Category: Investing

Bidding Wars for Homes Return

This article on bidding wars for home returns appeared in the Wall Street Journal.Right here in my home town of Denver:

Christina and Kevin Dirks have been searching for a house in the Denver area for four months at prices up to $275,000. They made offers on six homes—and were outbid on each one.

“When we first started looking, you had to pay $10,000 over” list price to win the bidding, Ms. Dirks said. “Then, as the weeks went by, it went up to $20,000. And now it’s up to $30,000 and $40,000.”

Ms. Dirks, a 28-year-old office coordinator, said she and her husband, a 30-year-old merchandiser, hope that as the market slows down this winter, “people will put a halt on being so crazy.”

Bidding wars, a hallmark of last decade’s housing boom, are making a comeback in a number of metro areas across the U.S. But while the earlier wars reflected enthusiasm fueled by easy-money mortgages, the current froth stems from a market short of homes for sale.

I’m fortunately not trying to buy a home right now but this is kind of scary for all those who are trying to buy that home! History tells us that after bidding wars end bad things usually happen….What would you do if you were in this situation; buy or pay outrageous rent until the inevitable happens?


Should the Financial Engine of the World be in New York?

Hurricane Sandy has had a terrible toll on lives and property and the misery will last for many months to come. Since 911 this is the second time the New York Stock Exchange has been closed for more than a day-granted, both of these were extra ordinary events but maybe it’s time to rethink having the financial engines of the world concentrated in New York…

When I first started with Merrill Lynch we trained in the Twin Towers and everything was so close and convenient; the exchanges, investment bankers etc. From 911 we have learned that terrorists all around the world have also made this observation-does it really make economic sense to have all of our financial centers clustered together? Read more »

Hunger Games Fans-Did You Buy the Stock?

I always enjoy the writing of Crystal over at Budgeting in the Fun Stuff! She’s a much more engaging writer than me-I’m not too jealous! Her post today was Yes, I am a Hunger Games Fan. As a matter of fact, she is such a fan that she wrote about it in December 2010-Crystal just knew this was going to be a BLOCKBUSTER!!

She goes on in her post, on a serious note giving her readers some very good take aways from the movie. Me, on the other hand just have one question-Did you buy the stock of the company that made this great movie-Lions Gate, symbol LGF? Read more »

Insider Trading

He’s Back!! Have you seen the new Public Service announcement from Michael Douglas? You remember his memorable role in Wall street as Gordon Gekko. His mantra was “greed is good”.

Now he is a spokesperson for the FBI, where greed and insider trading is not so good! I think he’s a great choice for the FBI’s campaign against insider trading-albeit a little ironic. It’s interesting to note how this issue had really been put front and center with the arrest of prominent hedge fund managers and Congress trying to ban insider trading…….not holding my breath 😉

Here’s the clip for your viewing enjoyment:

Michael Douglas’s PSA

Do Rich People Live Longer?

Yahoo Finance had an article called Do Rich People Live Longer? let me guess…Yes!! Here are the major points of this article:

  • It’s clear that those who have less wealth will have fewer years to live than those with more wealth.
  • The longest-running longitudinal study of health, run by George Ballian, professor of psychiatry at Harvard Medical School, found education to be one of the biggest determinants of longevity, along with behavioral factors-excessive drinkers were more likely to die young, for example. Read more »

Does a Higher I.Q. Make Better Investors

Robert Shiller has an article in the Sunday New York Times called: What High I.Q. Investors Do Differently.Does having a high I.Q. score help you pick good investments? According to a paper published in the December issue of The Journal of Finance, is a qualified yes.

  • Even after taking into account factors like income and education, the authors concluded that people with relatively high I.Q.’s typically diversify their investment portfolios more than those with lower scores and invest more heavily in the stock market.
  • They also tend to favor small-capitalization stocks, which have historically beaten the broader market, as well as companies with high book values relative to their share prices. The results are that people with high I.Q.’s build portfolios with better risk-reward portfolios than their lower-scoring peers.

From my personal experience in the stock market; I would take some of their findings with a grain of salt. I’ve seen brilliant people do incredibly stupid things. When money is involved so are emotions. Emotions that can certainly cloud rational judgement. The paper has an interesting point:

Only about half of all American adults have money in the stock market, directly or indirectly. So maybe some thing else is going on. The real problem may not be that many people lack investing savvy or smarts. Perhaps what they lack is trust, or confidence in whom to trust!

What do you think? Does a higher I.Q. necessarily equate to a better portfolio with better returns? 


The First Steps for Investing

Who Can You Help?

I took a friend to lunch Friday and discovered that she has not the slightest idea how to start investing in the stock market. She is 22, single, part time student and works part time. Her family never talked about money and since she is a waitress, she has never been exposed to 401-k’s. She is not the lone ranger; think about how many people may opt out of working for corporations after graduation-we could have a lost generation of investors because no one mentored them. This is where all Personal Financial Bloggers can help-You have heard of the day once a year called Take Your Child to Work? I propose we take a friend to Scottrade or whatever firm you feel comfortable with!

So, this week I’m taking my friend to lunch and then to Scottrade to show her the ropes. Think about this: if you have never had any exposure to the financail world you may have many questions such as:

  • How much money do I need to start with
  • Does the firm accept cash
  • How do I make subsequent deposits
  • Should I have my boyfriend/girlfriend on the account with me
  • What documents are needed to open an account
  • What’s best, stocks, mutual funds, ETF’s or options

The whole process can be very overwhelming and extremely intimidating. I feel obligated to pay it forward and show someone my world and the financial riches that it can bring down the road.

I hope you’ll join me in this effort and take some one under your wing and expost them to a very confusing and potentially very rewarding world.

Do you have additional suggestions on how we can help our friends?


Remember the Dot-Com’s?

There was an article in Strategy+Business that asked an interesting question: What percentage of dot-com start-ups have failed? Many people typically guess that 90 percent of dot-com companies failed-they would be wrong. The facts are that a random sampling of all dot-Com’s that received venture capital financing in 1999 showed that about half (48 percent) were still in business five years later. The two authors of this study, Tim Laseter and David Kirsch also had an interesting observation: “Upon reflection, the fact that so many companies survived suggest that the first wave of the dot-com revolution suffered from too little entry, and not too much,” they write!
I can’t help but remember a dot-com that made me a ton of money. The symbol is CMGI. Back in 1999 it was around $20 a share and it gave us a great ride to $160 a share in 2000-2001! Fortunately, I took my profit and ran because it went from $160+ to $2.38 a share today!!
So take heart all you would be entrepreneurs-there is always room for your great ideas! Good luck! Sorry for my lack of posts: I’ll get back in the grove.

Steve Mertz

How Do You Invest Your Money?

I love the short money interview that Deborah Solomon did of Suze Orman titled She’s So Money. As regular readers know I’ve never been a fan of Ormans. I’ve found her information to be very condescending and simple! She is a great marketing machine and I do applaud her entrepreneurial skills.

I am a huge believer in always asking financial advisers how they invest their money and that’s why I really enjoyed the Solomon interview. When she asked Orman how she invested her money, Orman replied: “Save it and build it in municipal bonds. I buy zero-coupon municipal bonds, and all the bonds I buy are triple-A-rated and insured so that even if the city goes under, I get my money. I take a little lower interest rate to make sure my bonds are 100 percent safe and sound. “

What about the stock market: “I have a million dollars in the stock market, because if I lose a million dollars, I don’t personally care. ” Interesting comments! You can learn a lot about hiring a potential financial advisor by asking good questions. Wouldn’t you feel funny if your financial advisor invested all her money in real estate and was advising you to invest all your money in the stock market? Ask good questions before you commit to an advisor or guru!!

Steve Mertz
Suze Likes the AMT Tax!

Investor Sentiment

Mark Hulbert follow the advice of newsletters given to investors. He notes this morning that the Monday before the big sell off the investor sentiment was 62.4%-this was the recommended exposure to stocks from the newsletters. The investor sentiment index as of last Monday’s close was at 22.8%
He argues that the average recommended exposure to the stock market has now fallen by nearly 40%. Something you never see see at the top of a stock market rally. Now may be the time to get bargain hunting and pick up some of your favorite mutual funds and stocks that have been battered!
His current report is Newsletter editors have beaten a fairly hasty retreat to the sidelines.

Steve Mertz
Asset Allocation Revisited!