BillionairesLife.com Just Came Out with their Christmas List

Time to make a list and check it twice. BillionairesLife.com has just published their 2009 Christmas List, which includes such items as a million dollar SUV, a diamond encrusted chess set, a $10 million island, a bottle of beer for just $1160, and much, much more. Check and see if these items are on your list.

Why Doesn't the Revenues per Employee Ratio (R/E Ratio) Get More Respect?

One obscure way of measuring how efficient a company operates is the amount or sales or revenues that are generated for each employee at the company, also known as the Revenues per Employee Ratio or R/E Ratio. It is also sometimes referred to as the Sales per Employee Ratio or S/E ratio. I've written about the R/E ratio in the past a couple times, but there doesn't appear to be much interest in this metric.

The concept is simple. Let's assume there are two companies in the same industry generating the exact same amount of revenues. But Company A has 1,000 employees and Company B has 10,000 employees. Which company do you think would generate higher net earnings? Which stock do you think would perform better?

Let's take some real life examples, using the technology sector. With only 19,665 employees and raking in $182.95 billion in revenues, Google (GOOG) is by far the top large cap tech company with the highest R/E ratio at $9,303,330 for every employee. And to top things off, the stock is up 79% so far this year. Apple (AAPL) is close behind with an R/E ratio of $5,408,163 and the stock is up an amazing 127% for the year. Then there is Amazon (AMZN) at $2,746,376 per employee. Amazon has a top return year-to-date of 142%.

Now let's look at some of the tech stocks that don't have as high an R/E ratio. Yahoo (YHOO) has a revenue per employee ratio far below the others at $1,646,323 and the stock was only up 24%. Both Dell (DELL) and IBM (IBM) generate almost identical revenues per employee at $410,000 and are up about 49% for the year; not even close to the returns for Apple or Amazon. And Hewlett Packard (HPQ) only has a R/E ratio of $372,866 and has the lower year-to-date return to show for it at 38%.

So next time you are trying to decide which stock you want to buy in a particular industry or sector, take a close look at the R/E ratio.

Author owns AAPL, AMZN, and YHOO.

By Fred Fuld at Stockerblog.com

Stock Market Trivia Quiz Answers

If you haven't taken the Quiz yet, click here and see if you can answer the questions first before looking at the answers.



The answers have been bolded below.



1. What was the largest bankruptcy in U.S. history (as of November 2009)?
a. Lehman Brothers Holdings, Inc.
b. Washington Mutual
c. Worldcom, Inc.
d. General Motors
e. CIT Group
f. Enron Corp.
g. Conseco, Inc.
h. Chrysler
i. Thornburg Mortgage

2. Which of the following jobs did Warren Buffet have when he was young?
a. newspaper delivery boy
b. running a pinball machine business
c. stealing golf balls
d. all of the above

3. What is the oldest stock exchange in the United States?
a. Philadelphia Stock Exchange
b. New York Stock Exchange
c. Boston Stock Exchange
d. Pacific Coast Stock Exchange

4. What is the oldest commodities exchange in the U.S.?
a. Chicago Board of Trade
b. 
Kansas City Board of Trade
c. 
New York Cotton Exchange
d. New York Mercantile Exchange

5. The highest priced share of stock that ever traded was of what company?
a. Yahoo! Japan
b. Berkshire Hathaway
c. Indians Inc.
d. Mechanics Bank
e. Google

6. Who said, "An investment in knowledge always pays the best interest"?
a. Benjamin Franklin
b. Bernard Baruch
c. J.P Morgan
d. Warren Buffett

7. The country with the highest inflation rate last year (2008) was
a. Zimbabwe
b. Ethiopia
c. Venezuela
d. Guinea
e. Mongolia

8. On the day after every presidential election since 1896, what percentage of the time was the Dow Jones Industrial Average up for the day?
a. 48%
b. 76%
c. 23%
d. 81%

9. Which of the following companies are owned by Berkshire Hathaway?
a. Dairy Queen
b. World Book Encyclopedias
c. See’s Candies
d. GEICO
e. all of the above

10. Which of the following metals sells for the most amount per ounce (as of November 2009)?
a. rhodium
b. platinum
c. gold
d. palladium
e. silver

If you want more trivia, check out Investment Trivia and Stock Market Trivia.

By Stockerblog.com

An Increase in Interest Rates May Be Good for the Stock Market

If you look at the prime rate and the Standard & Poor's 500 since January of 1992, you will notice a trend of increasing prime rates and increasing stock prices. During 1992 and 1993, the prime rate was flat at 6% with the market not doing much, trading between 415 to 450. Then in April of 1994, the prime rate started moving up eventually hitting 9% a year later. The S&P 500 began to make its move during that same time frame.

The prime did take a dip in the late 1990's, dropping below 8%, but in June of 1999, it turned right around and shot up to 9.5%. A lot of investors remember what happened near the end of the year 2000; the market began its long severe decline, the famous dot com crash. During that same time frame, the prime dropped from 9.5% to 4% before bottoming out in July of 2003.

The years 2004 through 2007 marked an increase in both the market and the prime. But in the summer of 2007, the prime started tanking again going from 8.25% all the way down to 3.25%, with the market following closely behind, having its biggest, sharpest decline in recent history.

The prime rate has been flat this year. Will it go up soon? If it goes up, will the market continue its recent rise? Watch what happens.

If you like interesting charts and graphs, check out the bank failure graph and the Gisele Bündchen Stock Index.

By Stockerblog.com

A Thanksgiving Week for Dividends: Stocks Going Ex Dividend Next Week

It's time to give thanks for dividends. Next week is Thanksgiving week, and surprisingly there are a lot of stocks going ex dividend during those days. There is a stock trading technique called 'Buying Dividends', which is becoming more and more popular. This is the process of buying stocks before the ex dividend date and selling the stock shortly after the ex date at about the same price, yet still being entitled to the dividend. This technique generally works only in bull markets.

When you buy dividends, there are many stocks in many different sectors to choose from. In order to be entitled to the dividend, you have to buy the stock before the ex-dividend date, and you can't sell the stock until after the ex date. The actual dividend may not be paid for another few weeks. WallStreetNewsNetwork has compiled a free downloadable and sortable Excel list of the stocks going ex dividend during the next week or two. WSNN.com came up with many companies all with market caps over $500 million. Here are a couple examples showing the stock symbol, the ex-dividend date, the market capitalization, and the yield.

FPL Group, Inc. FPL ex div date: 11/24/2009 market cap: $21.4B yield: 3.6%

Northrop Grumman Corporation NOC ex div date: 11/25/2009 market cap: $15.9B yield: 3.5%

The Empire District Electric Company EDE ex div date: 11/27/2009 market cap: $626.7M yield: 7.0%

The rest of the ex-dividend stocks can be found at wsnn.com. (If you have been to the website before, and the latest link doesn't show up, you may have to empty your cache.) If you like dividend stocks, you should check out the high yield utility stocks and the Monthly Dividend Stocks at WallStreetNewsNetwork.com or WSNN.com. For more details on dividend definitions, check out definitions of dividend dates. Don't forget to reconfirm the ex-dividend date with the company before implementing this technique.

Author doesn't own any of the above.

By Stockerblog.com

George Soros: Trader and Author

George Soros is considered the second leading trader/investor after Warren Buffett, and is considered one of the thirty top wealthiest people in the world. But Soros is not only an investor, but is also an author of a dozen books. If you haven't read any of the books by Soros, maybe you should, considering his success. Here are some worth perusing.

These would make great reading during the Thanksgiving holiday, and would make great holiday gifts.

The Crash of 2008 and What it Means: The New Paradigm for Financial Markets

The Alchemy of Finance

The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means

Soros on Soros: Staying Ahead of the Curve

Open Society Reforming Global Capitalism Reconsidered

George Soros On Globalization

El nuevo paradigma de los mercados financieros. Para entender la crisis economica actual. (Spanish Edition)

Stock Market Trivia Quiz

Think you know a lot about the stock market and investing? See if you can answer all the trivia questions on this quiz. The answers will be published tomorrow.

1. What was the largest bankruptcy in U.S. history (as of November 2009)?
a. Lehman Brothers Holdings, Inc.
b. Washington Mutual
c. Worldcom, Inc.
d. General Motors
e. CIT Group
f. Enron Corp.
g. Conseco, Inc.
h. Chrysler
i. Thornburg Mortgage

2. Which of the following jobs did Warren Buffet have when he was young?
a. newspaper delivery boy
b. running a pinball machine business
c. stealing golf balls
d. all of the above

3. What is the oldest stock exchange in the United States?
a. Philadelphia Stock Exchange
b. New York Stock Exchange
c. Boston Stock Exchange
d. Pacific Coast Stock Exchange

4. What is the oldest commodities exchange in the U.S.?
a. Chicago Board of Trade
b. 
Kansas City Board of Trade
c. 
New York Cotton Exchange
d. New York Mercantile Exchange

5. The highest priced share of stock that ever traded was of what company?
a. Yahoo! Japan
b. Berkshire Hathaway
c. Indians Inc.
d. Mechanics Bank
e. Google

6. Who said, "An investment in knowledge always pays the best interest"?
a. Benjamin Franklin
b. Bernard Baruch
c. J.P Morgan
d. Warren Buffett

7. The country with the highest inflation rate last year (2008) was
a. Zimbabwe
b. Ethiopia
c. Venezuela
d. Guinea
e. Mongolia

8. On the day after every presidential election since 1896, what percentage of the time was the Dow Jones Industrial Average up for the day?
a. 48%
b. 76%
c. 23%
d. 81%

9. Which of the following companies are owned by Berkshire Hathaway?
a. Dairy Queen
b. World Book Encyclopedias
c. See’s Candies
d. GEICO
e. all of the above

10. Which of the following metals sells for the most amount per ounce (as of November 2009)?
a. rhodium
b. platinum
c. gold
d. palladium
e. silver

If you want more trivia, check out Investment Trivia and Stock Market Trivia.

By Stockerblog.com

The Inside Story of the Collapse of Lehman Brothers

If you will be in the New York area on Thursday, November 19, you should check out the lecture at the Museum of American Finance at 48 Wall Street that will be given by bestselling author Lawrence McDonald, who wrote A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. The event will be held from 5:30 pm to 7:00 pm with a book signing and reception afterwords. Fee to attend is $15 for non-members, and reservations are required at 212-908-4110.

If you can't make it to the lecture, you can always get the Collapse of Lehman Brothers book.

How to Get Tax Free Dividends

It's a great feeling to receive a lot of dividends throughout the year, then on the following April 15, realizing that you don't have to pay tax on any of that income. There are many stocks, which are primarily closed end funds or CEFs, which pay dividends that are tax free. This tax free income is generated from municipal bonds in the portfolio. Although many of the Canadian oil income trusts pay income that may be partially or completely tax deferred due to depletion and depreciation deductions, the tax free stocks that invest in munis usually generate dividends that are completely exempt from Federal taxes.

Municipal bonds are issued by states, counties, cities, and other governmental agencies. Income from these bonds is exempt from Federal income taxes, and if the bonds are issued in your state of residence, the income is exempt from state income taxes also. Municipal bonds issued by Puerto Rico and other U. S. dependencies are exempt from state income taxes also for residents of most states. There are over 200 different tax free income stocks according to WallStreetNewsNetwork.com, with 42 of them yielding 7% or more. Just be cautious about investing in extremely high yield muni CEFs which may use leverage to attain their high yields.

One of the highest yielding tax free stocks is Federated Premier Municipal Income Fund (FMN) which yields 7.8%. They have been paying monthly dividends since 2003.

For you New Yorkers, there is the BlackRock New York Municipal Income Trust (BNY) which pays 6.7%. It invests in New York education, hospitals, housing, pollution control, tobacco, transportation, and water and sewer bonds. It has paid quarterly dividends since 2001.

If you live in California, you might want to consider the Van Kampen California Value Municipal Income Trust (VCV) which yields 7.6%. They mostly invest in California investment grade municipals. The fund was founded in 1992 and pays dividends monthly.

Van Kampen also has a high yielder for Massachusetts residents, the Van Kampen Massachusetts Value Municipal Income Trust (VMV), which pays 6.8%. The fund invests in Massachusetts municipals including bonds for education, general purpose, and water and sewer. They have paid monthly dividends since 1995.

There is also their Van Kampen Pennsylvania Value Municipal Income Trust (VPV), which yields 7.0%. This holder of Pennsylvania municipal securities has been paying monthly dividends since 1995.

You can download a free Excel database spreadsheet list of over 200 tax free stocks at WSNN.com. Keep in mind that both yields and share prices fluctuate, and there is the possibility of bonds in the portfolios defaulting, as junk munis do exist, such as some 'dirt bonds' used to fund infrastructures of new housing developments (some of which never get built).

Author does not own any of the above.

By Stockerblog.com

How To Buy Stocks at a 20% Discount from Current Price

There are a couple ways of buying stocks at a discount to their present value. One way is by investing in closed end funds, also known as CEFs, that are trading at a discount from Net Asset Value, also known as NAV. The NAV is similar to the book value of stocks. In other words the NAV is calculated by adding up all the stocks in the portfolio, and dividing that amount by the number of shares.

A closed end fund is similar to a regular mutual fund except that the trading price of the CEFs can fluctuate way above or way below the NAV. In addition, the number of shares is fixed. There are over 20 closed end funds that are trading at a discount of over 20% of their net asset value. Many investors invest in these discounted CEFs in the hopes that the gap between NAV and price per share will close.

One example is Helios High Yield Fund Inc. (HHY), which is a closed-ended fixed income mutual fund managed by Brookfield Investment Management Inc. The fund yields 6.5% and a based on its current price, trades at about a 20% discount from its NAV of 8.34.

Another heavily discounted CEF is Liberty All Star Equity Fund (USA) is a closed-ended equity mutual fund managed by ALPS Advisers, Inc. which has a yield of 6.7% and trades at a discount of over 19% of NAV.

However, there are plenty of risks. First of all, that gap may exist for years, and can even widen. Second, the gap could theoretically close but the stocks in the portfolio could drop, so still not gain. Third, and probably most important, is that many CEFs hold illiquid, private, or non-trading stocks, and the NAV is based on how the company valuates those shares, which may be a much higher value than what they could get if they tried to dump those shares. In addition, some may own real estate or mortgages.

Occasionally, you see activist shareholders come in and buy up a significant amount of shares of heavily discounted CEFs and force the liquidation of those CEFs, in order to realize the Net Asset Value. WallStreetNewsNetwork.com has come up with a downloadable Excel database of over 35 CEFs trading at a discount of at least 17% to NAV. Before investing in any of these, check out the CEF's web site to see what kind of stocks they own, and how many are illiquid private shares.

Author does not own any of the above.

By Stockerblog.com