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New Federal Reserve Change And How It Affects You

January 17, 2012

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Jon

The Federal Reserve has picked up the transparency bug again to start the year off. The new recently announced change will include quarterly forecasts on the federal funds rate. This guidance will be forward looking at least two to three years out starting with its first announcement from the January 24-25 meeting.

So why is this change important? Well, interest rates tend to move based on the direction of the federal funds rate. If you remember back in August, the Fed slipped in an addendum to expect low rates through mid-2013.

After that announcement, interest rates dropped to all time lows. With the rate drop, savings and money market account interest rates moved lower. Mortgages rates headed lower too. Many, myself included, believed this would be the lowest point of mortgage rates. If you don’t think rates can go lower, just wait. The potential of the first announcement could push long term rates lower still.

Possible Outcomes

Depending on which direction the Fed goes with its first forecast of the year, one of three outcomes are possible. Continue Reading…
Happy Hour: Earnings, Netflix, The Science of Dew, & #DenySuzeCard

January 12, 2012

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Jon

This week was cut short, so I had to drop an exciting, brilliantly written post on the Federal Reserve. I know right, thrilling. Okay, maybe not. So hopefully, thanks to earnings season, some mail I got, Mountain Dew, and a guru controversy will give me a fairly strong finish for the week.

Earnings Season

Earnings Season kicked off this week with companies beginning to report 4th quarter earnings. If you own stocks, now is the time to check what you own, listen to the conference call, and read the earnings report. If you’re invested for the long term, remember that earnings season offers just a very short term glimpse of a company. Stay focused on the long term fundamentals, not on the comparison to analyst’s estimates.

Netflix Lawsuit

This is for all you Netflix subscribers out there. Apparently there is a class action lawsuit against Netflix and a settlement with Walmart. How does this affect you? Good question, I’m no lawyer but the gist from the mailer I got was supposedly the two companies conspired to keep each other out of certain dvd businesses, eliminating each other as competitors and keeping prices high. If you ever subscribed to Netflix in the past 6 years or so, check it out.

The Science of Dew

Continue Reading…
Happy Hour: Better 2012 and Stock Picking Challenge

January 6, 2012

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Jon
As goes January, so goes the year! Or so the January Effect saying goes. If the first few days of 2012 is a sign of things to come, we’re in for a good year. At least that’s the hope.

Better 2012

The folks over at Betterment have put on a Blogging For A Better New Year event. It’s an article a day about the importance of setting goals for your life and investments, written by some of the best finance bloggers out there. How I was included is beyond me. Most likely just a filler, but proud of the opportunity nonetheless. Mostly because I finished writing it three weeks in advance. The collection has been great reading so far. Check it out.

Money Pro Challenge

A stock picking challenge is being had over at Money Pros and I tossed my picks into the fray. The rules are fairly simple: pick 3 stocks that you think will do well in 2012, submit them, and wait.

I thought I’d put my money where my mouth is and submit 3 stocks I own (but reserve the right to sell at any time). Here’s my picks:
- New York Community Bancorp. (NYB) – The lone bank stock and dividend play of the bunch.
- MGM Resorts (MGM) – MGM is a play on an economic recovery in the US, specifically Vegas.
- Whiting Petroleum (WLL) – Energy is always a good play and oil is king.
Being a competition I’d like to point out I’m up almost 8% for the first week. Too bad we can’t take profits along the way.
Disclosure: I own shares of NYB, MGM, and WLL.

Last Call

Continue Reading…
Predictions For 2012

January 3, 2012

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Jon

Starting any new year there is an abundance of prediction posts that have been popping up for the past few weeks. Think of it more as an educated guess on what’s to come in the next year.

Making predictions offers a chance at a better understanding of the financial world around us and how to invest in it accordingly. Plus it’s just downright fun! Sometimes we’re right, others we’ll be wrong. But it’s a good exercise for investors to pick up so you can plan your allocation accordingly.

In an effort to get the mental juices flowing after the New Year’s celebration, here’s my predictions for 2012.

Europe

The Euro doesn’t break, but it does become the most expensive currency ever to maintain. The final price tag for keeping the Euro alive closes in on $3 trillion when it’s all said and done. Too bad they didn’t act sooner.

Don’t expect the Euro mess to end quickly either. I’m looking at a timeline of 6-9 months. Sometime around July sounds best. August is a big vacation month over there and no one will want to deal with this after an extended holiday. Until then, expect volatility similar to what was seen this past year. This whole event is far from over.

US

Continue Reading…
Goodbye 2011: Best And Worst Market Awards

December 27, 2011

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Jon

Part of having a finance blog offers me the opportunity to add my two cents every now and then. With that in mind I’ve come up with the Novel Investor Best and Worst Awards for 2011, relating to stocks and ETFs that may or may not have been part of your portfolio this past year.

In order to come up with the stock list, I eliminated all penny stocks and limited the list to the more well known companies. For the ETF list all leveraged ETFs were eliminated. Something to keep in mind before getting into the winners or losers, these are not investment recommendations and past performance doesn’t equate to future performance so invest at your own risk.

Best Stock of 2011 – Mastercard (MA)

In a time when debt has been the biggest topic in personal finance, Mastercard stock was one of the best performers of the year. Finishing the year up 64%. Thanks in large part to the growing cashless society we’re moving towards. The Fed allowing banks to charge more for debit card fees didn’t hurt either.

Worst Stock of 2011 – Research In Motion (RIMM)

Proof that not keeping up with tech trends is bad. The maker of Blackberry phones has been destroyed with the advances in the smart phone thanks to the Apple IPhone and the growth of Android smartphones. RIMM failed to get on board and has been killed because of it. Starting off January at $58/share and ending the year around $14/share, for a loss of -76%.

My two cents is this company is done. The current smartphone wars will come down to Android and Apple. Very reminiscent of the operating system war of the 90s. Android is the new Windows for smartphones. Hopefully better, but there’s only one real winner in Google.

Best and Worst Stock Award – Netflix (NFLX)

Continue Reading…
Holiday Roundup: Lessons From A Christmas Vacation

December 21, 2011

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Jon

In the spirit of higher learning I decided to put myself through the arduous task of studying the educational side of National Lampoon’s Christmas Vacation. A few things I took away from the hours of research:

Several strings of lights are okay, 250 strands for a grand total of 25,000 imported italian twinkle lights, might be excessive. If you’re trying to compete with the laser light show at Epcot Center, stop, you lost already. Your wallet will thank you and so will your neighbors.

Writing a $7,500 check to cover the deposit on a swimming pool when you don’t have money in your account is a bad idea.

Hoping that your Christmas bonus shows up on time and is big enough to cover the check is even worse.

I’m not sure how far ahead one normally pays for a pool instillation, but the middle of winter might just be too early. Paying too far in advance is borderline sketchy, wait till the ground thaws.

Despite what you might think, kidnapping your boss, will not get you that bonus either.

When the insanity of the holidays begins to set in, remember, there’s always Jack Daniels. Continue Reading…

New Federal Reserve Change And How It Affects You

Possible Outcomes

Happy Hour: Earnings, Netflix, The Science of Dew, & #DenySuzeCard

Earnings Season

Netflix Lawsuit

The Science of Dew

Happy Hour: Better 2012 and Stock Picking Challenge

Better 2012

Money Pro Challenge

Last Call

Predictions For 2012

Europe

US

Goodbye 2011: Best And Worst Market Awards

Best Stock of 2011 – Mastercard (MA)

Worst Stock of 2011 – Research In Motion (RIMM)

Best and Worst Stock Award – Netflix (NFLX)

Holiday Roundup: Lessons From A Christmas Vacation