Apple Computer Stock up on Good News

I was just about to research the post-MacWorld stock performance of Apple Computer stock, since I noticed that the stock dropped off after the MacWorld conference was over. This is the reverse of what it generally does prior to the MacWorld convention (see my previous blog on this).

However, today I noticed that the stock was up over 3 1/2 points (over 6%) on news that they have come out with a new volume control for IPods to protect hearing. Another great idea from the big Apple.

Outstanding Charting Website for Stocks, Bonds, Industries, and More

Normally I'm not much of a chart person; however, when deciding to make a purchase of a stock, I generally check out the charts that Yahoo provides, such as the 5 day and 3 month charts to see if I'm buying at the high or low or somewhere in between. Recently, I was doing some research on performance of stocks by industry, and much to my delight, I found a fantastic site that does an unbelievable job of charting this information. I have no connection to this site whatsoever, but I think that this site provides the best charting that I've ever seen. It is the StockCharts website, and if you click on this link:

http://stockcharts.com/charts/performance/Industry1.html

you will see what I mean. Each line represents a different industry and if you do a mouseover one of the color lines, it will tell you what industry it is and details about the performance.

But this isn't the best part. Look down at the bottom of the chart and you will see a rectangular box with the words 200 DAYS inside. Move your mouse to the left side of the rectanular box (not the left arrow), then press and drag to the left, you will see the box change to 300 DAYS, 400 DAYS, etc, and the chart changes accordingly. If you scroll down a little more, you will see that you can enter up to eight symbols and compare them on a PerfChart. Wow! Check it out.

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Wall Street and Stock Market Humor

How about a little investment and stock market humor?
Broker: What you become after investing in dot com stocks.
Bull: What comes out of your stockbroker's mouth.
Bear: What your brokerage account becomes after investing in Enron.
Short: What you end up being after shorting stocks in your portfolio.
Bond: A thing you used to have between you and your stockbroker before he lost your money.
Call: What a stockbroker does when he has a hot tip for you.
Tip: What you won't be leaving your waiter, if you invest based on his hot stock ideas.
Over the Counter: Where you'll be getting your food from when you go out to dinner, after losing your money in the stock market.
Volume: What you turn up on the radio when the financial report comes on.
The above is copyrighted by (used with permission) and courtesy of InvestmentTrivia.com.

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Kentucky Municipal Bond Ruling

In case you missed the news item last month, there was a court ruling in Kentucky relating to the taxability of out-of-state municipal bonds for residents of the state. The court ruled that the interest on the out of state bonds is not subject to state income taxes for the residents, due to Interstate Commerce laws. If this ruling is upheld, then it will be a major benefit to muni owners if this decision spreads to other states. It would mean that a Califonia (or New York or any other high state tax state) municipal bond investor would not be limited to buying munis from just their own state. They could now diversify across several states.


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When Oil Drops in Price - Stocks that Benefit

I am currently looking for stocks which will be a play on the fall in the price of oil. The type of companies that will benefit are the ones that use oil and gasoline as part of their business, and which is also a significant cost of either operations or cost of goods sold. For example, oil is used extensively in the plastics manufacturing industry. And plastic is used everywhere: the auto industry, the manufacturers of furniture, the high tech manufacturing industry (what is your printer made out of?, how about your monitor, keyboard, & mouse?), etc. Other industries that will benefit are the ones that use gasoline for fuel to run their operations. Examples would be airlines, trucking companies, utilities that utilize gasolene generators, etc. Other types of businesses that would benefit would be the owners of amusement parks (more customers are willing to drive, and airline prices may come down from reduced fuel costs so more may be willing to fly). The overnight shipping companies would also have reduced costs.

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Real Estate Values

Need to look up the value of a house you are planning on purchasing or maybe the values of the surrounding homes for comps? How about your own home? Or maybe you just want to check on the values of the homes of your friends and neighbors. There is a site that will provide that information for free, without being subject to the harassment of real estate agents emailing and calling you, trying to get your business. The site is called zillow.com. Check it out. A great tool for real estate investors.

By the way, don't forget our stock market survey:
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Stock Market Survey: Where will it be at the end of 2006?

I have created a simple survey, less than one minute, for my readers to give their opinions on where the DJIA, the NASDAQ, and the S&P 500 will be at the end of 2006. Click on the link below to go to the survey.


Click here to take survey

Caution with Canadian Oil Income Stocks in IRA's

Beware of the problems of putting Canadian oil income stocks in your IRA accounts (either regular IRA's or Roth IRA's). For that matter, be careful about putting any stock from any non-US company in your IRA. The problem is the foreign tax that is withheld from your dividends. I ran into the problem with a couple Canadian stocks including Provident Energy (PVX) which I put into my Roth IRA. I started noticing that Canadian taxes were being withheld from my dividend payments, which were effectively reducing my yield. This stock is currently paying about 11.4% but after the tax, it brought the yield down to about 9.7%, still a very high yield but it would be nice to have that additional 15% of cash flow that is being distributed. I asked my stock brokerage firm what I could do about it and they said 'nothing'. I asked my CPA what I could do about it and he said that if I owned the shares personally, there is something I could do about it but since the shares were held by a retirement account, there was nothing I could do (talk to your own accountant, I'm not providing accounting advice).

In addition, I understand that there may be some partial tax sheltering of the dividend due to depletion, which would be another reason for holding an oil income stock outside a retirement plan instead of inside. For example, Petrofund Energy Trust (PTC) recently stated that 8.86% of their distributions for 2005 are non-taxable. Something to consider.

Buying Stocks Before they go Public Follow-up

In one of my previous blogs, I described how I bought Apple Computer stock before it went public by buying shares of a closed end venture capital fund. I've come up with a list of publicly traded closed end funds that specialize in investing at least a part of their portfolio in companies that are privately held. Unfortunately, not all privately held companies have closed end funds that are invested in them. You almost have to work backwords: look at the various funds to see what their investments are and decide if those investments are favorable (which is probably what you should do anyway, even if you are not looking for a fund with a company that may go public soon). For example, if you check out American Capital Strategies, Ltd. (ACAS), you would find out that they invest in Piper Aircraft. If you look at Allied Capital Corporation (ALD), you will see that they invested in the Elephant Bar, a popular restaurant in California, Arizona, Colorado, Kansas, Missouri, and Nevada. They also invested in Meineke Car Care Centers.

A list of some of the closed end funds are:
Allied Capital Corporation (ALD)
American Capital Strategies, Ltd. (ACAS)
Harris & Harris Group (TINY)
MCG Capital Group (MCGC)
MVC Capital (MVC)

Remember, these are not investment recommendations.

Buying General Motors Stock

Last year, I invested some of my Roth IRA money in General Motors stock. I thought that since it had dropped to around 34 at the time and since it was generating a nice yield of over 6%, I thought it looked like a pretty good buy. Of course it continued to drop, and rumors of bankruptcy started floating around. When it dropped to the 20's, I got worried and bailed out. One of the main reasons was, you can't deduct a loss in an IRA.

Now that the stock is in the low 20's, I thought that if it was a buy before, it must be a better buy now. But I did some exploring and found that General Motors has some high yielding bonds that are traded like stocks and even some convertible bonds (sometimes spelled convertable bonds).

These bonds are much safer (will be paid off first before the shareholders get paid off if the company goes bankrupt) and provide a higher yield. There is also upside potential with the convertible bonds that can be converted into common stock. Keep in mind that all the bonds have a par value (redemption value) of $25. The following are what are available (symbol, interest rate, maturity, approximate price):

GKM, 7.25, 2033, 22
GMS, 7.5, 2044, 15
GXM, 4.5, 2032, 22, convertible*
GBM, 5.25, 2032, 16, convertible
GPM, 6.25, 2033, 16, convertible
* The GXM can be redeemed at $25 in March of 2007.

Because they are high yield, still means that they are high risk. They could drop in value even further. (No buy or sell is expressed or implied. In the interest of full disclosure, I own a couple of the above.)

Buying Stocks before they Go Public

Is it really possible to buy stocks before they go public, without being a venture capitalist? Absolutely, I did it myself with Apple Computer. How, you might ask? Many years ago, when the Apple II Plus computer came out, I had read in Forbes Magazine that a closed end mutual fund, called the Nautilus Fund, invested a large chunk of money in, what was at that time, the private Apple Computer Corporation. Nautilus, in addition to owning regular publicly traded stocks, also took positions in private companies.

So I bought some shares of Nautilus, and after several months, Apple went public and the Nautilus Fund spun off shares of Apple to all their shareholders in proportionate amounts. What a great way to get in on a new issue before it goes public.

There are plenty of private companies out there that may consider going public (Fry's Electronics, Fidelity, Bose, LL Bean, etc.). Unfortunately, not all of them are partially owned by venture capital oriented closed end funds. And even more unfortunate, for some of the companies that are, they may not tell you that information about who owns them. I will be doing some research on some of these companies to see if some similar opportunities exist and will keep you posted on what I find.

Wash Sales on Stocks and Bonds and Options

In December of 2005, I sold off a lot of my stocks that were trading at a loss from what I had paid for them, in order to generate some capital losses to offset some gains (sometimes called 'Loss Farming'). However in January, I was looking over what I had sold and wondering if I should get back in to some of these positions. But before I did, I had to take into consideration the wash sale rule which prohibits taking a loss if the stock is repurchased within 30 days. What's the exact rules on this? Here it is from the IRS:
You cannot deduct losses from sales or trades of stock or securities in a wash sale. A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: 1. Buy substantially identical stock or securities. 2. Acquire substantially identical stock or securities in a fully taxable trade, or 3. Acquire a contract or option to buy substantially identical stock or securities. If you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale. If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities. The result is your basis in the new stock or securities. This adjustment postpones the loss deduction until the disposition of the new stock or securities. Your holding period for the new stock or securities begins on the same day as the holding period of the stock or securities sold.

Stocks: Disney takeover of Pixar

I have been following the news relating to the Disney takeover of Pixar. You can check out a recent article about it at http://news.yahoo.com/s/ap/disney_pixar. Usually when this type of merger is announced, the acquiring company stock goes down, and the stock being acquired goes up. In this case, the reverse happened, at least at first. Disney went up and Pixar went down. However, the news on this had been rumored for a few months. Also, both Disney and Pixar have been moving up lately.
What I also read in another article was that Pixar CEO Steve Jobs (who is also the CEO of Apple Computer) will become the largest individual shareholder of Disney and will join Disney's Board of Directors. This should be interesting to watch in the next couple months. (In the interest of full disclosure, I own shares of Disney and Pixar. No purchase, sale, hold, or short recommendation is expressed or implied.)

Buying 'Worthless' Stock Certificates

A month ago, I attended the Northern Virginia Antique Stock and Bond Show in Tyson's Corner (Falls Church) Virginia. The collecting of old and antique stock certificates is called scripophily. The show was well attended, with about 35 antique stock certificate dealers and a few hundred attendees. There was also an auction of antique stock certificates, some of which sold for fairly high prices. Collecting old stock certificates is a great hobby, especially for investors. One collector told me that he started buying antique stock certificates because his wife told him to. He works almost 18 hours a day, and his wife said he shouldn't work so much and should take up a hobby. So he heard about collecting old stocks and scripophily and started buying. More information about collecting antique stock certificates can be found at: AntiqueStocks.com

Super Bowl Stock Market Indicator

Have any of you heard of the Super Bowl Stock Market Indicator (bellweather) whereby if an original NFL (now NFC) team wins, we will have a bull (rising) market. If an original ALF (now AFC) team wins, the stock market will fall (a bear market). The indicator has been correct most of the time. Snopes has a great article on the indicator at Snopes, but as Snopes says, just because there is a correlation, doesn't mean there is a causation. Since the Pittsburgh Steelers won (an AFC team), it would mean a bad market, since they beat the Seattle Seahawks, an NFC team. But wait. The Steelers were formerly an NFC team; and wasn't Seattle originally an AFC team? Does that mean we are going to have a bull market, or a mixed up market?

Buying Stocks and Bonds at a Discount

Yes, there is a way to buy stocks and bonds at a discount to what they are currently trading at. How? Through Closed End Funds, sometimes called Closed End Exchange Traded Funds (Closed End ETF's) or Closed End Mutual Funds. This is the opposite of an open end fund (in other words, a typical mutual fund) which trades at exactly what the stocks in the portfolio are worth. So, to get the value of an open end fund share, you would add up the value of all the stocks in the portfolio, and divide by the number of shares outstanding, which gives you the Net Asset Value (NAV). The number of shares can increase or decrease depending on purchases and sales, but the price per share will always be at the Net Asset Value.
However, a closed end fund has a fixed number of shares and the price per share depends on market conditions. So, the share price can trade above or below the Net Asset Value, and sometimes substantially below. A great website for doing screening and finding discounts to NAV is ETFconnect.com. As an example, I did a search and came up with several corporate bond funds trading at a discount of GREATER than 10% and with yields greater than 5.75%. I even found one closed end stock fund that trades at a 21% discount.

Pink Sheet Stocks

I was doing some research on some pink sheet stocks recently. You can tell they are traded on the Pink Sheets when you look for a stock symbol, and it has the .PK extension on the end. If it has a .OB extension, it means the stock is traded on the Over-the-Counter (electonic) Bulletin Board. If the symbol has four or more characters but no extension, it means that the stock is traded on NASDAQ. Pink sheet stocks are generally considered to be the lowest quality stocks. Although Pink Sheet stocks are now shown on the Internet, the information on those stocks used to be distributed on long sheets of pink paper. Pink Sheets is also the trademark of Pink Sheets LLC which provides financial information for over-the-counter securities. Want to see what pink sheets used to look like? Here is a picture of Pink Sheets. More information on pink sheets can also be found at InvestmentTrivia.com.