Archive for October 2010

Ed’s Daily Summary for October 29th: Happy Halloween!   14 comments

For a dull day on the markets, it was a good day for me, even though my MannKind play yesterday didn’t pan out. Then again, it didn’t tank either, in spite of missing earnings by a penny/share. I am going to hold it for a little while and see what happens.

As for the rest of my portfolio:
AGQ: 6.23 to $105.59 (6.27%)–bought at $103.00
AOD: -0.04 to $5.63 (-0.71%)–bought at $5.78
AT: 0.03 to $13.47 (0.22%)–bought at $12.62
DGP: 0.77 to $39.30 (2.00%)–bought at $38.8199
INTC: -0.42 to $20.05 (-2.05%)–bought at $18.52
JUBAX: NA to $10.43 (0.00%)–bought at $10.17
MNKD: -0.02 to $6.38 (-0.31%)–bought at $6.40
PALL: 1.76 to $64.47 (2.81%)–bought at $55.76
SIVR: 0.76 to $24.63 (3.18%)–bought at $22.00

OVERALL: +1.15%

Consider this your open thread for the weekend! Have a great Halloween folks!

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Posted October 29, 2010 by edmcgon in Market Analysis, Open Thread, Portfolio

Warning for Fidelity investors   5 comments

I am going to repeat this warning from Bernie in the comments, as I am sure there are at least a few Fidelity investors out there:

I thought i would just mention this to others in case they are thinking of purchasing the new Sprott Silver fund thru Fidelity. This is just an ATTENTION for Fidelity customers. I purchased PSLV today and they charged a $50commission. Its a DIFFERENT $50 warning screen during the purchase. Therefore its almost impossible to see. They made the adjustment for me because i called and complained. But for others they are all paying a $50 fee plus the $7.95 purchase. I don’t know why since its on the NYSE. Fidelity will make out like a bandit today

That’s obscene. Thanks for the warning Bernie.

Posted October 29, 2010 by edmcgon in Stocks

In the Bag   23 comments

Commenter Bag had some questions, so I thought I’d throw him/her a whole post.

1) Ed, you earlier stated you do not suggest using 401k for more than matching funds. I cannot remember, but I think this was due to lack of options for funds. I think you suggested the following 1) 401k for matching funds 2) IRA (Roth or regular? I lean towards Roth) 3) any further savings – brokerage account.

It seems that you would roll into option 3 if you want to save 15% and make more than 50k a year. Are the advantages of flexibility greater than the tax advantages of a 401k? Would that matter if it is Roth or regular 401k?

Yes, the advantages of flexibility are far greater. Remember, most 401k options are pretty bland funds with high management fees. What returns you get are heavily eaten away over time, unless you buy your company’s stock.

I haven’t discussed this before, while having some of your 401k in your company’s stock may or may not be a good thing (only you can judge that), you need to also consider how much of your retirement funds overall you have in your company’s stock, and that means considering what you have outside the 401k. I wouldn’t advise having more than 10% in your company’s stock, and only then if you either work for a blue chip company, or work for a company for which you have complete faith (this requires a lot of soul-searching AND research). Remember the downside: When Enron busted, a lot of it’s employees lost everything they had in their 401k plans because they had it all in company stock.

Back to your question, you can still receive the same tax advantages of a 401k with a regular IRA (not a Roth). Everything you put into a regular IRA is fully tax deductible (up to the contribution limit). If you still want to put away more money for retirement after that, I would consider a Roth IRA (Note: I don’t know how the contribution limits would apply for a Roth donation made on top of a regular IRA donation in the same year.).

If you still wanted to save more beyond that, I would sooner go with a regular brokerage account than a 401k, simply for the flexibility. Even if you were following a strict conservative investment strategy, the options available to you in a regular brokerage account are better than most (if not all) 401k plans. If you are concerned about the tax hit, you could always use a tax-free strategy, by buying tax-deductible bonds or funds in a regular brokerage account. 

Remember, 401k’s are all about the matching funds. If your company matches 50%, then you get an immediate 50% return on your money up front. Not many investments will give you that.

And when you leave your company, make sure you roll over your 401k to an IRA as soon as possible! It will involve some paperwork, but it is well worth your time to do it.

2) What do people do when they go on vacation to protect themselves? For the more “buy and hold” type investments, I imagine that is something to let ride. I had some Lynas and came back to see it drop about 15-20% while I was away. Do people set stops before you leave? Or do you not really walk away from your account?

Vacation? What’s that?

Seriously, I am not much of a traveller. Most places I go, I am usually not away from a computer for more than a day.

However, if I were going to be away for longer than that, I think I would have to take a serious look at my portfolio. Stocks like Intel (INTC) would be left alone. Stocks like Lynas would probably be sold ahead of time, since there is too much risk involved. Simply put, remove as much risk from the portfolio as possible. I would remove my commodity plays like SIVR and PALL too, since commodities require constant babysitting, due to all the economic factors that can effect them. For borderline stocks, something like Atlantic Power (AT), I would put in stop loss orders. 

3) Is there a consensus on what are good brokerage companies? I use Ameritrade currently, but started this when I was just looking to play with a bit of my own investment. As I am looking to start putting more money into IRAs and otherwise, should I look somewhere else?

We actually haven’t come to a consensus on that question. I do see a point in the near future when I will probably move into 100% cash, and then I plan to do some serious brokerage shopping. I do plan to report what I find here, so I can see what everyone thinks. Stay tuned…

Posted October 29, 2010 by edmcgon in Investing Education

Great blog day!   5 comments

First, I would like to thank all of you who came by yesterday. We had the heaviest traffic day ever here with 1,930 hits!

Second, you folks carried it over into the night. I woke up this morning to more comments than I could respond to! But I am glad to see all of you using the site. As always, this is your place too, so feel free to discuss anything here. I will try to keep the intelligent commentary coming, although I may have to outsource it to India…

Posted October 29, 2010 by edmcgon in Blog stuff

Ed’s Daily Preview for October 29th: Waiting for Bernanke   5 comments

If you have ever heard of Samuel Beckett’s play Waiting for Godot, or seen it, then you may be aware that it is controversial, in that people either love it or hate it. Of course, any play about two guys sitting around waiting for a third guy is bound to be either a highly intellectual experience, or deadly dull.

That explains what we can expect from the markets from today through Tuesday. Even with the election on Tuesday, the markets won’t react to that unless the Democrats pull off an upset (about as likely as me being named the next CEO of Exxon). Even then, the markets might pay more attention to the Federal Reserve’s announcement on Wednesday.

Until then, expect the markets to do very little, unless something major happens elsewhere in the world.

Posted October 29, 2010 by edmcgon in Economy, Market Analysis

Ed’s Daily Summary for October 28th   6 comments

We had some good discussions going on the blog today, and my portfolio did well (not a loser in the bunch!). All in all, a good day!

AGQ: 3.04 to $99.36 (3.16%)–bought at $103.00
AOD: 0.04 to $5.67 (0.71%)–bought at $5.78
AT: 0.02 to $13.44 (0.15%)–bought at $12.62
DGP: 1.03 to $38.53 (2.75%)–bought at $38.8199
INTC: 0.28 to $20.47 (1.39%)–bought at $18.52
JUBAX: NA to $10.38 (0.00%)–bought at $10.17
MNKD: 0.00 to $6.40 (0.00%)–bought at $6.40 today
PALL: 1.18 to $62.71 (1.92%)–bought at $55.76
SIVR: 0.36 to $23.87 (1.53%)–bought at $22.00

OVERALL: +1.22%

Posted October 28, 2010 by edmcgon in Portfolio

Buy MannKind Corp. (MNKD)   16 comments

Why would I buy a biotech stock that is bleeding cash, like MannKind Corp. (MNKD)?

This is a small play, based on two simple facts:
1. The CEO bought 700,000 shares (worth over $5 million) back on October 20th, for $7.15 each. Insiders already own nearly 37% of the company’s stock. This one transaction is more than all the insider transactions on the stock for this year.
2. The company reports earnings tomorrow (October 29th).

This is strictly a gut play. I don’t have a large investment in it, but we’ll see if it pans out.

I picked up the shares at $6.40.

Posted October 28, 2010 by edmcgon in Portfolio Moves