Posted: December 30th, 2008 | Author: Joe | Filed under: Investing | Tags: Cramer, Investing | 4 Comments »
I’ve been reading Jim Cramer’s Real Money: Sane Investing in an Insane World on and off for a while now. I came across a section on how Cramer recommends a person pick stocks (if they decide to engage in active stock picking). I found it interesting, and maybe you will too. 
1. Buy local.
Buy stock in a company that has a presence in your community. He recommends checking the business section of your local paper for a truly local business, though a local franchise of national chain is OK too. It’s good to support the people who live and work in your community, but it’s also a great way to get in on the potential growth from day one. If you pick a winner, you’ve done so before it’s hit the national radar.
2. Oil stock.
Oil stocks are consistent performers, and offer high dividends. They also tend to be solid when times are tough, as we’ve seen over the 2007-2008 market. Obvious players here are Exxon Mobil (XOM ), ConocoPhillips (COP ), BP PLC (BP ), etc..
3. Brand name blue chip that sells at yield above the S&P 500.
Look for history of raising dividends, high quality company. Especially good if you can get one from the S&P 500 Dividend Aristocrats (companies with a history of increasing dividends every year for the past 25 years.)
4. Financial stock.
Historically, financial stocks tend to be stable, and secure. They also offer nice dividends. Of course, the past year or so is the exception to the rule, but now is probably a good time to start looking for one. Interestingly, Cramer emphasizes regional banks over national banks. This is presumably because of the greater possibility of growth, though it seems that regional banks have managed the credit crisis far better than the larger, national banks.
5. A Speculative stock.
Go for a risky, under $10 stock of a small company. This is where you swing for the fences, but never have more than 25% of your portfolio in speculation.
It is important to note that Cramer recommends the above sample portfolio for discretionary investment capital only, i.e. not for your retirement savings.!
It was at this point when I started to think he wasn’t as big an idiot as his loud mouth demeanor led me to believe
Related Posts:
Posted: December 23rd, 2008 | Author: Joe | Filed under: Scam, spending | Tags: auto warranty, Extended Warranty, Scam, U. S. Fidelis | 135 Comments »
One of my vices, when I’m up late and my wife and kids have all gone to bed, is watching bad science fiction, or bad science programs on late night T.V.. Yes, I know I’m a tremendous geek, but thank you for the compliment anyway.
About a week or two ago I saw a commercial for U.S. Fidelis, an auto warranty program. I thought it was hokey, and scammy and didn’t think anything of it. But I must have seen it 5 times in the space of 2 hours last night. To be fair, it was a very long 2 hours, since I was watching something about the edge of the Universe narrated by Alec Baldwin who was apparently attempting to deliver his poorly written lines like William Shatner doing a parody of himself as Capt. Kirk! But I digress…
The U.S. Fidelis auto warranty program.
The commercial goes something like this:
“An alternator can be a $825 repair… throw in a new transmission and you’re out almost $2500…”
Then the words:
“Repair bill paid!”
Flash on to the screen, followed by:
“Customized warranties – you choose deductable “
It goes on to show some couple and a young woman who look about ready to slit their wrists (It’s never that bad people!) because of the outrageous repair bills. But if they got an auto warranty through U. S. Fidelis, they wouldn’t pay a dime. Sounds great. An auto safety net.
It got me wondering how many people think this auto warranty program is a good idea. Is U.S. Fidelis a scam, or just a bad deal?
It seems that there are few sites out there that question these companies and their ads. So, I went down the rabbit hole, and this is what I found…
According to the Better Business Bureau (BBB) website, U.S. Fidelis is really a company called “Dealer Services”, and they have 809 complaints against them over the past 3 years alone.
U.S. Fidelis obviously has some unhappy customers, but that doesn’t make them a scam. But what about the concept? Are extended auto warranties a good deal?
Playing the odds.
The basic idea behind any warranty is the same as insurance: it’s a gamble. It’s a mathematical function of the odds that you’ll need the service vs. what the service costs.
These companies offer extended warranties to make a profit. The cost of the warranty that you pay minus the cost of repairs they pay out, is profit for the company. Ask yourself, if that many transmissions go belly up on cars today, why would the warranty company charge you much less than the cost of replacing the transmission? They’d go out of business, unless the quality of cars today is such that most don’t need the kind of staggering repairs profiled in the commercial.
I’m pretty sure companies like these also limit their coverage to cars less than 10 years old, or they cover less on older cars to limit their loss.
A better deal.
It’s a shame, because the likelihood of a major repair is so low on newer cars that people would be better off setting up an emergency fund as their own “safety net”.
If people took the money they pay companies like U. S. Fidelis, or “Dealer Services”, for the warranty, and put it in a high yield savings account from ING, they would have the money when they needed a costly repair AND they’d earn interest while they didn’t need the money.
UPDATE:
NBC had a story on U. S. Fidelis earlier this week. I’ve posted a link to it at the post: MSNBC Thinks U.S. Fidelis Auto Warranty is a Scam! (Video).
Related Posts:
Posted: December 22nd, 2008 | Author: Joe | Filed under: Insurance | Tags: Insurance, Life Insurance | No Comments »
About a month ago, I posted about offers for Mortgage Protection Using Life Insurance being on the Rise. Well, today I received yet another offer. This time from the Mutual of Omaha Insurance Company.
At least this one only had the purchase price of my home listed as the value, and not the real outstanding balance of my mortgage!
Anyway, regardless of how accurate their information is, or how they’re getting it the fact remains it’s a bad deal. I already have life insurance, and one of the main reasons is to pay off the mortgage. Of course, it’s also to provide for my children, and generally replace my income so my wife wouldn’t face financial hardship on top of the emotional hardship caused by my loss.
Is anyone else getting a peppered with these offers, or am I just the “lucky” one?
Related Posts:
Posted: December 19th, 2008 | Author: Joe | Filed under: Economy, Investing | Tags: Inflation, Investing | No Comments »
Unless you outpace inflation, it can destroy your savings.
BankRate.com has a poorly timed article titled: Inflation-Beating Investments for Retirement
I say it’s poorly timed because with the U.S. in what will likely be a pretty severe recession, high inflation is an unlikely risk. Especially since energy prices are down around 65% from there recent highs. High oil and the ethanol debacle have waned, and so has inflation. In fact, there’s been a ton of articles making the rounds on the new fear: deflation.
Still, that doesn’t mean it’s a bad article, and inflation is a big worry when it comes to retirement since you will no longer be able to count on receiving a cost of living raise to help outpace inflation.
Their list of Inflation-Beating Investments:
- Treasury-Inflation Protected Securities (TIPS).
- I Bonds.
- Dividend-Rich Stocks.
- Exchange-traded funds, or ETFs.
- Mutual Funds
Personally, I find the last three to be deceptively identical. They are all targeting stocks, which is the best bet for long term outpacing of inflation. The devil is in the details, since both Mutual Funds and ETFs carry some additional expenses. In the end, I think the Mutual Funds and ETFs options are virtually identical in terms of beating inflation and they probably offer Mutual Funds for people who aren’t familiar or comfortable with ETFs.
Of course, you can go further and say you don’t need Dividend-Rich Stocks either, since there are ETFs that cover these like, iShares Dow Jones Select Dividend Index (DVY), PowerShares International Dividend Achievers (PID) and PowerShares HighYield Dividend Achievers (PEY).
I suppose a simple, inflation beating portfolio would have TIPS, I Bonds and some combination of the above ETFs. Of course, allocation percentages within each is another matter entirely
Check out the BankRate article for more info on the pros and cons of each inflation beating investment.
Photo by darkmatter.
Related Posts:
What others are saying