July 01, 2009 –
We hear much talk about hyperinflation these days but I contend that hyperinflation has been at work throughout my entire adult life from when I graduated high school in 1995 up to today. The cpi makes us think wages have stayed even with inflation but do we really think tracking the price of electronic gadgets has anything to do with the cost of living? The things that are a much higher priority than electronics such as housing, education, healthcare, and good jobs aren't reflected in the cpi. I start my first teaching job this summer as a high school math teacher and will earn roughly $34,000 a year. A modest starter home in my area goes for $100,000 so you could say the pay is low but so is the cost of living in the area. Using the conventional rule of doubling your mortgage payment to include insurance, utilities, and upkeep, do you feel my income will support home ownership? I say that home ownership combimed with the other typical expenses of life would leave me little to no money leftover. Could I both buy a home and hope to get ahead financially on my income? Those of you who are older, ask yourself if during your early years of working, a first year teacher could reasonably expect to be able to afford a small home and get ahead financially. I think this kind of comparison illustrates how much the purchasing power of a typical working American has declined over the last couple of decades. [more]
June 22, 2009 –
Suppose I have a knack for picking stocks (both short and long positions) that outperform the S&P 500 by a sizable margin. And suppose that my portfolio has a 50/50 allocation to short and long positions. My short positions would consist of overpriced and hopeless companies and my long positions would consist of bargain priced companies with bright prospects. Of course, this portfolio would underperform a portfolio consisting only of my long positions in a bull market and underperform a portfolio consisting only of my short positions in a bear market. Do you think my 50/50 long/short portfolio would outperform an all long portfolio over a 20 year span? What about a 10 or a 5 year span? Thanks in advance for your input. [more]
May 28, 2009 –
A few years ago I took advantage of an opportunity to purchase some shares of JP Morgan Chase through an employee stock purchase plan. At the time the shares were trading at around $40.00 and my cost basis was around $24.00. The plan carried some risk the way it was structured, but odds were if you participated you would profit and clearly it worked in my favor. Before you think that I was some sort of priviliged company executive, let me say I was far from it. I was fairly low on the totem pole and only made about 30k per year. Very few of my peers took advantage of this company benefit which later was tweaked so that employees could only get roughly a 5% discount and they couldn't sell for a year after their purchase without being denied the opportunity to make new contributions for a year. With such a small margin of safety, I ceased to partifipate in the program after the changes were made. [more]
May 12, 2009 –
Occassionally, I feel very strongly about a particular stock and am willing to bet my hard earned money on it. But these strong feelings are the exception rather than the norm. Most stocks cause a sinking feeling in my stomach as I envision a rotten management that will squander my hard earned capital. I seem to be able to find a couple of bright spots in the market every month or two. Something I have noticed, however, is some Fools who play CAPS seem to be able to generate ten or more solid ideas a month with astounding accuracy and performance on their picks. For those of you who have demonstrated this ability, how much effort are you putting into getting your investment ideas? [more]
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