Wednesday, February 27, 2008

Accounting for Restricted Stock Units

Bonus season has come for most, and as many companies do, bonus compositions are part cash and part company equity. Prior to SOX, companies would grant stock options which were very confusing for most employees but advantageous to company balance sheets, but post SOX, many grant restricted stock units (RSUs). I myself received some, and as the month is about to end, I had to wander, how do I account for RSUs? (For more detailed information on RSUs, click here)

The IRS would suggest that at the point of the grant, the RSUs are worth nothing until they vest, at which point, I would have to pay taxes on the total value of the RSUs converting into company stock.

However, I'm not a fan of the IRS, not only because they take my money but also because the grants do have some real value.

When I think about, it is an asset of mine, however illiquid it may actually be. If I continue working for this company, it will become liquid, and if I don't make it to the vesting period, there is some real monetary value that I'm losing when I switch companies.

So I've decided that the best method would be to do a mark-to-market valuation every month of my RSUs and add that value to my assets whenever I calculate my networth.

Tuesday, February 26, 2008

FRAUD ALERT: Chase advertising checks

Chances are, you receive about a dozen of these every month: checks mysteriously written to you with a big "CASH ME NOW" look on them.


As the classic saying goes, "If it's too good to be true, it probably is." No one is writing you checks altruistically. They are all shady, scummy legal contracts that bind you into some form of monthly fee for a service you really don't need if you sign and cash the check. I don't understand why the government doesn't crack down on these, but I hope more and more people will see these checks and tear them up.

So why do I point out Chase?

As my bank and credit card backer, it has been great. I haven't had too many issues with them. But boy do they like to sell their logo to advertisers who send out these checks.

Initially, they were almost benign, coming with letter inserts about identity theft protection or the like. But recently, all I received was a check and the Chase logo on it. After looking more carefully, on the back of the check, in 10pt font, there is a legal contract stating that by signing, I would be signing up for some emergency credit card insurance in case something bad happens to me.

Shame on you Chase.

Big Blue helps market see green, but beware

IBM raised its earnings estimates today, just in the nick of time, as the market was still soaking in the sharp rise in inflationary indicators as well as record-breaking oil futures at $101 a barrel or more. Yet, this should really make any saavy investor pause to question the market reaction.

Is it really as financial media outlets say, that IBM's outlook is better and therefore the global market itself is better or, is it that investors are still very optimistic about the market and any reason for celebration is taken? I would suggest the latter.

If you look carefully, IBM's executives point out most of the earnings per share (EPS) increase of 5 cents is attributable to a giant $15 billion share buyback. This change in IBM's earnings is really just a pure mathematical increase, rather than some economic indicator.


Think of this as a simple fraction. If you hold the numerator the same, and decrease the denominator, the final result is a larger number. The numerator, earnings, is not expected to change. However, the stock buyback with affect the number of outstanding shares, and therefore decrease the denominator.

Frankly, I expect IBM's stock to fall back from today's bump.

But, for investors looking to jump in, it does seem like a good time. Other investors are just as optimistic as you, and maybe you can get in on a big bump day like today.

Monday, February 25, 2008

Market troubles signals good times for some

The market helds its breath today, waiting to hear word on S&P ratings of bond insurers (such as MBIA and AMBAC). When it found out S&P was affirming the AAA ratings, markets soared.

This makes me laugh.

The very same institutions that are blamed for this subprime mess, rating agencies, still hold the same credibility?! It doesn't make any sense to me. I would think at this point, S&P would have very little value to investors, considering its ridiculous blunder.

But speaking of mortgages, this mornings report on existing home sales and prices was pretty glum for sellers, and continuing great news for buyers. Prices are down 4.6% compared to last year. At this rate, summer '08 is looking like a great market bottom to buy in.

For students graduating this year, this is excellent news. They are getting out at a time when interest rates are low, prices are low, and market is desperate to get rid of a 10-month glut of homes.

For myself, I am thinking about switching from leasing to buying as well. The tax benefits and equity are significant, IF I can foot the initial down payment. More to come later on this subject.

Sunday, February 24, 2008

Credit Crunch

For a while, I had been preaching the good news of 0% transaction fee transfers from different credit cards that were offering 0% interest-free credit for 6-12 months. Unfortunately, with the current credit crunch in the economy, I have not seen such an offer in months. The best I have seen are credit cards that offer 0% interest on any new transactions, but it doesn't help me very much with my debt-moving game.

Just throwing this out there to alert readers: have you seen any offers of 0% transaction fee balance transfers and 0% interest-free for 12 months on the same card?

New Approach

Going to try something new with this blog. I'm realizing that with my work schedule, I can't really keep a consistent stream of posts going. It's either going to be like last week, where I could barely find time to post, or where I have time to blog 2-3 posts a day. So instead, I'm going to try saving every blog idea I get, and then only releasing one a day, guaranteeing daily posts while still allowing me to take time off when things get crazy at work.

Tuesday, February 19, 2008

Stimulus Package

As I blogged before, I was waiting for word on the stimulus package before I would send in my tax forms this year. However, turns out, the stimulus package is a separate check (as noted by an alert reader) that is sent out to current tax payers. This means that those used to not paying taxes would still have to send in a tax form in order to collect the $600 per head stimulus.

You can read more here. But essentially, individual earners under $75K and for couples less than $150K. Those above that income will see the $600/$1200 slowly phases out.

This of course means I can send in my taxes this weekend, after I do a final once over.

Thursday, February 14, 2008

Bernake talks, markets tank

Pretty much, that's the pattern. Whenever Bernake speaks, he causes panic on the Street, and with good reason. He does see the economy weakening. He is predicting that the Fed needs to continue being aggressive in its tactics, which translates to more rate cuts.

When the man in charge of one of the largest economies in the world says he's worried, people are VERY worried.

I expect this bad market to continue well into the summer, especially as the housing market continues to slump, with no sign of bottoming out.

Finished My Taxes!

Finally finished my taxes, and it looks like I'm going to get back about $2600! And that's before this Bush stimulus plan's $600 per person that is still being kicked around.

How did I do it so fast? Good records plus a software tax package helps a lot.

Some big places that helped with deductions were student loan interest, moving expenses related to my job, and investment losses. When you are doing your taxes, make sure to look into these large items.

There are also smaller items, that while I couldn't take advantage, you may be able to, such a child credit, charitable giving (only with receipts), and renewable energy usage (such as a hybrid car).

Unfortunately, now I'm left with the dilemna of getting my taxes in now or later. What happens if I send in my taxes and the stimulus bill is passed? Will I lose the $600 or will they send me another check later?

I'll have to investigate. Readers, if you know, please post.

Monday, February 11, 2008

Long Days... Time to stop trading?

The last couple of weeks have been harsh to my trading accounts. Mostly, I have been burning the candle at both ends and finding it difficult to eek out time to really track the markets and make good trading decisions. The longer I think about it, the more I think I should stop and really just focus on work. At least there I have a guaranteed return on my time invested.

Camera Megapixels - Finally a good use for them

After this past Christmas' huge focus on consumer electronics, especially things like digital cameras, I had to wonder, do all those megapixels that come with the cameras really great for anything? After all, what photos have you been taking that required such serious megapixel detail?

I finally came upon one good use this weekend. This all started when my little brother, who is in high school, lost his wallet for the second time. Then, I was just worried that he hadn't lost too much cash. After all, what do you really have in your wallet in high school?

But this made me think of my own wallet. It would be far different for me. Cash is the least of my worries, primarily because I usually carry so little of it. However, all the credit, memberships, and insurance cards would be incredibly difficult to replace. I'm not even sure I could list everything in my wallet without looking first.

The problem of course is that I'm lazy. So I decided, hey, I'll take out all the stuff (and crap) in my wallet, line them up, and take a photograph. With the high amount of megapixels my camera has, I can go back and zoom in on each card and grab the numbers off of it if I had to. At the same time, I don't have to spend the time to meticulously catalog each card.

Maybe I didn't save that much time, but still, a great use for your high megapixel camera, and it'll help you in case you lose your wallet.

Thursday, February 7, 2008

Compensation Time!

Alright, finally some good news in the midst of a bad market and a streak of bad poker nights: I got my first year-end bonus and it should be a nice boost to the networth.

I was handed about a 10% bonus on my base salary, half in cash and half in restricted stock. Additionally, I received a 4% off-cycle raise.

Not bad all in all, but now I just have to figure out the value of restricted stock to my networth.

Tuesday, February 5, 2008

Feeling better, but the market isn't

I think I gave the market what I had, and it didn't take it well at all. Oddly enough, most people blamed today's giant drop on a lower than expected ISM Services index, or more accurately, non-manufacturing businesses. However, I don't believe this report was the entire reason the market fell.

I think a larger reason is the rising furor of voices demanding the government NOT bail out bond insurers and let the businesses who made bad loans suffer the consequences. This is very different than last week when a government bailout and possible stimulus package was met with much enthusiasm and applause (along with a rate cut).

However, even without a bailout, this narrowly-scoped issue should not be carrying over to the technology sector, where the high profile hostile bid from Microsoft to Yahoo still sits on the table, and with Google behind the scenes trying to grab its own pieces of Yahoo.

I think tomorrow can be a new day for the markets IF we see no unusual movements in crude inventories and we continue to hear renewed talk about a government bailout.

Monday, February 4, 2008

Pats lose, markets tumble, and I'm sick


Maybe, but it certainly has been a triple whammy.

Its never fun to have a sure thing turn into an upsetting lose, a week-long bull rally turn into a big red bear bath, and finding yourself requiring sleep 80% of the weekend. And yet, it all happened.

My prediction for tomorrow? The market is going to get better because I'm feeling better.

That's right, no technical, economic, or any remotely intelligent reason why, other than I feel lucky.