.

*** Read from the Beginning *** Next Article ***

Selling it, Part II

2006-09-10T08:12:00.000-04:00

As promised, more details of my stock selling experience. Selling Time Warner at a high was good luck for me, as the stock dropped significantly a short time later. I only wish I had sold more of it at the time.

But I have sold stock at other times too. I still had holdings in Walmart and in Coca Cola. You might remember that I had been purchasing both companies using Automatic Investment and also Dividend Reinvestment. These strategies proved to be good for my bottom line when it came to sale time. Having benefited from "dollar cost averaging" and having dividends being reinvested instead of being frittered away if I was paid in cash came in handy when I had the desire to sell recently.

A year or so ago, Kathy and I planned a cruise of the Caribbean. Though we had sufficient money in other more fluid accounts, I decided to tap some of our stock funds to cover our cruise.

When I told a coworker of this, she questioned my judgment.

"Why would you want to do that?" she asked, with a noticeable amount of incredulity.

"Why not?" I returned.

"You will be paying tax on the gains at a much higher rate than if you were to do it later in life."

Though she has a valid point, I looked at it differently. We saved for several years by socking away money into the stock market. The idea of trickling money into investments is to eventually sell, and to use the money in some manner of consumption. Though some sell in order to reinvest in some other financial vehicles, ultimately, the money eventually gets spent somehow.

My line of thinking was that I would much rather absorb the pain of paying slightly higher taxes at my current rate on the gains and spend our hard earned money on a nice cruise than to pay lower taxes in my old age and spend it on health care premiums.

The point is, if you invest in the stock market, consider how and when you will eventually sell. Don't always feel you have to invest all your gains back into some other investment. Do that and you may die rich, (and leave a big nest egg to relatives who may or may not share your values,) never having enjoyed all that money while you had the health to do so.

Better to enjoy life's little pleasures, using funds you worked so hard to earn and to grow during your productive years, while you're still young enough to enjoy them.

*** Read from the Beginning *** Next Article ***

Selling It

2006-08-03T15:18:00.000-04:00

Up till now I have been primarily discussing buying stock. But few buy without considering the eventual goal to sell the stock. After all, "buy low, sell high," is the investor's slogan, is it not?

I have had mixed luck in keeping to that strategy over the years. As I stated in a previous post, I pretty much dumped Sears and Kmart, feeling lucky to have sold them for about what I paid for them. Though I tried to wait till their value reached a little more than their original costs, thus at least returning my investment costs, (broker commissions,) I lost any gain I would have realized by having the funds in some bank or credit union savings account instead. Live and learn.

However, in another post, I stated that I had great luck with Turner Broadcasting System. My first purchase of 25 shares of TBS cost about two hundred fifty bucks with commission. A later purchase of an additional 50 shares set me back $1500 after the price climbed significantly. Therefore, my entire interest in TBS was about $1750. Turner split a few times, but not before joining media conglomerate Time Warner, and at one point, my interest in the company was valued at over $13,000.

It was right around that time when Kathy and I were looking to buy a house. I sold about $2,000 worth of Time Warner, (remember, I had only ever paid $1750 for my stock certificates,) along with shares of other companies I held and used the proceeds towards our down payment.

Bottom drops out

Soon after we purchased our house, Time Warner was bought out by another media giant, AOL. Market watchers wet their lips in anticipation of what could happen after this gigantic team got together.

What happened was ... everything fell apart. It is beyond the scope of this blog to discuss what went wrong, but the result was that AOL Time Warner went from about $46 a share to about nine dollars and change in a very short time. I lost thousands in value for my remaining shares. Had I sold nearly all of my holdings when we went to buy our house, I would have gotten out just in time, and would have had quite a gain to boast.

As it is, I had little choice but to hold and pray. AOL had climbed to about twenty bucks a share, but never gained anything close to half its value before the merger. It's going up and down a bit now, but when it comes to buying and selling stock, you just never know.

In a future post, I'll talk about other experiences I had selling stock.

*** Read from the Beginning *** Next Article ***

Go for the gold

2006-07-01T12:51:00.000-04:00

About twenty years ago I had some investment funds burning a hole in my pocket, and I wanted to try something new. Having had a love of coin collecting since a lad in '67, I thought it would be interesting to invest in precious metals. At the local coin store in Allentown Pennsylvania's Lehigh Valley Mall, they had a 100 ounce silver bar on display. Wow. The thought of owning a 100 Oz ingot of pure silver struck my fancy, and it became my immediate goal to own that bar. Silver was selling for approximately six dollars an ounce at that time, so for me to walk away with that giant ingot, I would need to cough up $600 plus tax.

(I would later learn that you should never purchase precious metals in a retail environment in which you would pay sales tax, which greatly erodes at your profits. There are ways around this.)

At any rate, I purchased that bar, and proudly held it for several months, as silver prices climbed. When silver reached about $8.80 an ounce, I soon realized an interesting dilemma of owning such a large bar. You have to sell the whole thing to get your profit. What if silver continued to climb after the sale? It would have been much more efficient to have bought ten 10 ounce bars and sell them off incrementally as prices went up and down rather than to have bought one great big bar. But the thrill of owning such a large investment vehicle clouded my judgment. I had visions of being like that guy on the James Bond classic, Goldfinger, (only with a block of the much cheaper silver instead.) Lesson learned.

Another lesson I learned is that the smaller the size of the ingot, the higher the cost of trading. The trading fee (dealer charge for selling to you or buying from you,) for a 100 Oz bar is less than for a 10 Oz bar, which is less than for a one ounce bar. To put this in perspective, before I bought my 100 Oz mega-bar, I purchased a puny one ounce silver bar. By the time I paid the fee and taxes, silver would have needed to climb 25% before I could see a profit.

At any rate, I sold my silver bar for about $880, but the profit from that mega-bar was short lived. In attempts to capitalize on the volatility of the silver market, I foolishly repurchased ninety ounces of silver in ten ounce bars over the course of the next few weeks in the vain attempt to have more flexibility in selling options. At least I had the foresight to purchase from a bullion remarketer who doesn't charge sales tax. However, I still paid a higher premium for trading in smaller ingots.

It took two decades before silver reached the point where it became profitable to start selling off. (This was not so much from selling my mega-bar and insisting on "change," but rather because of where metals prices were going during that time.)

Gold

As a long time collector of US silver coins, it had been a goal of mine to someday own gold. For a time, it was illegal for the average US citizen to own gold bullion. That changed in 1975 when Congress allowed gold bullion to be sold to its citizens. So right around that time, I bought my first gold coin - a one ounce African Krugerrand. Shortly after, I bought a one ounce Canadian Maple Leaf, and then a US American Eagle, also an ounce in weight.

Over the next couple of years, I also acquired three platinum units in the form of one ounce ingots.

In a future post, I'll let you know how these investments worked for me.

*** Read from the Beginning *** Next Article ***

Dividend Reinvestment

2006-05-03T18:10:00.000-04:00

Last time I spoke of Auto-investment to take advantage of "dollar cost averaging."

Now I'd like to tell you about something else you might find of value, and that is dividend reinvesting.

Dividend reinvesting is taking the dividends that the company would normally pay to stockholders via a quarterly check and instead, reinvesting it back into your stock account in the form of fractions of a share.

It's a good way to continually grow your stake in the stock market without having to tap into your savings or other investments.

Here's how it works. Suppose you have 100 shares of The Coca Cola Company. Let's say that Coke is paying a quarterly dividend of twenty five cents a share. If you did not take advantage of dividend reinvesting, you would get a check every three months from Coke for $25.

Wow. Think of what you could do with twenty five bucks. You could buy six "half double decaffeinated half-caf, with a twist of lemon" coffee drinks at Starbucks. Or you might want to download a bunch of ringtones or MP3 songs from the R&B artist du jour to load onto your cell phone, iPod, or BlackBerry.

Or, you could ask the company that manages your stock account to reinvest that twenty five dollars back into your account towards the purchase of additional shares.

Let's use the Coke stock example. Suppose Coke were trading at $50 a share. Now, instead of taking that $100 per year you would have frittered away, it were to go towards two additional shares of stock. Instead of having 100 shares, now you will have 102 shares. Just two percent more shares, granted, but remember that now you have slightly more shares against which the dividends will apply next time. In other words, next year you'll have $102 in dividends going towards the purchase of additional stock. Compounded over time, you'll find that increased investment worth more than those frivolities would have.

It doesn't take rocket science to recognize that to continue to reinvest your dividends will net you more shares in the long run, and a corresponding gain in your total portfolio. And because you are technically making regular, predictable payments into your account, you are also taking advantage of dollar cost averaging."

*** Read from the Beginning *** Next Article ***

Auto investment

2006-04-06T20:31:00.000-04:00

One thing I learned once I had a hand in investing in the stock market for the first time was auto-investments.

Auto-investment, or Direct Deposit, is having your investment in a stock come automatically from a bank account, such as a savings account. You fill out a form acquired from the holder or manager of your stock account, and they will regularly automatically deduct the amount you specify from your savings or checking account and directly deposit said amount into your stock account towards the purchase of shares of stock in that company. Presumably, if you regularly invest a fixed amount towards the purchase of stock, you can take advantage of something called "dollar cost averaging." In other words, when the stock cost is low, your regular deposit is buying more shares than when the cost is high, at which time you're purchasing a lesser number of shares.

Anyway, at first, I thought they held the balance until such time as it would have reached a sufficient amount to purchase one share. For example, if Sears were going for $50 per share, and you were depositing $25 per month, they would hold your $25 until the second month, and then credit you with one share.

Well, that's not how it works. In fact, if Sears were going for $50 per share, and your monthly auto-deduction were twenty-five bucks, you would be credited as having purchased .5 shares the first time a deduction was applied to your account. More likely, the figure would be accurate to the thousandths of a share, like 0.500 shares. Accountants like to deal with tiny fractions. Like that would matter to a first time investor.

Anyway, for me it was quite a hassle to start up Direct Deposit. It's not like Sears did not want my money. Far from it. The problem was trying to get the Direct Deposit account properly set up. For whatever reason, in the Direct Deposit world, your savings account number is not the seven or so digits you write on the back of your check from Aunt Bessie for your birthday, nor what you write on the deposit slip at the bank.

No. Instead it's some brazillian-digit number that's BASED on your seven digit account number that the stock manager needs. You also need something called a "bank routing number," another number that takes longer to write out than to say.

After about the third attempt to sign up for Direct Deposit for Sears, I decided to call my bank directly and ask for the proper numbers.

"Wachovia Bank of Charlotte, formerly Union Bank of Delaware, formerly Merchant's Bank of South Carolina, how may I help?"

"Yes, I am trying to set up Direct Deposit for a stock account and I need my routing number and my account number please?"

"May I have your account number please?"

"Sure, it's four two four, one nine six."

"Four two four, one nine six?"

"That is correct."

"OK, for Direct Deposit, you need to add the following to the front of the number. Have you got a pen?"

First of all, this teller obviously has WAAAAY too much faith in my abilities to write down numbers without making mistakes. I grab a pencil.

"Yes, I have a pen. Go ahead," I said.

"Zero zero zero, zero zero zero, zero zero two."

"Let me repeat that," I beg, "Zero zero zero, zero zero zero, zero two."

"No, it's zero zero zero, zero zero zero, zero ZERO two."

"Zero zero zero, zero zero zero, zero two," I attempt again.

"No. It's ..." she begins, "Hold on." I can hear her counting in the background. "OK. It's eight zeroes and then a two.

"Ahhh!" I exclaim. "Now I've got it. So it's eight zeroes, followed by a two, followed by my account number. Is that right?"

"Yes, but you also have to add digits AFTER your account number."

Oh, brother. I was beginning to wonder whether it was worth it at this point. Sears stock might have plummeted $6 by the time I got this right.

"OK," I sighed, "lay it on me."

"You have to add zero one to the end."

That's it? I asked myself.

"That's it?" I asked her.

"That's it. So altogether, the number you need to tell them is zero zero zero, zero zero zero, zero zero two, four two four, one nine six, zero one."

"Got it," I presumed. "Is that all I need?"

"No," she proceeded, "you also need the bank routing number."

"How long is THAT?" I cringed.

"That's only nine digits!" she laughed. I honestly think bank tellers get a charge out of rattling off numbers over the phone. "Pen ready?" she patronized.

"Pen ready," I fibbed.

"Two seven six ... (pause) ... three one four ... (pause) ... five nine six."

I could tell she added these pauses intentionally to mock my short term memory issues.

"OK, I think I got it. 276-314-596. Right?"

"Yay!" she said. Now it was clear she was basking in superiority.

"Thanks," I began, "Now all I gotta do is get all this to the stock manager before they close at five o'clock." It was 10:30 in the morning. Silence greeted me at the other end. "Hello?" I queried.

"I'm sorry, I was typing something." Sure. "Is there anything else I can help you with today?"

No, I thought, you have done more than your share of making me feel totally incompetent, thank you.

"No," I began, "you have been more than helpful," was what came out instead. "Thank you."

"Thank YOU for calling Wachovia Bank of Charlotte, formerly Union Bank of Delaware ..."

The rest just kind of dropped off the radar.

"Bottom line, once I got the proper digits loaded up on the stock manager's tabulator card, (carefully printing the digits in the microscopic boxes, and then darkening the proper circles in rows beneath each digit,) and had sent it off, I was on my way to take full advantage of "dollar cost averaging."

*** Read from the Beginning *** Next Article ***

Walmart

2006-02-05T10:35:00.000-05:00

Walmart. Wow. Has there ever been a company that has gotten so much press lately? Well, I'm sure there has, but it seems that Walmart has gotten its share in the past few years.

Walmart. It seems you either love Walmart or you hate it.

What is it about Walmart that leaves no room for indifference?

Reasons some people HATE Walmart:

1. When Walmart comes to town, everyone panics because the store overwhelms all the other smaller businesses and steals everyone's jobs.
2. Walmart decides what kind of music YOU want to listen to.
3. There are never enough cashiers at the check out.

And I am sure there are many more.

Reasons some people LOVE Walmart:

1. Low prices

Well, OK, there's only one reason why anyone would love Walmart. But you have got to admit, Walmart does have low prices. How do they do it? How can they offer such low prices day after day. In fact, I believe their slogan is: Always. Low Prices.

One theory is that Walmart forces US manufacturers to ship jobs overseas in order to meet their requirements for the lowest wholesale prices. Those suppliers choosing not to deal with Walmart's stringent requirements do so at their own peril, because to not do business with Walmart can be tantamount to disaster to their businesses.

Investing in Walmart

With all the negative publicity surrounding Walmart, who in their right mind would invest in such a company?

Well, I did. But who ever said I was in my right mind?

In earlier posts, I talked about my expectations of making it big in the stock market with Sears and Kmart. Man, with the popularity of The Sears Catalog and the longevity and recognizability of Kmart under my belt, how can I lose? The bottom line is that I didn't lose.

I didn't win either.

In fact, I was lucky to break even. Those two stocks did so poorly during the 90s that I decided to dump them both once they "climbed back up" to what I bought them for during the late 80s. Lessons learned.

But why Walmart? And why now?

I was at one of those inspirational meetings one year. You know the type. The one where the guy is standing up there expounding on where the industry is going. What's the hottest company and what to avoid. He talked about the big disappointments for which everyone was hoping to make a killing, and of those sleepers of which only the wisest of investors was aware.

The speaker asked a question. "Which Fortune 500 company is poised to overtake General Motors as the largest employer in the United States in the coming months?" he asked. Audience members ventured guesses, but nobody knew the answer.

"Walmart," the man disclosed.

There were a few nods, as if some were saying, "Yeah, I can see that. After all, I know someone who works at Walmart ..." Just like everyone knows someone who works at a McDonalds, Starbucks, or Best Buy.

He continued to tell us how Walmart had become bigger and bigger over the years, all the while wiping the floors with Sears, Kmart, and Target. I thought, "OK, I learned my lesson with Sears and Kmart. Maybe it's time to give Walmart a try. After all, if they are about to overtake GM at something, they must be doing something right. I mean, GM's a big company, aren't they?

So let's buy Walmart

In the winter of 2001, I visited the Walmart Investor's Relations page to see what I would need to do to get started as an investor in Walmart. Turns out if I opted to have regular, direct deposits from my savings or checking account, I could buy shares directly from the on-line broker handling Walmart, Computershare (formerly Equiserve) rather than to need to visit my local discount broker in person.

No need to humiliate myself in front of seasoned brokers commiserating over my measly purchases. Now I could be humiliated remotely - much less personal.

I made my first purchase of Walmart on-line. A short time later, Walmart did indeed overtake GM as the nation's largest employer. So now Walmart is bigger than General Motors for numbers of employees. Can they mimic such superiority in other areas of their business to excel in value to their shareholders?

Time will tell.

*** Read from the Beginning *** Next Article ***

Coca Cola

2006-01-06T19:01:00.000-05:00

"Coke? or Pepsi?"

Which are you? It seems you are either one, or the other. Nobody likes both. If you DO drink both, you still prefer one over the other.

My wife and I are at a restaurant. The server says, "Care for something to drink?" My wife says, "Coke, please." The server says, "Is Pepsi OK?" She asks, "What else've you got?" She will NOT drink Pepsi. Just doesn't like it. Me? I will drink both, but I prefer Pepsi.

Opposites attract, I guess.

We were at one of those hundreds of festivals they have in Northern California a few years ago. They had the little booth set up with the Coke versus Pepsi challenge. (I know they used to do that in the mid 70s; I was surprised they were still trying to settle that debate decades later.)

Though they want you to believe that the challenge is unbiased, the bias comes in after you have made your selection. I walked up to the stand and the woman poured two small plastic cups with the caramel colored soft drinks from bottles that were enclosed in hoods so you couldn't see the brand names.

I took a sip from the cup on the left, swished it around a bit, and swallowed. Then I took a sip from the cup on the right, swished and swallowed. "Which do you prefer?" the woman asked cheerfully. "The one on the right," I proclaimed. She lifted both hoods simultaneously, revealing that my soft drink of choice was the Pepsi, and she trumpeted, "PEPSI!!" for all to hear. She applauded me on my selection, and others who were standing around joined in. She replaced the hoods.

Then my wife stepped up. The woman drew the hooded bottles beneath the table, (presumably to possibly switch them, or not,) and returned them to the table top, where she proceeded to pour out two cups. My wife drank from the left cup, then from the right, and put both cups down. "Which do you prefer?" the woman asked cheerfully. "The one on the right," stated my wife.

Without saying a word, the woman raised the hood on the right bottle just enough for us to see that she had chosen the Coke, and then lowered it again. I also seem to recall her giving my wife quite a GLARE, however perhaps I was mistaken. Anyway, the reaction you get from your choice really seems to depend on whether or not you choose the "right" product.

Anyway, I digress.

Taking stock of Coke

One day I asked my wife what company she'd invest in if she were to want to buy stocks. She said, "I don't know. Probably Coke."

I asked why, and she said, "Why not." That's one of the things I love about her - she doesn't hold back.

So I asked myself, well, why not? The Coca Cola company has been around since the 1880s. They make a great, popular product, and you see it everywhere. It's not going out of business any time soon, so let's invest in it.

Coke, but which one?

When I started my initial investigation into Coke, I discovered an interesting thing. There were TWO companies available - the Coca Cola Company, and Coca Cola Enterprises. Which is which, and what's the difference? Turns out that Coca Cola Enterprises is the bottling company that packages Coke soft drink products, and Coca Cola Company is everything else, (the marketing, research and development, advertising, etc.) So which did we want? When I thought about what made Coke such an exciting candidate, my thoughts were not so much about the actual soft drink, and certainly not about how it got into the bottles. Rather, when I think of Coke, I think of the ads we grew up with.

Who could forget these slogans?

1963 Things go better with Coke.
1970 It's the real thing.
1971 I'd like to buy the world a Coke.
1976 Coke adds life.
1979 Have a Coke and a smile.
1982 Coke is it.
1988 Can't beat the feeling.
1989 Can't beat the real thing.
1993 Always. Coca-Cola.

I knew that the Coca Cola "wave" was more than just the carbonated beverage in the odd shaped green bottle, it was the image. Coke was everywhere. Do a search on eBay for Coke or Coca Cola and you'll find tens of thousands of items for sale that have the Coke logo. For us, the Coca Cola Company was about more than just the cola, and that was what we wanted to invest in.

By this time in our lives, my career was taking off, and I was in a position to buy more than just ten shares of a company. Coke was selling for about $70 a share, so I figured 15 shares should be a good initial investment. In the summer of '97, my wife and I became proud shareholders in the Coca Cola Company.

It was time to ride the "wave."

*** Read from the Beginning *** Next Article ***

Turner Broadcasting

2005-12-02T09:33:00.000-05:00

Something new

In 1987, I was looking for additional interesting companies in which to invest. It was time for something new, in more ways than one. I had already started investments in Sears, Kodak, and Kmart. In previous posts describing my experiences with choosing those companies, you may have noticed a trend. If a company had been around for several generations, there was little reason for me to believe they would not be around for several more. Therefore, in my novice investor's enthusiasm, company longevity became my primary criteria. (In a future post, I'll let you know how that worked out for me.)

The FOX Network

On April 6, 1987, a new primetime television network premiered. The FOX network became the fourth national network after the "Big Three" (ABC, CBS, and NBC,) of the nation's most popular TV networks, excluding PBS.

I thought about that. Wow. A fourth network. The "Big Three" had been around at least as long as I had, and now there was a fourth. There was something magical and mysterious about a company's ability to get so large as to be able to position itself with such a distinguished group as the three biggest broadcasting companies in America such as those the FOX Network was joining. That would have been like an American automobile company joining the "Big Three" carmakers of Detroit fame, Ford, Chrysler, and GM.

But that's what FOX did, and I was impressed. I said, any company who can pull off a deal like that one must have something going for it, so I am going to invest in it.

Let's buy stock

So in the Fall of '87, I walked into my local discount stock broker, fully prepared to pay an odd lot differential, with the intent of buying shares in the FOX Broadcasting Company.

"How can I help you?" asked the broker who greeted me.

"I'd like to invest in the FOX Broadcasting Company!" was my proud exclamation.

"Hmmmm," the broker began, "Do you know what Exchange that is on?"

Exchange? I asked myself.

"Exchange?" I asked the man.

"Yes. Is it on the New York Stock Exchange, the American Stock Exchange, NASDAQ?"

Nazz Dack? No, I was not going there. I've already exhibited investor ignorance in the past. I was going to try to bluff this time.

"I'm uncertain," was my casual response.

"Let me try to find it for you," he offered.

After a few minutes of digging in books and on his computer, he asked a colleague. "Hey Frank. What do you know about the FOX Broadcasting Company?"

"FOX Broadcasting?" he began, "Is that anything like Turner Broadcasting?"

"Is that anything like Turner Broadcasting?" my guy asked.

"I don't THINK so ..." I stumbled. Of COURSE it wasn't anything LIKE Turner Broadcasting. Haven't these guys HEARD of FOX Broadcasting?? Haven't they watched Married with Children, or The Simpsons? Well, maybe not.

"I'm not sure we are going to be able to help you. There is a possibility they may not yet have gone public."

To say I was disappointed was apparent. Now, after all those stock picks based on longevity, I chose one that was too new. It hasn't even been made available to relatively poor investors such as myself. I was dejected. I came in to buy stock in an exciting new company, and I feared walking out empty handed.

TBS

Then a thought occurred to me. Turner Broadcasting Company. Wasn't that that OTHER Broadcasting wonder that was taking over the TV experience in recent years? As I recalled, this really rich guy in Atlanta, Ted Turner, was churning out network after network on cable. Everywhere you turned, you saw a new Turner channel on TV. Big names. Common names, such as CNN, TNT, and TBS.

Though I walked in to buy FOX, my desire was to acquire interest in an exciting new television venture. It might have been too early to buy FOX, but apparently Turner Broadcasting was established enough to be made available to the public. After all, these guys have heard of it, and no doubt they are wealthy financial advisors. So why not. Let's buy Turner Broadcasting.

"How much is Turner going for?" I asked, too late to realize I sounded like I was asking some guy what he's looking for for an old Chrysler.

"Let me check," he started. After tapping a series of keys on his computer, he comes back with, "Turner 'A' or Turner 'B'?"

Here we go again.

"What's the difference?" I queried, resigned that my ignorance was probably old news at this brokerage.

"Turner 'A' pays dividends, and 'B' does not."

He explained, in typical brokerese, what that meant. I was still trying to absorb the whole investing experience, so I'm not sure if I recall how he explained it. I think it meant that the 'B' company reinvests what they would have paid out in dividends back into the company, or something like that.

"Turner 'B,'" I requested, wanting to put as much into investing as I could. I had no need for the small amount of dividend I would have gotten from this tiny purchase anyway.

A few more taps on the keyboard yielded a response. "Turner 'B' is presently trading for eight and three eighths," came back the professional reply.

Eight and three eighths? Dollars?? Eight dollars a share? That didn't even sound like a price for something you invest in. I was used to paying share prices in dollar amounts of 30s, 40s, and 50s. I can't even buy a pair of gym shoes, ('athletic footwear' if you're under 25) for less than thirty dollars. But I figured, OK Turner's new, so maybe that's why the price is so low.

I looked at the amount I was prepared to pay for FOX, did a quick calculation, and said, "OK, give me 25 shares of Turner 'B.'"

A few taps of the keyboard later, and I walked out the proud share holder of twenty five shares of Turner Broadcasting Company.

Little did I know that that purchase, and a later purchase of 50 more shares, would turn into the most prolific of all my investments. At one point, after several stock splits and mergers, my stake in Turner was worth over $13,000. Helped us put a down payment on a house. A real head turner.

*** Read from the Beginning *** Next Article ***

Kmart

2005-11-05T09:36:00.000-05:00

Sears was the first of three retail companies in which I chose to invest. The other two were Kmart and Walmart. (More about Walmart in a future post.)

While walking through a Kmart one day, I looked around and said to myself, Kmart has been in business since I can remember. And even though you hardly ever see anyone in the store, and there is never enough checkout personnel, they must be doing something right because day after day, Kmart is offering discount prices.

Somehow I got it in my head that Kmart was going to be the Sears of the future. I had a gut feeling that Kmart was a sleeper stock, and as soon as people would start to realize that, the stock prices would skyrocket, hopefully AFTER I had made an initial investment.

So in the Fall of '87, I became a shareholder in the Kmart Corporation after buying an odd lot, (ten shares,) of the company stock.

Now I just needed to wait until everybody else learned what I already knew.

*** Read from the Beginning *** Next Article ***

Kodak

2005-10-07T17:57:00.000-04:00

In a previous post, I mentioned my goal of purchasing ten shares of each company I found interesting, and in fact, my very first investment was ten shares of Sears. With few exceptions, ten shares of any company held a short time would make no man rich, but keep in mind this was just a start, with the cash I had at my disposal. The getting rich part would have to come later.

The first exception of the ten share goal was Eastman Kodak. (For those born after the 70s, that's what Kodak was called.) When I found myself interested in Kodak, their shares were over $50 each, and a $500 investment was more than I wanted to pay. Wanting to stick to my goals of paying about $200-300 for each company, I decided on only five shares of Kodak.

What was special about Kodak?

First of all, Kodak was a big part of my life at that time. After graduating from college, I had become a photographer, (in fact, that's how I met my wife-to-be,) and so Kodak Film was a regular weekly purchase back then.

But my decision to invest in Eastman Kodak in the mid to late 80s was based more on where the company seemed to be going at the time. Already more than 100 years old, Kodak was getting into more high technology ventures beyond the photographic film for which they had been known.

During the 80s Kodak introduced their disc photography line, and they joined the video market by manufacturing videocassettes in 8mm, Beta, and VHS. They even made computer diskettes and lithium batteries at that time.

Given the company's heritage, and their advancements towards the 21st century, I figured Eastman Kodak was a keeper. I anticipated lots of growth opportunity for this classic company, so in the Fall of '87 I became a proud shareholder in the Eastman Kodak Company with five shares under my belt.

Now it was just a matter of sitting back, watching, and waiting to see what developed.

*** Read from the Beginning *** Next Article ***

Sears

2005-09-30T12:43:00.000-04:00

In my previous post, I stated that my first foray into the stock market was a ten share purchase of Sears and Roebuck. (For those born after the 70's, that's what Sears was called.)

But why Sears?

While thinking of which companies I would like to invest in, I asked myself what criteria I should use. After all, there was plenty of advice available regarding Earnings Ratios, etc. Did I want to learn what all that was, and research company portfolios, to determine into which companies I should invest?

I decided that since I was investing so little initial funds, I would just go with my gut. One of the first criteria that came to mind was longevity. I asked myself, of the big companies, which have been around for a long time? For whatever reason, Sears came to mind. Sears has been around since the late 1880s. It seemed that a company that had been around that long must be doing something right, so perhaps I had my first candidate.

I told my Mom I was thinking of getting into the stock market.

She said, "Really? Which company are you thinking of investing in?"

I said "Sears!"

And she said, "Oh! I shop at Sears all the time!"

Normally such a statement by itself would have been sufficient to ensure I had picked a winner, but she had more.

"Did you know your Grandpa used to buy chickens from Sears?"

I did not know that. My Grandpa was a farmer in Minnesota during the early 1900s, and it seems that at the time, Sears and Roebuck was quite a supplier of choice for farmers of the day.

The Sears Catalog

So Grandpa ordered chickens from, get this, the Sears Catalog. A week or so later, a crate would come to the farm with live chicks from Sears.

Ahhh, yes. The Sears Catalog. For those of you born in the late 80s, that was a really thick catalog you used to get for free at Sears - all you had to do was ask for it. The Sears Catalog. This book was so big and heavy, Mom used to use it, (along with the Phone Book,) to hold items she was gluing down with Elmer's Glue . And when my sister could not reach the dinner table, Mom would say, "Run and get the Sears Catalog so your sister can reach the table." Yes, the Sears catalog had a special place in our family history.

How could Sears be a bad investment?

*** Read from the Beginning *** Next Article ***

Just jump right in

2005-09-23T13:20:00.000-04:00

Long before the days of E-Trade and Ameritrade, you had to go to the offices of an actual stock broker if you wanted to buy a few shares of stock.

Around the mid-80s, when the MBA boom was in full swing, followed by the stock market boom of the 90s, discount brokerage services were the rage.

They boasted low commissions to lure new investors to trade for the first time. ("As low as $35!")

Around that time, I was starting to do well in my career, and found I had a few bucks to spare. I had always wanted to get started investing in the stock market, but didn't know where to begin. The discount brokers seemed a good bet.

I figured the best way to begin my investing "career" was to just jump right in, however small my initial investments. I decided to pick a few companies and buy ten shares each. That would get me started.

I chose my first company in which to invest, Sears, I believe. Then I visited the branch of a local discount trader in my town.

"How can I help you?" asked the broker who greeted me.

"I'd like to invest in Sears and Roebuck!" was my proud exclamation, knowing that I had taken that first step.

"I'd be delighted to help. How many shares would you like to purchase?" he asked, professionally.

"Ten shares!"

The broker dropped his pencil. I could sort of feel his eyes rolling in his head, as if to say, "My last sale was 1000 shares of Ford Motor Company, and this guy wants ten shares of Sears."

"Of course, you realize that there will be an 'odd lot differential' for this purchase," he said dryly.

An odd what?? I asked myself.

"An odd what??" I asked the broker.

"An odd lot differential. Since you would like to purchase less than 100 shares, there is an additional charge."

So I had my first lesson in investing in the stock market. The expectation is that if you're going to buy stock, you're going to buy at least a hundred shares. A hundred shares! Let's see. Sears is selling for 34 3/8 ... 100 shares would be $3437.50 ... and I am thinking of spending a tenth of that.

Well, I thought, I came in here to buy stock, I learned my first lesson, and I am not going to let that affect my decision. I said, "Let's go ahead."

He placed the order, I paid the man the cost, plus the differential, plus the commission, and walked out of there a shareholder of ten shares of stock in the Sears and Roebuck company!!

About a week or so later, I received the stock certificate in the mail. There it was, all fancy with the scrolled borders and my name and all, but most important, the indication of how many shares I now own:

00010 shares

And to ensure no foul play, there was a bold statement on the certificate: "Good for less than one hundred thousand shares."

I was in my glory.

*** Read from the Beginning *** Next Article ***

Introduction to First Time Investor

2005-09-16T16:21:00.000-04:00

I remember when I first decided to buy stocks. I was frustrated because I always remembered the expression "it takes money to make money," and yet I wasn't 'out there' investing in the stock market.

Over the course of this weblog, I will attempt to recap my experiences when first entering the land of "Investing in the Stock Market" as a "first time investor."

I hope you learn something from it.

*** Next Article ***