Are Macs Irrelevant?

In my post about recently installing Internet Explorer 7 on my computer, I had mentioned that I have added a Site Meter to my blog. This lets me keep track of some statistics, like browser share. Currently (as of 12/30/06), Internet Explorer represents 61% of the browsers used to view my blog. Firefox is represented by 38%, and the other 1% is an Opera browser.

One of the other statistics that is tracked is operating system (OS). Currently, 100% of the blog readers are using some version of Windows. This means that 0% of you are using an Apple Macintosh. While this is very surprising, Macs almost always represent less than 5% of my audience. I will occasionally see some Linux or UNIX systems show up in the stats. And so far, nobody running Windows Vista (beta) has visited my blog. I have recently purchased a new Compaq computer (made by Hewlett-Packard), and I'm entitled to a copy of Windows Vista when it is officially released.

I suppose that these statistics represent who is visiting this blog, and not the general population as a whole. Since I write this blog for the personal finance community, I would assume that the Windows-based PC is the machine of choice in the area of personal finance.

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The Blogroll

I have been writing for PFStock for about five months now. I am surprised that (so far) nobody has asked me to put their blog onto my Blogroll. By contrast, I've recently been fighting blog spam. I found a bunch of irrelevant comments or links to advertising sites on my blog, which I have deleted.

Anyway, the invitation remains out to legitimate PF bloggers. If you have a personal finance or investing blog, please send me an Email, and I will consider including a link to it. (Note that my Email address is listed in the right side column of my blog.) However, I won't generally link to another blog that doesn't contain original material, or that has more ads than useful text. Even I have standards...

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Cruise Line Shareholder Benefits

I recently noticed that one of my most popular postings on PFStock was my post about Investing in the Cruise Line Industry. Most people reading this post were searching for information about how to get the Shareholder Benefit offered to stock holders of Carnival Corporation (NYSE: CCL), Carnival plc (NYSE: CUK), or Royal Caribbean (NYSE: RCL). I mentioned that each cruise company offers a $100 onboard credit for shareholders that book a 7 day cruise and a minimum of 100 shares. However, I didn't post all of the details at that time.

As a service to my blog readers, I have decided to publish more details of the Carnival and Royal Caribbean Cruise Lines (RCCL) shareholder benefit programs. If you are considering going on a cruise in the near future, both RCL and CCL require that shareholders own a minimum of 100 shares of their stock. The associated stock symbols are RCL, CCL, and CUK depending on which cruise you are going on.

For Carnival Corporation (including Carnival Cruise Lines, Princess Cruises, Holland America Line, Windstar, Seabourn, and Cunard Line in North America) the following benefit is offered:

Onboard credit per stateroom on sailings of 14 days or longer: US $250
Onboard credit per stateroom on sailings of 7 to 13 days: US $100
Onboard credit per stateroom on sailings of 6 days or less: US $ 50

Outside of North America, Carnival Corporation also operates P&O Cruises, Ocean Village, Swan Hellenic, Costa Cruises, Aida Cruises, and P&O Cruises Australia. Note that on these ships, the shareholder benefit will be offered in British pounds, Euros, or Australian dollars depending on the currency used onboard the particular cruise ship.

This is the direct link to the Carnival Corporation Shareholder Benefit. It gives the address and telephone numbers for each of the cruise lines that offer this benefit.

For Royal Caribbean (RCCL) and Celebrity Cruises the following benefit is offered:

$250 Onboard Credit per Stateroom on Sailings of 14 or more nights.
$200 Onboard Credit per Stateroom on Sailings of 9 to 13 nights.
$100 Onboard Credit per Stateroom on Sailings of 6 to 8 nights.
$50 Onboard Credit per Stateroom on Sailings of 5 nights or less.

The Shareholder Benefit excludes sailings on Celebrity Xpeditions.

Here is the direct link to RCCL Shareholder Benefit. This is an FAQ for their program. And this is a PDF file of the information for Royal Carribean. (I just noticed that the P.O. Box numbers differ between these two documents, so it is probably best to contact RCCL by email or phone before submitting your information to them.)

In general, you will need to mail or fax either a shareholder proxy card or a copy or your brokerage statement to the company (either RCCL or CCL). This is to prove that you own at least 100 shares of stock.

Personally, I have taken advantage of the CCL shareholder benefit twice. However, I have not (yet) used the RCL benefit. If you have general questions about the shareholder benefit, or just want to talk about cruising, I invite you to send me an Email. (Note my Email address is listed in the right side column of my blog). Also, the above links may change or go out of date. If you find that the information or links are out of date, please Email me so that I will know to update it.

The other major player in the North American cruise market is Norwegian Cruise Lines (NCL). NCL and NCL America are owned by the Genting Group of Malaysia (which also owns the Asian cruise line Star Cruises). I mentioned that you cannot buy their stock directly in the United States. Unfortunately, a shareholder shipboard credit is not offered for NCL or NCL America cruises.

I have a one final thought. If you don't already own Carnival or RCCL stock, then I do not recommend buying the stock just to get the shareholder benefit. Make your investment decisions to buy CCL or RCL based on your investment needs, and not on your vacation needs.

A Note from the Author:
Thousands of people have read this post, but neither Carnival nor Royal Caribbean compensate me for directing readers to their websites. A few readers have sent me a message of thanks for pointing out a benefit that they didn't know about, but the vast majority of people pass through without saying anything. I don't want to get into the details, but unfortunately, PF Stock has fallen upon some financial difficulties. Things are simply not nearly as stable as they've been in the past.

If you have read my posts and have benefited from the information, I want to ask you to consider making a donation to help out PF Stock. I have added a PayPal link below, if you choose to make a donation. Any amount is appreciated, but of course this is strictly voluntary. Thank you for your support and happy travels.

PLEASE NOTE: There is a newer version of this post. Please see Updated Cruise Line Shareholder Benefits for the latest information.

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Vacation

This month, I will only be posting sporadically to my blog. I have some well deserved vacation time coming up, and I don't plan to post while I'm away. Have a safe and happy holiday.

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The Decline and Fall of Internet-only Banks

Many people know that I have been following approaching demise of NetBank (Nasdaq: NTBK) on this blog. The story began when I decided that I was going to close my NetBank money market account because it was underperforming other money market accounts, and I was tired of the long delays it took to make deposits. I hinted that NetBank would no longer be able to pay competitive interest rates due to some significant losses that they suffered earlier this year. There were questions about where I was getting my information from, so I wrote another post explaining that I got most of my data about NetBank's deteriorating financials from NTBK press releases and the NetBank website. Only one day after I posted that article, NetBank publicly admitted that the company was both unprofitable and unstable. As a result, NetBank ousted their CEO that same week.

At this point, I have gotten all of my money back from NetBank, and redeployed it to some safer institutions. I wanted to point out that the NetBank website offers existing customers a 2.99% APY interest rate for their Standard Money Market. However, I can get a 5.oo% APY at both Citibank and Washington Mutual (WaMu), and they have real branches and ATMs. Note: Please do not misconstrue that I am an advocate for either for Citibank or WaMu here. I am only pointing out the facts about their higher interest rates. The truth is that I've had other issues with both Citibank and Washington Mutual in the past. I have a saying that "There are no good banks, only some that are less bad."

Anyway, I've digressed. On the same web page that notes NetBank's 2.99% APY money market, there is a statement that touts "Earn over three times the national average." However, according to Bankrate.com the average MMA is said to pay 3.41% APY.

Am I reading something wrong? It seems like NetBank's rate is actually below the national average. I don't know what y'all folks in Georgia call that, but here in California I call that a bald-faced lie!

At the same Bankrate.com site, this is their assessment of Netbank:

We have come to believe that, as of June 30, 2006, [NetBank] exhibited a significantly below average condition, characterized by lower then [sic] normal overall, sustainable profitability, questionable asset quality, below standard capitalization, and lower than normal liquidity.

NetBank could say that other online banks are making similarly outrageous claims. And they wouldn't be wrong. The Orange Savings Account offered by ING Direct pays only 4.50% APY (recently raised from 4.40% APY). At the same time, they claim that the average bank's money market rate is only 0.84% APY. I don't know how they can keep a straight face, when the Bankrate.com website shows an average rate much greater than 0.84% APY. Somebody answer one question for me: why do online banks feel it is necessary to outwardly lie in order to attract new customers?

The claim to fame of NetBank, ING, and other internet-only banks is that they save money by doing business online and not incurring the expenses associated with maintaining branch locations. Unfortunately, they are starting to be outmaneuvered by their bricks-and-mortar competitors. The historically high interest rates that online banks used to offer on their deposit accounts was the only compelling reason for their competitive advantage. You can mark my words now: if they fail to compete, this will be the beginning of the end for internet-only banks.

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Free USB Flash Drives

Previously, I wrote about collecting freebies at The Money Show and at the Hard Assets Conference (also known as the Gold and Precious Metals Investment Conference) in San Francisco. At the Hard Assets Conference held over this past weekend (Thanksgiving Weekend), I have discovered a new trend in freebies: USB (Universal Serial Bus) flash drives. For those who are not familiar with the technology, a USB flash drive is a portable computer memory that plugs into a computer USB port and can be used like a small hard disk. USB Flash drives are also known as thumb drives.

In the past, exhibitors have used a variety of media to get their messages across. Typically, they have used glossy brochures, and CD-ROMs containing information about their companies. Now, some companies have put their annual reports, company press releases, PowerPoint slides, and other data onto USB flash drives that they give away as freebies. I was able to snag a couple of these 512MB drives from a booth at the conference. My DW also got a free MP3 player for herself. In this case, the 256MB MP3 player also contained soft copies of company literature from the sponsoring firm. Of course, the casing of each USB flash memory is printed with the company logo, so it is unmistakably a freebie. After viewing the information on the USB flash drive, the memory can be re-used for whatever purpose the user wants.

I think this is a shrewd move on the part of the exhibitors. When their company literature was contained on a CD-ROM, I might choose not to view it. However, when the information is on a USB drive, I pretty much have to at least glance at it once (even if it is only to delete the data so that I can re-use the flash memory). With a bunch of new freebies in hand, I've chalked up another successful investment conference!

On a related topic, I also purchased the latest versions of H&R Block's TaxCut and Microsoft Money, this past weekend. I am getting started on taxes early this year. TaxCut also offers a version of their software on a reusable USB flash drive. But I got the regular version of TaxCut on CD-ROM since it is $10 cheaper. Also, I think that the flash drive has a pretty small capacity.

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Ameritrade's Unimpressive Site Upgrade

I have written before that I have both an original Ameritrade account and an original Waterhouse account. Ameritrade recently upgraded their web site. This "upgrade" was delayed for about a week with no reason given. Thus far, I'm thoroughly unimpressed with the new site.

So, where's the upgrade? I was expecting things like better online statements, easier to use account history, PDF views for my trade confirmations, and so on. Instead, the changes to the Ameritrade website are mostly cosmetic in nature -- mostly rearranging the menus, and changing the site color to green. I can't see any real improvement in functionality. Some features are either not improved, or even worse than before.

Take for example, the new stock screener. Here is a stock screen that I might put together: find all large cap stocks that are within 10% of their 52-week low. I couldn't figure out how to run this simple screen in the Ameritrade stock screener. Another thing is that the screener is no better than the free stock screens available at Yahoo Finance or MSN Money.

I use Standard and Poors (S&P) stock reports extensively for my personal research. However, the usual S&P reports available at the new Ameritrade site have somehow shrunk from 8 pages to 5 pages. I think that they cut out the three pages that include S&P's Sub-Industry Outlook, Company News, and Analysts' Recommendations from the abbreviated reports. Again, there's no explanation for the change.

As a former Waterhouse customer, I would qualify for Ameritrade APEX twice over based on my Waterhouse account balance. But after talking with Ameritrade customer service representatives about this, they were unwilling to upgrade me to APEX unless I transfer my funds from my original Waterhouse account to a new Ameritrade account. Logically, this is like saying that TD Ameritrade is one company, but you have to transfer your funds from one TD Ameritrade to another TD Ameritrade in order to get APEX access. Huh, what gives?

As a Waterhouse customer, I'm concerned now that Ameritrade will downgrade my account to a lower standard when they finally finish straightening out the mess they made. As I mentioned in my previous post, there are features that I particularly like in my Waterhouse account. Mainly, these features are access to IPOs and the cost basis calculator available through Waterhouse. Ameritrade doesn't keep track of cost basis for you, and instead the refers you to Gainskeeper which costs extra.

Ameritrade SPAM: I know that I am not the first person to write about getting SPAM at my Ameritrade Email address, as it has been reported by other PF bloggers. Like many others, I use a unique Email address for my Ameritrade account. This is accomplished through Yahoo's "AddressGuard" feature. In other words, the only entity that knows my Ameritrade Email address is Ameritrade itself. However, I have been getting spam at this address. Whenever this happens, I change my Email address to a new one, and delete the old Email address. This has happened three times already, as it seems that my Ameritrade Email address has been repeatedly compromised. I think that it is a security issue at the Ameritrade end, and I now have to delete yet another Email address. By contrast, the Email addresses that I use for Waterhouse and E*TRADE have never been compromised.

Ameritrade has been touting such features as Trade Triggers, but I'll tell you that the E*TRADE site has them beat there. However, I think E*TRADE's customer service is worse than Ameritrade's. Nevertheless, I now have a wait-and-see attitude on Ameritrade. But based on what I am seeing, I predict that E*TRADE might end up with a lot more business out of me in the future.

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Hard Assets 06: San Francisco

I had previously written about the San Francisco Money Show, which is held each fall at the downtown San Francisco Marriott Hotel. There is a second investment conference that is held each year at the same hotel. This year the theme is "Hard Assets". While the carnival atmosphere of the Money Show is retained at this show, the subject matter usually focuses on precious metals, mining, oil, and gas.

Many of the exhibitors in the investment conference are foreign mining companies. These are largely listed on the Canadian stock exchanges, most notably the Toronto Stock Exchange (the TSX). Unfortunately, a large share of these stocks are penny stocks of questionable quality. For a few years, there were a lot of dotcom exhibitors, and even mining companies that actually became dotcoms to feed off of the associated hype. This came at a time when the prices for gold, oil, and other commodities were depressed.

Among the speakers at the conference, one stands out among the crowd: James Dines. This flamboyant individual has been touting something every year since about the late 1960s, whether it is gold, dotcom stocks, or his current favorite, uranium. Mr. Dines is the publisher of The Dines Letter, and the author of the book Mass Psychology. I haven't had the opportunity to read the latter, though. His booth is typically rimmed by half a dozen blond, blue-eyed assistants that could politely be referred to as bimbos. And you wouldn't expect anything less from a man whose motto is "Always travel first class, because if you don't, your heirs will!" At any rate, his seminar is usually well attended and very entertaining, to say the least.

Just like at the Money Show, this investment conference also offers an array of freebies. Over the years I've been able to snag several tote bags, caps, and keychains. I have one titanium keychain that was offered by a titanium mining company, and I have another one that includes a flashlight and looks like a miniature miner's hat. Hard Assets '06 is held November 26-27 this year.

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David Bach: 90% Good, 10% Evil

A lot of good things have been said about David Bach, author of The Automatic Millionaire. I do think that his work is largely good, and a lot of good things have been said about him. His book is especially helpful for those who are just starting to pull themselves out of debt, and starting to build on their savings. I won't repeat the positive things that have already been said. Instead, I'm going to focus on what I don't like about his books.

First of all, Bach has a way of oversimplifying things. Throughout the book, he uses examples of how you will end up with an astronomical amount of money, if you stop buying coffee drinks, and invest the money at a 10% annual return. Of course, he doesn't really tell you where you can get the 10% annual return. He dances around the issue in his book, and mentions a bunch of brokerages and mutual funds, but I don't see any one of them guaranteeing a 10% annual return.

Like many popular financial writers today, Bach's book reads like an advertisement. Indeed The Automatic Millionaire contains 5 full pages of advertisements for his website, his other books, and his 10 CD set for the complete Automatic Millionaire Audio System. And, did you realize that Bach trademarked the term "The Latte Factor (TM)"? Boy, I hope I don't owe Bach royalties for writing this post.

Aside from this, nothing irks me more than Bach's three paragraphs covering the term "leverage". In this one section, Bach describes buying a $250,000 home with $50,000 down. He states that if the home's value goes up to $300,000, then the investor has doubled his money. Fair enough. But, he goes on to finish the section with the following paragraph.

Over the last five years, many homes have doubled in price. Think of
what this means in terms of leverage. If you invested $50,000 in a
$250,000 home five years ago and it's now worth $500,000, you've made $250,000 on a $50,000 investment. In investment circles, that's called a five-bagger -- an amazing 500 percent return on your money.

Talk about glittering generalities! In any responsible coverage of the topic of leverage, the author would explain that leverage is a double-edged sword. While one can make outsized profits in an up market, one's loss could also be multiplied in a down market. In the stock market, the parallel example is buying stocks on margin. In this case, you are using leverage in the hopes of making multiplied gains when the stock market goes up. On the other hand, if the stock goes down, you could lose your entire investment and more.

Bach doesn't even mention the potential downside of leverage anywhere in his 240 page book; he only discusses the upside. I think that David Bach's omission here is at best irresponsible, and at worst criminal. While the term criminal may be a harsh assessment of The Automatic Millionaire, it is nonetheless accurate. You may have noticed that mutual fund prospectuses have a statement that goes something like this:

Past performance is not an indication of future performance.

Do you know why mutual funds are required by government regulators to print this in their prospectuses? That's because it's true! You can't make the assumption that if an investment is increasing in value at a certain rate, that it will continue to do that in the future. Similarly, you can't just assume that if the stock market has returned an average of 10% for several years, that it will only continue to do that in the future. Clearly, Bach is strongly implying that buying a home in this already overheated market is a great investment. And at that, he is peddling his advice to those who are least likely to know any better.

Anyway, so much for David Bach. As I have said, his material is pretty good for people who are just starting to pull themselves out of debt. I will say that his books do contain about 90% good advice. It is the other 10% that I have issues with.

Clearly, though, there are better personal finance books available. I would recommend a couple time-tested classics. My first recommendation is The Richest Man in Babylon, by George Clason. The second book is The Wealthy Barber by David Chilton. These books have a far better track record that Bach, and I think that they will better withstand the test of time.

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Ameritrade's "Hidden" Cash Sweep Account

Ameritrade has a cash sweep option called the Total Asset Plan (TAP) which offers a significantly higher interest rate on cash than the default Ameritrade cash sweep option. When you first setup an Ameritrade account, you are put into a cash sweep option that pays less than 1% interest. By contrast, as a participant in the TAP, the cash sweep is offered through money market funds at "The Reserve" (website: ther.com). There are a variety of taxable and tax-free money funds available. For example, the taxable Primary Money Market fund pays about 4.4%. Personally, I chose the California Tax-Exempt fund which pays about 2.4%.

But, don't go looking for the Total Asset Plan on the Ameritrade website; it's not there. In order to setup this account, I needed to talk to a customer service representative. In fact, I would not have even known that the TAP option existed without speaking to a real person at Ameritrade. I don't know why they keep the TAP a secret from most investors.

Lastly, having gone through the application process once, I now know where to find the TAP application on the Internet. However, since this is a "hidden" option (that Ameritrade doesn't want the average person to know about), I would suggest calling Ameritrade to inquire about it.

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Buying an IPO: Free Money

I had previously mentioned the Bare Escentuals IPO (Nasdaq: BARE) that I received from my stock broker, Waterhouse. Since most people are probably not familiar with the process of getting Initial Public Offering (IPO) shares, I thought that I would write an overview of the process. My caution here is that I am not an expert. IPOs represent an added layer of risk that many investors are not willing to take. Nevertheless, if one is willing to "invest" the time to understand the IPO process, and more importantly the companies in which you are investing, buying IPOs can be a relatively low-risk venture that is like getting free money.

First of all, there are two online brokers that I use which offer IPO shares. These are Waterhouse, and E*TRADE. Of course, there are other brokers that offer IPOs, but I'm not yet involved with them. I recently found that Fidelity offers IPOs. However, their minimum requirement of $500,000 in a Fidelity account makes that venture prohibitive for most people.

The first step in getting an IPO is passing an eligibility questionnaire. You will be asked questions about your income, your liquid net worth (excluding the value of your primary residence), your investment experience, and your investment objective. My only advice here is to be honest when answering the questions.

Once you pass the IPO eligibility questionnaire, the next stage is to wait until the broker announces that they are taking conditional offers on a new IPO. At that time, you should go to the broker website, read (or at least skim) through the prospectus, and place a conditional offer. In general, a conditional offer is placed in multiples of 100 shares, and you will indicate the maximum number of shares you are willing to buy at the offer price. Up to this point, you are not under any obligation to buy the IPO shares, and may cancel your offer up until the allocation phase. However, it is your responsibility to read and understand the "risk factors" that are listed in the prospectus.

Next comes the pricing (if the IPO is not withdrawn). Note that pricing occurs after hours on the day before the IPO begins trading. You will be asked to confirm your conditional offer (usually by midnight of the same day). This step is very important! You have to make the decision at this point if the IPO is one that you really want to participate in. If you decide that you don't want the IPO, you can still cancel at this time. Warning: not all IPOs go up, so choose carefully! I cannot overemphasize this point: buying an IPO can involve significant risk.

The last stage is the allocation phase, which occurs in the early morning hours on the day that the IPO begins trading. Here you will be randomly allocated shares based on the level of interest in the IPO. However, I estimate that 80-90% of the time, I was not allocated any shares after completing this whole procedure. In practice, I have usually placed conditional orders for 200-300 shares of a new IPO, and have been allocated either 100 shares or nothing.

In the case of Bare Escentuals, the IPO priced on Thursday, September 28 at $22 per share. I placed an order for 300 shares, and was allocated 100 shares. It began trading on Friday, September 29 when it closed at 27.15. I later sold the stock at $30, and made a profit of $800.

As with any investment, I advise you to do some outside research of the companies that you are potentially investing it. Two resources I use to gather information about new IPOs are IPOhome and MarketWatch. Please use these resources before you invest. One last note, sometimes you will see what is called a secondary offering for stocks that are already being traded on a stock exchange. I generally avoid these because the potential for quick gains is not as good.

In summary, buying an IPO can be a big hassle, and you most likely won't even get any IPO shares in the end. But if you play the IPO game right (and avoid poor quality IPOs), you can end up with an almost certain profit. It is like getting free money.

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NetBank Increases MMA Rates

After nearly a year, NetBank (Nasdaq: NTBK) has finally raised its interest rates on money market accounts for existing customers from 2.90% to 2.99% APY. Although this rate is much below what its competitors are offering, it shows NetBank's willingness to move in the right direction. Honestly, I thought that this day would never come! This is an impressive 0.09% increase! Imagine that if you have $10,000 deposited with NetBank, that would work out to an incredible $0.75 per month or $9 more per year. I'm absolutely flabbergasted by the immense generosity of the folks at NetBank. For once, I'm speechless...

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Prior posts about NetBank (Nasdaq: NTBK):
Sayonara NetBank
More on NetBank
Unprofitable and Unstable NetBank

Internet Explorer 7

This past weekend I upgraded my browser to Internet Explorer 7 (IE7) by Microsoft. This upgrade is only available for legitimate owners of Microsoft Windows XP and Windows Server 2003. Some of the new features that I like in the new IE7 are tabbed browsing, a customizable search box on the right side of the address bar, and a shrink-to-fit feature for printing wide webpages. In Internet Explorer 6 (IE6), many webpages had to be rotated (or the right side was cut off), and thus wasted lots of paper.

But, what I like the best about the new IE7 browser is the ability to read RSS feeds (i.e. XML) directly. For example. The URL of the RSS feed for this blog is
pfstock.blogspot.com/rss.xml. This usually appears as gibberish in older browsers, but is formatted quite nicely in IE7. It includes all of the links, and if the blog is broken out into categories, you can filter posts by category. I think that this will be most useful when reading blogs that choose to load down their site with advertising. I am not opposed to ads, since I have a few on my own site. However, when a site has ads on the top, left column, right column, in-between posts, and so on, it gets a little out of hand...

I have noted a couple of issues with IE7 that will affect PF bloggers. In Blogger, there is a preview function on the "edit posts" page that lets you view a post without going into the editor. This doesn't work in IE7. And at pfblogs.org, clicking on "all" underneath "Today's active weblogs" will open a search panel on the left side that contains a list of all available blogs. This doesn't work in IE7, as it will open the list in a new window. There are various other websites that I've seen where parts of the text or images are cropped off, or don't display the same as they did in IE6. In the some cases, there are parts of the webpage that you can't read.

In a twist of irony, there isn't a way to run IE7 and IE6 on same computer. This will force me to install a competing browser, Firefox, on my machine in order to view the websites that are "broken" in IE7. This is probably not Microsoft's original intent.

On a related topic, I recently installed a Site Meter on this blog. This is basically a web counter that keeps track of a few different statistics including browser share. For this blog, a slim majority of the readers use Internet Explorer, with IE7 representing about 5%. (I expect that percentage to grow in the future.) About a third of the readers use the Firefox browser. (But I think that most of this fraction is actually one reader who visits frequently.) The rest use miscellaneous other browsers like Safari, Opera, Netscape, and Mozilla.

If you are curious, I have kept the statistics on my Site Meter public. Just scroll down to the very bottom of this page and click on the Site Meter icon.

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Nasdaq-100 May Be Reaching a Top

I wanted to take the opportunity to mention the Nasdaq-100 and Exchange Traded Funds (ETFs). ETFs are like Index Mutual Funds; however, they are traded like stocks. Until this past week, I had been holding shares of an ETF called Nasdaq-100 Tracking Stock (Nasdaq: QQQQ) which I purchased back in July (before I started PFStock). As an ETF, QQQQ is broadly positioned with 100 of the largest Nasdaq companies as its components.

Some of my investment decisions are based on technical analysis (i.e. looking at the chart) of an investment. The recent run-up of QQQQ is a nearly picture perfect example of how to buy into an uptrend. Here is a 6-month price chart of QQQQ (click to enlarge):




As I had mentioned, I first purchased QQQQ in July. From the chart, you can see that QQQQ hit a low in July. Low price alone is generally not enough of a reason to justify buying a stock. I waited until almost the end of July, when QQQQ was starting into an uptrend before buying. From there, I've held on until this past week. You can see that stock price has seen some dips along the way, which might stop out some traders.

Currently, the Nasdaq-100 Index is starting to encounter some resistance after this prolonged uptrend. If you look at the very end of the QQQQ chart for the past several days, you can see some recent weakness.

Although QQQQ may continue to climb, and I have closed out my position in QQQQ. This doesn't necessarily mean that I think that QQQQ is going to drop. However, I'm pretty confident that we won't be seeing the same kind of increase in QQQQ that we have in the past three months. QQQQ is near a 52-week high again, and has entered a volatile phase where it might be risky to take either a long or short position.

My opinion is that the safe thing to do now is to take profits. These are a certainty, and it is perhaps time to look for other investment opportunities. I will caution you, though, that I have a tendency to sell a little bit early.

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Annoyed

I had written before that I found a web site that used snippets of text that were literally stolen from this blog for what is called a "Made for Adsense" advertising site. I've now identified other similar sites and one particular site that has copied my entire entry on Resources for Early Retirement, verbatim. Again, there was no attribution to my blog or any link back to this blog from that site. Others whose stolen material appears on this site include 2million, John Greaney, Suze Orman, and other bloggers. It appears that the sole purpose of that web site is to earn revenue from junk ads that appear there.

Annoyed is perhaps an understatement of my feelings. Someone else is making money off of the material that I wrote here, and I feel that this is a violation of trust to say the least. I created PFStock with the genuine intention of giving others my insights in the areas of personal finance and stock investing. I had never expected my writing to be plagiarized in this way. I sought assistance from Google, the owner of Adsense, but they have been useless in helping combat this problem. And why should they be? After all, Google makes money from these sites that steal copyrighted material from others. Considering these events, I am now seriously considering ending the publication of this blog.

Update: On the advice of JLP from AllFinancialMatters, I Emailed a cease-and-desist letter to the owner of the offending website. In the end, the offending website was removed. But, I am still annoyed by the whole situation.

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More Links for Early Retirement

Akaisha and Billy Kaderli are the couple that I mentioned in my previous post about early retirement. Akaisha has asked me to post a link to their favorite websites. Among the links that they have listed, the ones near the top of the page are the most useful for those considering early retirement. Toward the bottom page are links that are related to their travels, mostly in Southeast Asia.

Akaisha and Billy have recently been profiled in the October 2006 issue of Kiplinger's Personal Finance magazine. According to this article, the couple has been able to keep their expenses very low -- about $24,000 per year. They maintain a diversified portfolio of mostly stock index funds. And they withdraw only about 3% a year from this stash.

For people considering early retirement, a question that would be interesting to ask is do you think that you could live off $24,000 a year? Here in Silicon Valley, I would say that it would be very difficult to retire on that amount, without moving to a less expensive area. Interestingly, the couple used to live in California, but have now setup residence in Arizona.

I also wanted to acknowledge that fin_indie has mentioned pfstock on his Retiring Early blog. His post expands on the mine by describing the main boards on the Early Retirement Forum, which I mentioned before. He has promised to provide some more of his insights of what he has learned from "actively lurking" on the retirement forums.

Updates:
Early Retirement Housing

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Comparing Online Brokers

The main online brokerages that I use are TD Ameritrade and E*TRADE. I actually had both an original Waterhouse account and an original Ameritrade account before their merger. For all intents and purposes, however, TD Ameritrade is still really two separate brokerages. I will give my opinion of each broker.

Each account that I have has its pluses and minuses. I still prefer to use my original Waterhouse account for most trades. There are some features that Waterhouse still offers that Ameritrade does not. These are access to IPOs, and a better selection of cash sweep accounts. In fact, I got my recent shares in the Bare Escentuals IPO (Nasdaq: BARE) from Waterhouse. However, as far as I know, you can no longer apply for a new Waterhouse brokerage account.

I think that E*TRADE has a better website overall than either Ameritrade or Waterhouse. However, their customer service is not as good. The E*TRADE site doesn't have a tear away "snap ticker" like either Ameritrade or Waterhouse. This makes it harder to look at real time quotes from the main website. The E*TRADE website also provides access to IPOs, and has a decent streamer (for streaming real-time quotes).

Comparing Ameritrade to E*TRADE, I think that Ameritrade has a better streamer. One annoyance that I have found is that Ameritrade doesn't keep track of your capital gains and losses. They say that "the calculation of gains and losses the responsibility of the taxpayer, so TD AMERITRADE does not provide this information." The truth is that I don't rely on this information to calculate taxes, but it is nice to be able to see it to quickly gauge my gains for the year.

As far as commissions are concerned, Ameritrade and Waterhouse are generally a little bit cheaper than E*TRADE. However, I stopped paying attention to commissions when they dropped below $20 per trade. The difference of few dollars is not a big deal.

All three brokerages have access to research such as Standard & Poors (S&P) and Morningstar stock reports. I do use S&P stock reports extensively to do some of my initial research when selecting new stocks to buy.

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Resources for Early Retirement

I think that many people can admit to fantasies of an early retirement. I know that I have had more than a few daydreams about the subject.

Over the years I have found a few really good resources (and many more really bad ones) to seek advice on early retirement. I think that the best resources are actual people who have retired early and are willing to share their thoughts.

I have found a few common themes among those who have retired early:
1) Living below your means (LBYM).
2) Maintaining a diversified investment portfolio on which to draw from.
3) Using a conservative 4% rule of thumb as a baseline for withdrawing from your retirement savings.

Since I am not retired (yet), I'll refer you to my sources for more information.
Books:
How to Retire Early and Live Well by Gillette Edmunds focuses on building a diversified portfolio on which to draw living expenses from.
Retire Early and Live the Life You Want Now by John F. Wasik is a very good all around reference on early retirement.
Cashing in on the American Dream by Paul Terhorst focuses on reducing expenses, and advocates selling your house, and moving to a less expensive residence, to finance an early retirement. Unfortunately this book is out of print, but might be available at some libraries.

Websites:
The Retire Early Homepage is maintained by John P. Greaney, an engineer who retired at age 38. This site gives a lot of general information about early retirement. He strongly cautions against retiring too early when your savings aren't really enough to sustain you for the rest of your life. I think that some of his older material is of more practical use than the more recent entries.
Early Retirement Forum is a message board for those who have retired early, and those who intend to. There are various forum topics broken out by the stages of planning for an early retirement.
Retire Early Lifestyle is an inspirational website by a couple who retired in their 30s. They spend a lot of time traveling the world, and are able to keep their expenses amazingly low. They also have an e-book available on CD-ROM which I recently purchased.

One last note, on the Internet, you may come across the acronym FIRE which stands for Financial Independence Retire Early.

Updates:
More Links for Early Retirement
Early Retirement Housing

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HELP! What is This?

I was recently searching for this blog through the usual search engines when I came upon this site and others like it. It appears to contain random snipets of text that I wrote for this blog, similar to what you would see in search engine results. However, no references are made to my blog and there are no links to my blog on that site. In fact, the entire site is completely unintelligible to me.

There are quite a few ads on that site and I've seen other ones like it when I was searching the Internet for other topics. I imagine that the Internet is littered with thousands of websites like these.

To be honest, I am a bit annoyed that someone else is making money on ads by reposting text that I wrote to their junk website. I'd like to ask if my fellow PF bloggers have encountered something similar. Is there anything that can be done to stop these sites from taking material that I wrote for their ads?

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The San Francisco Money Show

Each fall, The Money Show is held at the San Francisco Marriott Hotel in the city's downtown. This a literal carnival of investing. Every year The Money Show brings in a large collection of speakers, most of whom have some sort of investing product or service to sell, who pitch their advice in 30-45 minute speaker sessions. Over the years, though, I have seen some notable speakers. The ones that I remember most vividly are Bambi Francisco of Marketwatch.com, James Jubak who is a commentator for MSN Money, and William J. O'Neil who is the founder of Investor's Business Daily.

The seminar sessions are broken out into many of the hotel's subterranean meeting rooms. The SF Marriott is a huge hotel with dozens of meeting rooms that can be re-sized for practically any group of speakers. It is well suited for conventions such as The Money Show. At any given time, several speakers will be talking about different topics. Many of the speakers do have something to say about important topics. I think that the speakers representing larger firms are often trying to share their knowledge with people. But having said that, there are a lot of speakers who are just giving a sales pitch and fishing for new business.

The exhibitors at The Money Show range from large mutual fund companies and brokerage houses to individual newsletter writers and penny stock promoters. All and all, one has to pick and choose which booths are worth stopping by for more than quick glance. If you linger too long at any one booth, you might find yourself in the middle of an unwanted sales pitch. There is no shortage of reading materials for the numerous offerings that the exhibitors have. This brings me to another reason I like going to The Money Show: freebies.

I can usually cart off a couple of bags worth of sample newsletters, magazines, pens, notepads, keychains, refrigerator magnets, mouse pads, and candies. Sometimes, I've been able to land a canvas tote bag, baseball cap, or a free T-shirt. My DW says that I'm a magnet for a free T-shirt offer. One time, I was lucky enough to get a copy of William J. O'Neil's book, 24 Essential Lessons for Investment Success. And occasionally, exhibitors will invite you for lunch or cocktails, but that usually involves listening to a sales presentation for the duration.

Oh, and did I mention that admission to The Money Show is free as well? My DW and I generally make a trek into the city for The Money Show event. Unfortunately, this year we are not going because they have decided to hold it on the weekdays only from October 16-18, 2006. I still have a regular job to hold down, so I will have to miss it. Maybe next year.

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As a Rule of Thumb...

In an earlier post, I cautioned against putting too much weight into the usefulness of a rule of thumb. (See Wealth According to The Millionaire Next Door.) Let's build on my example, and take a single-income family (two people, no kids). Assume that one makes $80k/year, and they are both about 35 years-old. So according to the formula in The Millionaire Next Door, if they have over $560,000, they are PAWs (prodigious accumulators of wealth). For argument sake, suppose that they do have $560,000 in net worth, which would put them squarely in the PAW category.

Now, suppose the other partner decides to start a business, and their combined income increases by $60k to $140k. By the formula, they ought to now have $980,000 in net worth in order to stay in the PAW club. Well, they now fall $420k short of the mark. This sounds crazy, but the math proves it. Using this backwards logic, one could conclude that any activity that increases the income of the couple is a bad decision because it would change them from being PAWs (rich) to just plain average. Does this nonsense make sense to anybody?

Let's look at another example using two "rules of thumb." The first rule of thumb is that in order to have enough accumulated wealth to retire, one needs to be able to replace 80% of their current income in retirement through savings, IRAs, 401(k)s, and the like. The second rule of thumb is that one can expect to earn 4% on their accumulated savings in retirement (This is a conservative estimate that assures you won't run out of money after you quit working). Now suppose that an individual in his early 50s makes $100k per year. By the first formula, that person needs to be able to replace $80k per year in retirement. Using the second formula, the person has saved nearly $2,000,000. In the example, we assume a 4% interest rate: $2,000,000 X 4% = $80,000. So, he's all set!

Suppose, just months before early retirement, the boss comes by to acknowledge the great job he's been doing and offers a $10,000/year raise for his efforts. Let's run the numbers once again. A salary of $110,000/year X 80% = $88,000 that needs to be replaced in retirement. In order to guarantee this level of income, our friend needs to have saved $88,000 / 4% = $2,200,000. This is a full $200,000 MORE than he budgeted for.

That number, by the way, happens to be 20 times the amount of the raise. I can assure you that mathematically, a raise of any amount will require a 20X increase in savings based on these two "rules of thumb". So, the next time you are offered a raise, are you going to tell the boss, "No thanks, that will just push out my retirement date"? Of course not! Common sense alone tells you that you would be better off getting the raise, but a bunch of rules of thumb tell you that the raise will hurt you financially.

So, in summary, take a rule of thumb with a grain of salt.

Update: See also The Millionaire's Rule of Thumb.

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Unprofitable and Unstable, NetBank Ousts its CEO

Only one day after I posted my findings about NetBank's financial condition, NetBank (Nasdaq: NTBK) has announced that it will be replacing its CEO. So long. Hasta la vista, baby! This post was a follow up to my original posting where I speculated that something fishy was going on at NetBank, and that a worst-case scenario would be that NetBank customers would need to recover their funds from the FDIC if NetBank becomes insolvent. However, I noted that while this is certainly possible, it is not the most likely case.

To my blog readers at NetBank: I am glad that you have finally decided to pay some attention to me; it is a pity that you didn't afford me such attention when I was just a NetBank customer.

All joking aside, I think that replacing NetBank's CEO is a bold first move toward righting the problems at NetBank. Clearly, NetBank has finally admitted that there are serious problems going on. This is a statement by the new CEO taken from today's press release:

[NetBank's] main objective over the next three to six months will be to stabilize the company's operating profile and return to profitability as quickly as possible.

Overall, I think this is good sign. I'll be watching to see how NetBank follows through.

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More on NetBank

A previous post about my reasons for withdrawing my money from NetBank created a bit of a buzz among personal finance bloggers. Mostly, people wanted to know where I get my information about NetBank's financial condition from. I get it from NetBank (Nasdaq: NTBK) press releases and Securities and Exchange Commission (SEC) filings.

From NetBank's previous releases and other information available at their website, I can discern the following facts:
1) NetBank lost $11 million in the first quarter of 2006.
2) NetBank lost $31.4 million in the second quarter of 2006.
3) NetBank has stopped paying its shareholder dividend saying that they need "to protect the company's capital base and tangible book value from further erosion."
4) Most people know that money market interest rates at most banks have increased significantly in the past year. However, NetBank has not increased their MM rates since January 2006.

On September 25, NetBank filed a Form 8-K with the SEC. This covers their monthly financial data for the past year. This report shows that NetBank's deposits (assets) have been steadily declining over the last year. This means that people (like me) have been taking their money out of NetBank.

Regarding NetBank's dismal interest rates, I have copied this quote from the 8-K:

The online marketplace for deposits remains hypercompetitive. A number of providers continue to advertise money market rates in excess of the short-term FedFunds rate at 5.25%. Given the current overall rate environment, these rates are difficult to rationalize and likely not sustainable over the long-term. Since [NetBank] cannot invest deposits at such rates profitably, we have not matched them.

It stops a little bit short of saying that NetBank won't ever increase their interest rates. But it does look like NetBank is not even trying to compete with other online banks anymore. NetBank is currently paying a 2.9% APY on their money markets for existing customers. And they are pretty much admitting here that some of their competition is paying a lot more in interest.

The NetBank 8-K filing has already forecast that they will continue to lose money in the third quarter of 2006. They talk about selling off parts of the company that they are losing money on. Unfortunately, what is really lacking from the NetBank 8-K report is any type of good news.

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Bare Escentuals IPO

Great news! I was allocated shares of the Bare Escentuals IPO. Bare Escentuals (Nasdaq: BARE) priced on Thursday afternoon at $22 per share. Bare Escentuals, which is based in San Francisco, develops and markets mineral-based cosmetics. They were originally expected to sell 16 million IPO shares at between $15-17 per share.

The final share pricing of $22 per share indicates a high degree of demand for the underlying stock. I expect BARE to rise well above the $22 IPO price in early trading on Friday morning. Buying shares in an IPO such as this one is an almost certain guarantee of make money. Buying IPO stock is one of my investment strategies. I'll write more about the intricacies of subscribing to and getting an IPO share allocation in a later post.

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About Dividend Yields

One of my investment strategies is to buy dividend-paying stocks. When making investment decisions on dividend-paying stocks, it is important to know what the dividend yield of the stock is. Basically, a dividend yield is the sum of the regular dividends that a company pays over the course of a year, divided by the current stock price. In the United States, most dividend-paying stocks pay out every three months (quarterly). In a previous post, I stated that Pfizer (NYSE: PFE) had a dividend yield of 3.43%. Currently, Pfizer pays 24 cents per share in quarterly dividends, for a total of 96 cents in dividends per year. At the time of my post, Pfizer was trading at 27.96. If you take the annual dividend divided by the price, you get 0.96/27.96 = 0.0343 or 3.43%.

[Note that PFE has risen in price to 28.41 and the yield is now 0.96/28.41 = 3.38%. It is important to know that when the stock price goes up, the yield goes down. On the other hand, if the stock price went down, the yield would go up.]

When researching a stock at a financial website such as Yahoo Finance, the dividend and yield is listed with the company quote. I estimate that 95% of the time this number is correct. However, sometimes this number is inaccurate or outdated. This can be the case if a dividend has been reduced or eliminated. For example in another post I mentioned that NetBank has sustained a series of quarterly losses, and its management has decided to suspend their dividend. So the yield for NetBank (Nasdaq: NTBK) is actually 0%, but the Yahoo stock information still indicates that it pays a dividend.

Another case is when a one-time special dividend is paid by a company. This will make you believe that the dividend (and thus the yield) is greater than it really is. Unfortunately, it is not always obvious whether a dividend payment is a regular dividend or a special dividend. So be careful when looking only at the dividend yield statistic on financial sites.

While dividend yield is an important criteria used for selecting stocks worth buying, it is not the only criteria. Dividend yield is not the most important criteria either. In future posts, I will cover some of the other criteria that I use for selecting stocks to buy.

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The Backwards Investor

Would you rather make 21% in a year on your investment or lose 18% in a year on your investments? Believe it or not there is a subset of investors who would rather lose 18% than gain 21% on their investments. Let me clarify. The Standard and Poors (S&P) 500 index went down 23.37% (excluding dividends) in 2002. In 2003, the S&P 500 gained 26.38%. There is a subset of investors who strive to "beat the S&P 500." This perverse group of people would be thrilled to have lost 18% of their money in 2002 because they would have beaten the S&P 500 by over 5%. (If you didn't invest in the stock market at all and ended up with a 0% return, you would have beaten the S&P 500 by 23% in 2002.) In either case, I didn't exactly see many people celebrating their investment portfolios at the time.

By contrast, These same folks would be bummed out to make only 21% on their investments in 2003 because they would have underperformed the S&P 500 by more than 5%. I don't know about you, but I would happy to make 21% in a year on my investments, and would feel ashamed to have lost 18% in my investments. The truth be told, I used to compare my stock performance against the S&P. I don't do that anymore, after I saw how ridiculous that comparison can be. This reminds me of the "keeping up with the Joneses" comparison in personal finance. My advice is not to constantly compare your portfolio performance with the S&P, Nasdaq, or your neighbors. Instead, strive to improve your own position year over year.

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Sayonara NetBank

I have started the process of evacuating my money from NetBank. To make a long story short, I haven't paid a lot of attention to NetBank for a couple of years. I recently started to compare my various bank accounts, and I was shocked at how poorly the money market account I opened at NetBank was doing. Let me go back to the beginning.

I first opened my Net.B@nk (that is what they used to call NetBank) account six years ago. At the time, they offered interest rates of about 6% which was quite good at the time. I really wasn't so bothered by the fact that it was an Internet-only bank. True, deposits at NetBank took longer (usually over a week), and my checks were considered out-of-state. But that was only a slight inconvenience when you consider that the interest rate was about 2% more than what local banks were paying. To add to that they gave me a nice little bonus for opening my account.

Over the years, things have gone downhill at NetBank. They stopped sending me paper statements in 2001, and started to charge more fees. But, the interest rates still remained better because of their Internet-only model.

Fast-forward to today. NetBank is only paying 2.90% APY on my money market. Currently, I can get a 5.oo% APY return on money market accounts at either Citibank and WaMu (Washington Mutual). And these banks have real branches and ATMs. I was wondering why there was such a big discrepancy when NetBank does not even have to maintain the bricks and mortar branches and ATMs that these competitors do. As you will see later, the real answer is NetBank can no longer afford to pay good interest rates.

I could bore you with a laundry list of other reasons why I've decided to get out of NetBank, but it really comes down to poor interest rates and the inconvenience of having to deal with an internet only bank. I also think that there may be larger problems at NetBank.

The stock analyst side of my personality took a look at the overall company, NetBank (Nasdaq: NTBK), and I have some real concerns. NetBank stock has been steadily declining for over three years now. The company has posted significant losses for the first two quarters of this year. And NTBK has stopped paying its dividend. This is not good news for either NTBK investors or NetBank customers. NetBank's management has not adequately explained the reasons for these significant losses. In this era where the news is reporting one business scandal after another, I smell something fishy.

The worst case scenario for NetBank customers will be waiting for months to get their money back from the FDIC if NetBank defaults. More realistically, it is likely that NTBK will be acquired or merged into another bank. In any case, don't want to stick around long enough to see the fallout. I just hope that closing my account with them is not as difficult as putting money in with its long delays.

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How to Calculate APY

Have you ever wondered how banks calculate the annual percentage yield (APY) of a bank account? Suppose that an account pays 5.84% (nominal rate) compounded daily and yields 6.01% APY. The APY is the annual percentage yield, and is the best number to use when comparing rates from different banks. To calculate the APY from the nominal rate, you will need a scientific or financial calculator. A computer spreadsheet could be used instead of a calculator.

Warning: math is involved in the next section. In this example,

1) Enter the interest rate in decimal form: 0.0584
2) Divide the rate by 365 (number of days in a year)
3) Add 1 to the result
4) Then use the y^x key, and type 365 for the number of days.

You should end up with something that says 1.060134.... The digits after the decimal point represent the APY. In this case, it is 6.01% APY.

Shortcut: In most cases, you can take the nominal interest rate: 0.0584, and hit the e^x key on your calculator to get 1.060138.... This quickly approximates the APY, assuming that interest is compounded daily.

If you have an account that is compounded monthly, then replace the 365's above with 12 (number of months in a year). In this case, if interest were compounded monthly, then the APY would round off to 6.00% APY.

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The Squirrels Club

I remember opening my first bank account when I was about 7 years old. It was at a bank called Glendale Federal Savings, at the corner of 25th Avenue and Geary Boulevard in San Francisco. They offered a special account for children called the Squirrels Club account. The club would send a newsletter every few months and gave me a bank for saving coins in. The newsletters featured squirrels as cartoon characters with the head squirrel named Filbert. The materials included games, puzzles, and tips on such things as saving money. The educational part of the newsletter would explain things like interest compounding. I believe that the Squirrels Club was run by an association of different savings and loans.

I was a Squirrels Club member until I was 12 years old. After that, my account was changed to a regular savings account. Looking back, I think that it is a pity that more banks don't offer this type of club for young savers. The educational material that they offered really formed the foundation of how I think about money today as an adult. Actually, the Squirrels Club still exists in a different incarnation. This was the only information that I could find on the Internet.

As far as Glendale Federal is concerned, it went through different incarnations in its history. I think that they changed the name once to West Coast Federal Savings, and then back to Glendale Federal. In the late 1990s, they advertised that as a small bank, they were able to give superior customer service. This was largely a true statement. That was before things started to change.

Glendale Federal was acquired by California Federal Savings which was for the most part acceptable. Then CalFed was finally bought by Citibank. So, what was to me a small bank with good customer service was replaced with one of the biggest, most impersonal banks in the country.

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Investing in the Cruise Line Industry

Carnival Corporation stock (NYSE: CCL) is the largest cruise line operator in the world. In the United States, it operates several different cruise lines including Carnival, Princess, and Holland America. A few years ago, Carnival merged with Princess, and there are actually two stock symbols for Carnival. CCL is the symbol that represents shares in the original Carnival Corp. The symbol CUK represents American Depositary Shares (ADS) of the original Princess Cruise Lines, and is called Carnival plc. Carnival has what is called a dual listing on the London and New York Stock Exchanges. This arrangement is confusing, even to me. Although the two stock symbols technically represent two separate companies, they have the same management, and for all intents and purposes the stock prices move in lockstep with one another. I have only ever invested in the CCL symbol stock. CCL closed on Wednesday at 43.85.

Carnival's biggest competitor is Royal Caribbean (NYSE: RCL) which includes Celebrity Cruises. I also own shares in RCL which closed on Wednesday at 38.00. The third major player in the US cruise market is Norwegian Cruise Lines. However, NCL is owned by the Genting Group of Malaysia (which also owns the Asian cruise line Star Cruises). It would be difficult for US residents to directly buy shares in Genting. Though, it is possible to buy and an Exchange Traded Fund (ETF) which holds shares in Genting. This fund is the iShares MSCI Malaysia Index (AMEX: EWM).

Admittedly the timing of this post might be a little late as the cruise industry has already started to rally. The price of fuel factors in as a key component of the latest price movements. In the graph below, Carnival (CCL) is represented by the blue line. The red line is the U.S. Oil Fund ETF (AMEX: USO). This is another ETF that tracks the price of crude oil. Over the past few weeks, you might have noticed that oil has dropped in price. This is evident if you noticed that you're paying a little bit less at the pump for gas. As you can see in the graph, the price of oil has dropped while the price of CCL has increased.

In addition to the recent upward movement of cruise line stocks, I will add some of my usual criteria for purchase of CCL & RCL. Both are profitable companies that pay a dividend.

There is one more bonus, if you are considering going on a cruise in the near future. Both CCL & RCL offer a Shareholder Benefit in the form of an onboard credit for booking a cruise. For example, each offers a $100 onboard credit for shareholders that book a 7 day cruise and a minimum of 100 shares.

Update: If you were searching for information about how to get the Shareholder Benefit offered to cruise line stock holders, please find the details in my post about cruise line shareholder benefits for RCCL and Carnival stock holders.

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Calculating Net Worth

I thought that calculating one's net worth would be pretty simple. Add up the value of your assets and subtract your liabilities (debts) to arrive at your net worth. Having looked through a few blogs, however, I see that the definition is neither simple nor consistent. I've seen one guy who has listed over $50k in automobiles and the value of jewelry as "assets". On the other hand, I was recently reading a book (Getting Loaded by Peter Bielagus) where in calculating net worth, the author deliberately excludes things such as cars and other depreciable assets from the calculation.

I agree with the latter formula. I don't include what I would call non-financial assets as part of my net worth. I wouldn't consider stamp and coin collections, or jewelry to be financial assets. The reality is that while these items do have value, it is not as if I would be willing to sell any of them, or that I would rely on them for income. Similarly, I don't consider my primary residence an asset for the purpose of calculating net worth. In fact, I've seen a few questionnaires (that brokerage houses use to determine the suitability of certain investments) that specifically ask for net worth excluding one's primary residence.

Getting back to the question of net worth, I suppose that if one would exclude the value of their home from the calculation, then one could also exclude their primary mortgage (but not their second mortgage since that is not usually used to finance the house, but other consumer items instead) from their liabilities. Why do people try to inflate their net worth by including miscellaneous non-financial assets? My guess is that is like the game people play with inflating their resumes when applying for a job. You may be able to fool other people into thinking that your net worth is more than it is, but just be certain you aren't just fooling yourself.

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Wealth According to The Millionaire Next Door

To answer the question of whether one is wealthy, I will take a quote from The Millionaire Next Door, by Thomas Stanley & William Danko, which I read a few years ago. I consider this book to be a classic. Here, the authors discuss what one's expected net worth should be at any given point in life.

Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.

To give an example, suppose one is 35 years old and makes $100,000 per year. Then, by the above formula, one's expected net worth is $350,000. The authors then go on to describe the wealthy (prodigious accumulators of wealth, PAWs) as those who have at least double this expected net worth based on age and income. Conversely, one who has accumulated less than half of their expected net worth is known as an under accumulator of wealth, or UAW. (I have always found it peculiar that this acronym is the same as the one used by the United Auto Workers union, but that is another story.)

In any case, the suggestion by the two authors is a broad rule of thumb. I would caution one against putting too much weight into the usefulness of a rule of thumb. Nevertheless, armed with this knowledge, you can at least have a rough idea of where you stand with regard to what your savings should be at any point in time.

Update: See also As a Rule of Thumb...
and The Millionaire's Rule of Thumb.

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Stock Pick: Pfizer (PFE)

I'm ready to make the first stock pick on my blog. I am now recommending Pfizer Inc. (NYSE: PFE) for purchase. This pharmaceutical giant is a member of both the Standard and Poors 500 index, and the Dow Jones Industrial Average (DJIA). Pfizer is one of the largest makers of prescription drugs.

This stock closed on Friday at 27.96. Pfizer's stock price has stagnated for over a year, trading in a narrow range in the mid-20s. However, PFE has recently begun upward price movement, with Friday's close being a new 52-week high. My opinion is that Pfizer (and several other large pharmaceutical makers) are coming off of a period of depressed stock valuation.

I have picked Pfizer because it satisfies the following criteria:

• Profitable for the last 3 years, and consistently profitable for several years (Source: S&P Stock Reports): In general, I will not recommend an unprofitable company for purchase.
• Current dividend yield of 3.43%: I like to know that if the stock price stagnates, that I will still receive some income for having my money tied up.
• Large capitalization stock: PFE has a market capitalization of $200 billion. As a general rule, large companies are less volatile than smaller ones.

There you have it, my first stock pick.

Looking for My Coke Rewards Codes? Keep searching!

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Disclaimer

Before I get too far along here, I thought that I would write a disclaimer.

First of all, this is a personal blog, and I am not a financial advisor. The material provided by PFStock is for general information only. This information is not intended as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Readers should not assume that any recommendations made by PFStock will be profitable.

In other words, if you invest in something that I've mentioned here and lose money, then I'm sorry that this has happened, but I can't accept responsibility for your loss. On the other hand, if you do the opposite of what I've suggested and lose money, then I would say that I told you so.

Lastly, readers accept responsibility for their own investment research, due diligence and decision making. All investments involve risks and are not guaranteed. You may wish to seek the advice of a professional before investing.

Copyright © 2006 pfstock

Citibank Dividend MasterCard

I was going to write an entry about how much I like the 5% cash back feature for purchases at supermarkets, drug stores, and gas stations that I get with my Citi Dividend MasterCard. However, Citibank changed the rules. They recently sent me a letter stating that as of October 13, 2006, I will only be getting 2% cash back on my "everyday" purchases. I also noted that they added convenience stores and utilities to the purchases eligible for 2% cash back.

The way that this credit card works, one accumulates Dividend Dollars for the above mentioned "everyday" purchases. For all other purchases, a 1% cash reward is earned. Whenever $50 or more is accumulated, I can request a check from Citibank. They will pay out the entire balance, not just the minimum amount of $50. Believe me, this is a lot less hassle than a lot of the other rewards cards. In many other cases, I've found myself browsing through reward catalogs to find something that I had enough points for, and that I really wanted to get. Also, the Citi Dividend credit card is not a tiered award where you have to spend a certain amount (usually a few thousand dollars) before you qualify to get the maximum rate.

With the reward changing from 5% to 2%, this of course dampens my enthusiasm for using the card. On the other hand, I don't really have any better alternative card to use at the time. The 2% rebate is a lot better than most of my other credit cards which pay nothing. I would be interested, though, to see if another better offer will come along.

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About Me

I think that it is fair to give some background about myself. I want to give readers an idea of where I am coming from. I am a 30-something engineer working in Silicon Valley (California). I started saving for my future shortly after finishing graduate school. My main focus then was getting the best savings rates from my bank. Even the concepts of 401(k) plans and mutual funds were something completely new to me. I did become seriously interested in investing a little less than 10 years ago. Like many people, I got caught up in the technology stock craze of the late 1990s. Working in the high-tech industry also fueled my interest in these stocks. I rode a few of these stocks down in the early 2000s. And, I would say that my portfolio hit bottom in 2002. Coincidentally, I was also subjected to downsizing not once, but twice, in the past five years. Any employee stock options that I had were essentially worthless at the time.

But, I have been resilient. Each time that I got knocked over, I have gotten right back up and redoubled my resolve to succeed. Since 2002, I have rebuilt my investment portfolio. Although I actually own fewer stocks nowadays, I am better diversified across industry groups. I feel that the economy is much better now, but I've learned not to get too overconfident, and to plan for the worst while hoping for the best.

On a personal level, I have been happily married for over five years. My wife and I don't have any children yet. Recently, I have noticed a prevalence of "under 30" personal finance blogs on the Internet. I suppose that I am no longer qualified to be in the under 30 crowd. Nevertheless, I hope that the under 30 bloggers would look to me for advice from someone who is only slightly older. Now I am starting a blog to share my experiences with others. On the other hand, I hope to also learn from those who have more experience than I do.

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Welcome!

Welcome to PFStock (DC's Personal Finance and Stock Investing Blog), a new personal finance and stock investing blog. It seems that financial blogs are roughly divided into three groups. These groups are personal finance, real estate, and investing blogs. I am interested in personal finance and investing, but not so much in real estate. I've decided to make my blog a combination of a personal finance and stock investing blog. Thus, I've decided to call my blog PFStock.

In the area of personal finance, I am interested in saving money, banking, credit cards, and basically getting the best deals that you can out of banks and credit card companies. In the area of investing, I am mostly concerned with stocks, but I am also interested in discussing retirement plans, mutual funds, ETFs, IPOs, brokerages, and general investment strategies.

I've spent some time now perusing other personal finance blogs. There certainly is a great variety of them. Currently, I think that I have a better idea of what I don't want in my blog than of what I do want in it. I do not intend my blog to become a diary of my daily financial transactions. I am skeptical that anyone would want to delve into the detailed minutiae of how I spent every last penny over the weekend. Although some personal finance blogs do, I do not intend to disclose my net worth or list out my entire investment portfolio here.

Also, I can't promise you that I will have something new everyday. In fact, I am skeptical of people who always have something new to say. This is the case with financial writers who are obligated to either report news, or otherwise fill up space when there isn't anything newsworthy to report. The financial markets simply don't work that way. I can go for months without making a single trade or altering my portfolio (buy-and-hold), and then later go through a period where I'll make several stock trades in a week. Besides that, I have a regular job to hold down, and might not be able to write something everyday.

So, as I embark upon creating my new blog, I look forward to sharing my experiences and ideas. My initials are DC, but you can call me pfstock.