Parchayi.com – Personal Finance Simplified

The Nasdaq is up almost 50% this year while the Dow is up almost 20%. Tech stocks are reporting stellar earnings with Intel, Microsoft, Amazon, Apple, Google amongst others all beating estimates.

If the trend continues, 2009 will really be the year of the tech stock. And it isn’t even really that much of a bubble. Many tech stocks have non stellar P/Es. They are still higher than the S&P average but maybe justified considering the performance. INTC had a dismal last year which drove it’s trailing P/E to around 50. But now it seems to be back on track and has a forward P/E of only 13.5! Google has a forward P/E of about 24, Apple about 26. Amazon has the highest amongst the P/E ratios at 46 but as long as the recession continues, Amazon will probably continue to beat expectations as more shoppers turn to online shopping for more items.

Walmart.com, my new favorite destination for online shopping with free site to store shipping and prices that often beat Amazon, even after tax and the simplicity of returning to store, great customer service also can’t seem to affect the Amazon juggernaut much.

Windows 7  is selling like hot cakes and if Windows Mobile 7 is even a thousandth as successful as Windows 7, we should see Microsoft making some headway into the Mobile market. Really the best phones are either running Android or Windows Mobile and the current iPhone has nothing on them except the App Store. Expect both Android and WinMo to catch up quickly.

What can I say, if you can stomach the risk, wait for the excitement of  the current quarter die out and get some tech stock for yourself during holiday season.

Disclaimer: Parchayi and me own AAPL, INTC and GOOG stock.

Now that Ahan, my son, is 7 months old and I have time to think, I started looking into college savings plans. The world of college savings plans is more complex than it has to be with every state having their own 529 plans, some good and some not so good. Then there is the Coverdell ESA, which used to be called an Education IRA. I’m in Virginia and I hope to give you some basics and also discuss the Virginia plans over the next few posts. I’m hoping that writing these posts and analysing the pros and cons will help me make the choice of what to pick along with helping you too.

Let’s start with the ESA basics today. An ESA  is basically like a Roth IRA.

The Basics + The Good

• You can contribute $2000/child/year to ESAs (unless this drops back to $500 if not extended by congress next year). This includes all contributions made by everyone for the child.
• It can be used for almost any educational expense including k-12 (unless this benefit is not extended next year by the congress).
• The account is owned by the child. So any unused funds will be distributed to the child and not back to you.
• However as far as applying for financial aid goes it is treated as your account.
• High income folks >95,000 single and >190,000 joint filers can contribute less than 2000 and the benefit is completely phased out at 110,000, 220,000.  Unfortunately, we don’t have to worry about that.

The Bad

• The funds must be used by age 30 otherwise there are taxes/penalties
• The tax situation becomes complex if using ESA funds and planning on taking the Hope/Lifetime credit

If I decide to open an ESA, I’m thinking of using one of the companies we already have accounts with i.e. Scottrade or T. Rowe Price.

Part 2 will follow soon with 529 Plan basics.

The stock market is showing no signs of falling. From the looks of it the recession, at least as far as stocks go seems to be over.  Take into account that the S&P 500 is still at late 90s levels, it has a long way to go before reaching it’s 2007 highs. However looking at the S&P 500 historical P/E ratios, it seems that every time the 20 P/E ratio is crossed, trouble starts. Mostly the trouble starts soon with the exception of the mid 90s to the tech bubble burst where the P/E grew leaps and bounds for several years.

The chart puts the current PE at 19.35 which is dangerously close to 20. Maybe next quarter results will see company earnings rise causing P/E to stay below 20 in spite of a rising market. But that remains to be seen. I’m cautiously optimistic. Many of my investments are back in the black and I’m adding to some investments slowly.

Also even though the recession may seem over in stocks, it doesn’t seem over in other aspects of people’s lives. Companies are still trying to cut benefits, skip raises and are still recruiting slowly as unemployment remains near all time highs.

The real estate market is still depressed. Home sales may be picking up but home prices are not. People are still stuck in underwater mortgages. Obama’s refinance plan did not work out as well as expected. Hopefully his healthcare plan will work out better?

Overall I’d say the recession is far from over and if you are saving money it might not be a bad time to start getting back into the stock market slowly.