Networth Update

First month of the new year, and like the market, my networth has been tanking all month. Without doubt poker losses in Vegas hurt. On top of that, I had to pay for a ridiculous car towing charge. The only positive aspect of this month was that my company's 401(k) match went through.

So here we go:

Without question, the past two months have been the worst for my networth. Every possible asset is down and few of my liabilities have decreased.

Compared to last month, my networth is down 0.13%, or $1,252.50.

However, the good news is that I'm about 90% down with my taxes (thanks to some helpful tax software), and I'm expecting about $1,600 in tax refunds.

Overall, this brings my networth to -$10,900.18 or -1.09% to my goal.

Big cuts and big drops

Well, Bernake took the big 50bps plunge today, and how did the market react? I think right along the lines I was thinking. Initial bump followed by the long term realization that a) Fed thinks economy is getting worse and b) the value of dollar is falling dramatically. These two thoughts along bad earnings reports from UBS and Yahoo helped to propel the nosedive downward.

Big Day a-comin'

Every time the market sees a Fed announcement coming, it gets antsy, if not downright crazy. Sometimes the market soars in anticipation. Sometimes, the market fears the rationale behind the announcement.

Tomorrow's announcement will probably be a make-it or break-it moment for Bernake. The economy is on the rocks. The dollar is at all-time lows. Oil is still in the high $80s. Numerous companies have announced mixed earnings this week. And, not to forget, last week's heavy-handed Fed emergency 75 bps rate cut.

So is the economy really ready for the market anticipated 25 bps cut?

I think it is a terrible idea. We have now cut too much, and inflation should be a huge worry. The worsening situation for the dollar should far outweigh any benefits of a temporary economic stimulus, such as a rate cut.

The unemployment rate is still relatively low at 5%. The market appears to have bottomed or bottoming. At this point, the Fed should leave things along and let bottom side of the business cycle play out.

B-School Rankings are out on FT!

Financial Times' annual ranking of Business School rankings are out, and again this year, my school is in the top 30 for US business schools and in the top 100 for international business schools.

Why does this matter? Because the true value of the diploma is in the continuing excellence of the school from which your diploma was issued.

Check out the rankings at: http://www.ft.com/businesseducation/mba

Woah Nelly!

Spent the past week on the road for work, so it's nice to finally be home and blog from the comfort of my sofa.

Plenty has happened this week, both for me and the market. Personally, I had fun on the road and then going back to my college to hang out with some buddies who are still there.

For the market, it was a fun rollercoaster event. The week started with a headlong plunge into the black abyss, saved by an emergency Fed rate cut and smoothed out with three solid days of gains.

What will this week bring? More than likely, another 25bps rate cut on Wednesday. However, I still believe the markets are rattled and last week's gains are only temporary. We aren't clear of the bears yet.

Market Bottom?

Cramer claims that we are at a market bottom because of today's 600pt Dow uptick and the fact that the New York Times front page, above the fold article was about the economy.

I don't buy it.

If anything, today was another example to me that we still don't really know what is going on. The market started down 300 pts and ended up 300 pts.

I don't think its time to have that much faith yet. Sure, the market is down a lot, but where is the recovery? I don't think the market can really come back until we find a real economic recovery method.

No end in sight...

Market keeps falling, should you be worried?

Frankly, I'm not certain all the confusion is warranted. After all, people have been predicting this market down turn for some time, and we've experienced the same negative economic outlook since the new year began.

At this point, if you are still feeling optimistic about the market in the short term, you are delusional. There is no reason to believe it will get better for the next 3 months. Today's Fed action, rather than a remedy, should be considered a further indication that the economy is worsening.

The volalitility has been high every day, but when it closes, you can almost always bet on seeing a red number.

Consumer Alert: Two Major 'Free' Credit Report Scams

There is nothing more fearful than the notion that some has stolen your identity and is wreaking havoc to your carefully built credit. Major companies are now exploiting this fear through various marketing schemes toting supposed "free credit reports" that are in reality, cryptic legalese-laden contracts that force the unknowing customer into some sort of credit monitoring service.

The following are two major offenders I have encountered:

Alert #1: FreeCreditReport.com

Back on May 10, 2007, I wrote my first blog about this internet-age swindle. They claim to provide free credit reports from the major agencies, and then hide in their 10 page legal agreement in 4pt font, an agreement to purchase a credit monitoring service.

I had done a little research back then, and discovered this company, MNI Credit Report Services, has had numerous consumer complaints.

Recently, I noticed that they started advertising on TV their "free" credit report.

THOSE CREDIT REPORTS ARE NOT FREE. THIS IS A SCAM!

Alert #2: Bank of America's Free Credit Report

I considered making this my #1 alert, as their approach was one of the most audacious and twisted attempts to swindling.

I received a call this morning from someone identifying themselves as an agent of Bank of America. He told me that BoA valued their customers, and wanted to ensure their customers had clean, clear, and no unusual issues on their credit reports.

I thought, "Wow, what a nice company."

Then he said, "After reviewing your report, if you do not notice any issues, call us back and cancel your subscription to our credit monitoring service."

I had to ask him to repeat that! But you read that correctly, BoA is now going to start providing a pay service for credit monitoring and customers have to OPT-OUT.

This is out of control. And as I stated above:

THOSE CREDIT REPORTS ARE NOT FREE. THIS IS A SCAM!

There is only ONE source for a free credit report, mandated by law to be provided to consumers once per year: www.annualcreditreports.com.

DO NOT GET SUCKERED IN BY THESE AND OTHER SIMILAR FREE CREDIT REPORT OFFERS!

Off to Vegas

Folks, I'm off to Vegas tonight, and will be there for the weekend. Meeting up with b-school buddies to do a little poker tournament action. Maybe I'll win enough to retire...

Anyway, today's looking optimistic with the promise of an economic stimulus package for the economy. How good it is will have to be seen. No one quick shot to the arm is enough to fix the downwrd trend, but maybe it can soften the landing...

Market Outlook Better...?

With the past two weeks of bloodbaths, it may be time to seriously reconsider the financials. Citigroup has taken their medicine for the subprime mess and many other banks are scheduled to do so as well. Bank of America's buyout of Countrywide will occur soon. JP Morgan's profit, while significantly lower than last quarters, is still a profit. Overall, while the financials may not be out of the woods yet, at least people can see a dirt path out.

Across the rest of the market, as this sentiment for financials turns positive, and the pending rate cuts coming from the Fed, gold prices have started to fall a little, as panicked investors begin to question their own level of panic.

Oil continues to creep up slowly, but I think will fall due to downturns in the US economy (I am reluctant to use the R-word here) in a classic decrease demand, decrease price scenario.

Recommendation for tomorrow (Jan 17)? Classic butterfly option spreads are going to be good on general indexes. The volatility still remains high. XLF, the financial ETF, looks good as well. GDX is something to consider if you believe that the rate cuts will continue to drive down the value of the dollar and you would rather invest in some gold.

Bloodbath in the Markets

The hope is that the financials are starting to clear the air, and there's only an upside left. However, more likely than not, the consumer price index will show high inflation due to the decreasing value of the dollar which may bode ill for the economy.

It's another big round of economic data tomorrow, and its to volatile to predict which way its going.

Every dog has its day...

And the Nasdaq got its today after earnings announcements from IBM. The market for the rest of the day was upbeat, as a new found interest in technology arose out of the realization that stable technology companies are a) making money off of corporate expenditures and b) gaining from a weak dollar due to large percentage of international sales.

However, tomorrow appears to be a different day, with Citi this afternoon already announcing its big dividend cut. With more of the financials to report their earnings, focus may be back on the terrible credit situation and the financials at large.

From the way things have been going, it can only be a huge off day tomorrow, with investors happy to take any profit from today.

Also, retail sales figures and producer price index due out tomorrow. Both are likely going to be negative for the market.

2007 Expenses Are In

And boy are they scary. Overall last year, I spent about $12K more than I earned. Most of that amount is spread across credit cards or spent from my savings.

I am hesitant to announce my total expenditures, but suffice it to say they are significant. Doing this annual expense calculation has certainly provided me a snapshot of areas where I could be spending less.

For instance, I spent about $4K on entertainment such as vacation, bar cover charges, and movies. On top of this, I spent $362 on alcohol at bars. It probably is much more than this, since any charge that also included food I counted in my food expenses.

Food expenses last year were about $5,118, or about $427 a month. I think a huge factor in this has been eating out rather than cooking at home. On top of this, I had paid for a few large celebratory dinners when I received job offers.

With these expenses in mind, I hope to decrease my spending and increase my savings.

PS - This year, my total gambling was about a wash, but I am not entirely sure since poker winnings usually were split between 50% for the poker fund and 50% for immediate expenditure.

Bernake Learns

Finally, Bernake says something that the market wants to hear, interest rate cuts are coming. After the last two flops, he's realized, "Hey, the market needs clear direction, not wishy-washy academic talk".

The economy did have some other positives today: Countrywide has a potential buyout deal by Bank of America and last week's unemployment claims unexpectedly decreased.

Tomorrow will be a tough day for the market. It has to weigh a good positive day versus the potential for an upward trend for the next week. I'm worried that people will take any opportunity to cash in some profits rather than ponder future potential gains.

Saving on Energy

Typically, I consider the utilities the last place to look for savings, since in my mind, its practically penny-pinching compared to other expenditures where I could be dollar-pinching. However, in a recent conversation with my parents, I was shocked to learn that my energy consumption last month, 353 kWh, was only about 40kWh more than mine, but they in a much larger place, with many more lights and electronics plugged in.

So what was I doing to use so much electricity?

First, I wanted to know what the average consumption should be. Should I even be concerned about the energy usage? Turns out, both my parents and I are both below the average of 880 kWh per month (International Energy Agency). So in that regard, we are already saving pretty well.

However, I still wanted to know why my energy usage is so high. After all, I spend about 12 hours at work (including commute time), 6-8 hours a night working, and so all that leaves is about 4-6 hours on weekdays and more than half of weekends. Still doesn't make sense.

But then my dad pointed out there was one thing that I was running almost 24x7, my humidifier. And I don't know why that never occurred to me, but it makes perfect sense. After all, a humidifier is a glorified water heater, and I would estimate it probably uses about 100 watts an hour.

Assuming I have it on 20 days of the month, thats 480 hours or 48kWh, or 14% of my monthly energy consumption. That's crazy! I'm going to stop running my humidifier 24x7, and only running it when I'm at home. Hopefully, this'll cut it down to about 20kWh.

Although this is probably a small energy savings, it has really opened my eyes about my energy consumption. And considering at 353kWh, I owe $65, if I could cut half of my energy consumption, I could save $390 in a year.

Chutes and Ladders

Total was a CRAAAAAAA-ZY day. I don't think there could have been a better real market example of my chute and ladders analogy than what happened today. Look at a chart of the Dow Jones Industrial Average:

Look at constant up and down motion of that chart. Those aren't small moves up and down. You can define clear upward and downward momentum moments.

Today, I spent about a good hour watching this, and I actually managed to use some of the momentum to buy in low and sell high two times.

Frankly, this is one of the only methods to make money when the volatility is so high. Alternatively, you could just wait for a big down spike and buy and hold for the long term, or, an even riskier strategy, wait for a quick upward rise and short something.

I think for the rest of the week, it will continue being this kind of volatility. The week finishing much better than it started is unlikely, unless something amazing happens to the market.

Goldilocks Market

Those in the know have been calling the US economy a Goldilocks economy for a while now. The economy was growing to little or too much, but just right. But after last week's employment number shocks, and the sustained period of volatility, I'm reminded of the classic game, Chutes and Ladders.

Just like the game, we would normally expect to plod along slowly forward, knowing there will be a lucky break with a ladder upward, and also knowing that there will be unlucky breaks with chutes downward. However, the market just decided, forget the slow pace, lets just have Chutes and Ladders every day.

And that's where we are today.

Every turn is another economic report: negative means a quick slide down and positive means a quick upward climb.

But how can we get back to the normal market days, when the economy consistently moved forward, albeit slower? It may take some time. We need all the economic indicators to point in one direction. We need Federal monetary policy to be predictable. We need the dollar's strength back.

Recently, I have dropped my bullish attitude for the market. While there are plenty of cheap opportunities out there, the general direction is going to be flat. Day to day, we're going to seesaw between red and green.

What can you do to profit? If you could be a day-trader, you could make a lot. But also, if you are a long-term investor, buying the discounted stocks now and waiting for the market to correct yourself could also make you money. What's bad right now is betting on medium-term trades (under 6 months).

New Year's Resolution (Finally)

I have been racking my brain trying to come up with a good one (and one that I will stick to), and I finally have one, albeit 3 days late.

This year, I am going to try to save $5,000 and add it to my rainy day fund, which I have nothing in right now.

I think this is a tough but achievable goal. With tax refunds and year-end bonus coming soon, it can be reached, but it will involve a lot of will power to refrain from blowing the money on some crazy trip or rewarding myself.

Each month, along with my networth updates, I will update you all on this resolution.

Oil blew up the market

The market started the day off to a high note, with many coming back still jubilant from last night's festivities. However, this quickly melted back to the 2007 fearful and jittery market, with high oil costs and geopolitical insecurity weighing heavily on the minds of investors.

However, not all is lost. I still firmly believe that financials are due to rebound. Other good picks are of course the energy sector and any emerging markets non-Asian.

Networth Update

[Update: I have corrected my car and car loan values, as well as my networth]

2007 is at a close and so this networth update will be the last one in what I have been personally considering my "transitional" period from college life to the "real world". Starting this year, some of the fiscal irresponsibilities such spending too much on alcohol and "fun" stuff will instead become budgeted items. Gifts and other such discretionary items will also be properly allocated. And, I will be carrying forward my excess budget balance from last year to ensure I will be fiscally balanced.

Now onto my end of December '07 networth update:

I am almost embarrassed with networth update this month. Everything that could go wrong has. My poker fund is very low. My Roth IRA account took a huge hit. Christmas came and required gifts. And, I paid for my March cruise.

So, compared with last month's networth update, I have seen a 0.43% decrease in my networth, or a decrease of $4,154.08.

As always, I am looking forward to my tax refund as that should provide a very useful addition to my networth.

Overall, this brings my networth to -$9,363.68 or -0.93% of my goal.