Parchayi.com – Personal Finance Simplified

I generally follow two stock markets – India and US. And for the last few weeks things are looking all bright and rosy. The Indian stock market is once more over 20,000. The US market has been rising for the last three weeks and maybe we might have a fourth week of gains.

The recession is supposedly over, and things should be looking  rosy all around as we are in recovery. But the only problem is that the recovery might be slow and painful.  Housing has not recovered. There is the 10.5% rise in home construction in August but that is just one data point amongst a long period of doldrums. Unemployment has not dropped significantly. Taxes will rise if the Bush cuts are not extended and my feeling is that consumers and businesses will be reluctant to spend for a while to come. The acquisition spree in the tech industry (Intel Acquires McAfee, HP acquires 3Par and more, 3Com acquires Cogent, Intel acquires Infiineon wireless division, IBM to acquire Netazza etc.) might be an exception to business spending but it looks like they are more interested in spending on acquisitions as opposed to hiring.

My take is the recession might be over but we are not out yet. I’m waiting for another dip before buying any more stocks. After all where are the jobs?

Let’s start with the disclaimer that I own Intel Stock. After this acquisition, which I will try to fathom as I write this post, the stock is back down below the dismal level I bought it at. When I bought the stock it was with the thinking that “it can’t go lower than this” and for a while it hasn’t. Until they overpay for a company that makes a mediocre product.

I can see geeks joking everywhere that Intel bought McAfee because the bloatware that McAfee sells is second biggest driving force for CPU upgrades after Windows. And CPU upgrades are good for business at Intel. But the real reason might just be one or more of the following

1. Diversification. Intel wants to move up from just being a hardware company, maybe?
2. Some future in-processor security mechanism. However McAfee is not a great acquisition for that purpose. They could have bought out one of the smaller players if it were just for the security aspect. A combination of 1 and 2 is more likely to be the driver.
3. They think adding McAfee will improve profitability down the line. McAfee has revenues of $2 billion and growing with margins of 80%. But I don’t see any common ground here where the acquisition will save costs. So either McAfee was seriously undervalued or the deal will bring major improvements to something Intel has in the pipeline.

As an investor I’m not exactly sure this is a good thing. It might be but I’m skeptical. I would have been much happier if they would have bought some smaller security vendor and thrown the Intel weight behind that to get people to move away from McAfee/Symantec instead. Intel spent more than half it’s cash on this deal. Maybe their headquarters being a stone’s throw away makes it easy to merge and form Intelton, CA.

Whatever it is, hopefully this foretells less malware in our future?

I logged in to my Blockbuster account today and saw this:

Blockbuster is really throwing everything and the kitchen sink to compete with Netflix and Redbox. But nothing seems to be working to keep the company alive. I’m not sure why they don’t throw in free streaming like Netflix too.

Total Access (exchanging disks in store), no delay for new movies, no extra charge for Blu-Ray none of this has worked for Blockbuster online. I’m not sure how well the kiosks are doing as compared to Redbox.

In my opinion, the problem with  Blockbuster is not that they aren’t doing enough. They are just doing it wrong. None of their offerings integrate with each other and Blockbuster just seems like a combination of separate companies held together by a bandage that is too small.

When Total Access first started, it want very well integrated with the Queue. Finally when they did integrate it with the queue, they removed features that made Total Access attractive in the first place. After blockbuster started shutting down stores and opening kiosks, they made the kiosks incompatible with total access. When Blockbuster started the streaming options after buing a streaming company, there was no option to stream some items for free like with Netflix.

The allure of free streaming from Netflix is that  alot of devices come with the ability to stream from Netflix and it is included. With Blockbuster you have to pay to stream so that is not as nice as Netflix. Of course with Blockbuster you can stream newer movies but if you are getting them in the mail anyway, why would anyone pay to stream? I just don’t get it.

I’m not a gamer so this new game feature is useless for me but this might cause a few gamefly users who also have Blockbuster to possibly consolidate into one account.

Either way I hope Blockbuster stays relevant and I hope they add total access to their Kiosks. That would really make me stay with Blockbuster for longer than I am planning now.

As the market tumbles and the Dow continues to stay under 10,000, a big question is what should we buy now as a replacement for the AAPL we sold. The stock market is tumbling and I want some safe havens to park the money forever or at least until I feel like getting back into more risky investments.

Right now there are a few stocks I have in mind that can offer just such a proposition. I’m going to post the same age old advice that will never go out of fashion. However as of now the opportunity is fantastic thanks to depressed stock prices.

Without further adieu, let me offer my suggestion – large cap dividend paying stocks. I have a few in mind that pay handsome dividends and are not going anywhere:

1. VZ – Verizon:  Current Dividend is about 7% and the company is not going anywhere. They are the most reliable wireless network  and will be the first to have 4G nationwide. They are likely to get an iPhone next year and the stock is near recent lows. I have an order in if the stock reaches the mid $25s.

2. KMP – Kinder Morgan Energy Partners: Current Dividend is about 6.6%. KMP is an energy transport/storage company and is structured as a partnership (more work during tax time)  but the dividend yield is worth it. We own some KMP and inspite of the ridiculous P/E ratio I would still recommend this one. The dividend has been constantly rising.

3. MO – Altria: Current Dividend is about 6.9%. If you dont mind buying a cigarette  company stock, this one is a good buy always.

4. T – AT&T: Current Dividend is about 6.9%. AT&T inspite of network issues is doing well thanks to iPhone exclusivity. Even if the iPhone hits Verizon, there should be minimal short term impact on AT&T because of users being locked into long term contracts and famlily/corporate plans. If I were to make a selection between AT&T and Verizon, I would pick VZ but you can do your own research and decide.

If you are into researching stocks, here is a link to the Yahoo Finance screener for companies with market cap > $10 billion and dividend of more than 5%. There are some household names in there like drug companies AstraZeneca – AZN, Glaxo – GSK, Bristoll Myers – BMY, energy companies like Shell – RDS-B and Total – TOT.

If you would like to look into smaller companies that pay good dividends you can adjust the screener and here are a couple that I recommend you look at – TLP (8% dividend) – another energy storage company and BGS (6.5% dividend, we own some) – a food company with some known grocery store items.

I acquired AAPL stock at prices ranging from $120 to $205. I had a sell order for about a third of my holdings at $250 but as the stock rose, I raised that to $275 and as the stock approaches that value after 600,000 iPhone 4 sales on day 1, I want to raise that to $300.

Should I be greedy or should I sell 1/3rd of my holdings at $275? I have been greedy before and lost money on NBF – a now defunct company. I have been greedy and made money on the India Fund – IFN.

But with AAPL right now it is a hard decision. But I might just let the order stand. As analysts “scramble” to raise targets, I wonder how big can Apple get? With a current market cap of about $245 billion, has Apple grown too big?

The iPhone4 managed to withstand all competition and iPad managed stellar sales despite the criticism. Will the iPad2, the iPhone5 and whatever else Apple has in store continue this trend? Will other manufacturers catch up and make a dent in future sales? Will people get fed up of AT&T and just move to some non-iPhone carrier?

Looking at it differently, Apple’s P/E is 22, which is only slightly higher than the 21 P/E of the Nasdaq in general. Considering that Apple seems to be a great buy at even current prices. The possibility that the iPhone will hit other US carriers and that it will continue it’s global expansion make Apple all the more attractive.

Either way I think I’ll take some profits now and if Apple ever falls below the $250 levels and things still look bright, I’ll buy it back.

For more comments and discussion visit this post on Seeking Alpha

I’ve been following all the liveblogs online and have everything investors need to know about the new iPhone.

So far the most significant thing about the iPhone itself that we didn’t know since the  leaked iPhone is that it has a gyroscope. That will make the iPhone the leading development platform for mobile gaming until someone else adds one. The rest of the stuff is nothing as great or as magical as Steve Jobs would like you to believe.

The other  significant thing is the improvement in image quality and the great HD video quality. I’m not sure how the EVO stands up to this but I’m sure the difference will not be significant except maybe in the quality of the video editing tools. Android will probably catch up quickly.

Ome more thing was multitasking. Finally iPhone OS has caught up to everyone else there.

The most significant thing not directly related to the technology is that AT&T will let users upgrade now as long as they are eligible at any point in 2010, that is six months in advance. This should drive sales.

I don’t know if Apple has had bad snafus like the one they had this time where NYT wouldnt load on the iPhone 4. Steve Jobs conveniently blamed it on everyone else using the wifi. But it worked for the 3GS and everyone else, just not the new iPhone. So maybe that things revolutionary antenna is not so revolutionary. It was funny when someone from the audience shouted Verizon when that happened.

It was disappointing to see that video conferencing will be wifi only for a while. Considering how long AT&T took to deliver tethering, I wouldn’t hold my breath for that on 3G anytime soon. EVO, anyone?

In a nutshell – The iPhone 4 has some new features, some of which are part of iPhone OS 4 and sone of which related to the hardware. The software ones will mostly be available as a free upgrade for most older devices. Considering that iPhone revisions happen only once a year, other manufacturers will catach up soon. But so far the iPhone maintains a harware lead.

Some other highlights:

• iPhone OS was renamed to iOS and Steve Jons introduced the new iAd platform and claims that it will take nearly half the mobile ad marketshare for the second half of 2010
• Nearly 1 billion in payments have been made to developers
• Other impressive stats about app downloads etc. we given
• You can play farmville on your iPhone soon. Another nail in Flash’s coffin.
• Netflix is coming to the iPhone.
• Bing search was added to the iPhone.

So far the announcement has been a non-event for the stock which is down about in line with the market. This is what I expect to continue until sales numbers are announced at some point. The early upgrade option will really help numbers in my opinion. The only bad thing here is the end of AT&Ts unlimited plans because this iPhone is finally a serious competitor hardware wise to the other phones out there and will consume more data than ever before. This is the time for unlimited plans and caps much higher than 2GB. AT&T’s network has some suffering ahead.

Final conclusion – this should be a non-event for both stocks until some numbers are announced.

For more comments and discussion visit this post on Seeking Alpha

AT&T has ended unlimited data pricing on all devices including the iPad. The $30 unlimited plan has been replaced by the options of $15 for 200MB or $25 for 2GB. This may be good for AT&T in the short term but this is a long term negative for the consumer as data consumption is only growing as smartphone adoption increases. Also, Verizon is considering similar changes to their data plans. Already on most devices and plans, unlimited really meant 5GB.

Notable exceptions were AT&T’s plan for the iPad and Sprints upcoming 4G plan for the HTC EVO.

What does this really mean? It means that the HTC EVO seems a far superior choice than the new upcoming iPhone because Sprint’s plan is cheaper and unlimited. As it is Sprint’s plans have been better and cheaper than other carriers for a while but anybody who has experience with Sprint customer service a few years ago never wants to go back. After this change they might consider giving Sprint a second chance.

As a side effect (hoping for reduced data usage) of this AT&T expects to  introduce tethering for the iPhone at an extra $20 per month (without adding any more data, What?) to coincide with the launch of the new model. This has been a long time coming with promises of it ‘coming soon’ made three years ago when the original iPhone launched. US is the only country with tethering missing for the iPhone in the world. This should be have been an embarrassment for AT&T who also cannot get the phone to work right in major metros like New York.

Just a few days ago AT&T introduced new smartphone early termination fees. My assumption is that AT&T doesnt want a mass exodus to Verizon when a new iPhone launches on Verizon later this year or next year. But now I realized it also prevents people from defecting to Sprint when they get hit by data overages.

Final conclusion is that this is bad news for the consumer, not so good news for AT&T and Apple (especially in case of the iPad) and impending bad news for Verizon when they introduce tiered pricing themselves. The only winner here is Sprint. Maybe. AT&T claims that the tiers are based on what people actually use but I’m not sure I believe that and going forward as we start watching vidoes etc. on our phones and mobile devices – I’ve been using Youtube often on my phone – things are only going to get worse.

As for stock, if you can handle the risk buy Sprint. It has been on a roll after recent upgrades but if the first to 4G works out for them, the stock might to well. If you are less risky buy Verizon because over the long term they will get an iPhone. I’m not so sure about AT&T’s prospects if they lose their iPhone exclusivity and they will also be the last to market with 4G. Even the CEO says the people will not switch to other providers because they are locked in and not because AT&T will provide better service.

Disclosure: I own no stock in any wireless company. I do own Apple stock but no Apple products. I am happy with my Windows Mobile HTC Touch Pro which can be tethered and also has wifi hotspot.

On Friday rates dropped to 4.5% for FHA loans and 4.625 for Conventional with 0 points from many lenders as long as you had good credit. However working with lenders is painful. I found lenders from interest.com (owned by bankrate) and I started calling the ones with lowest fees. I actually started on Thursday when rates were an 8th of a point higher.

The first lender I called – Atlantic Mortgage and Funding had lender fees of only $195. I always compare everybody to quotes from aimloan.com, who provide their quotes online on one of the best designed websites for home loans. I would have gone with aimloan but their rates for high LTV loans were higher and they only do conventional.

My 4.625% has only a $195 lender fees and AIM’s has a lender fee of $1995.So
I am beating them by $1800. If you would like to try to lock in today please
give me a call and we will start the application process.

Thank you,

Daniel Dunn
President
1-866-443-9777

Come Friday when I actually started to apply, the fees had gone up to $663.

$675 is the listed lender fee. This includes Credit Report, Tax Service, and
Underwriting. They actually total $663.000.

…

Kimberly A. Jones
Toll Free: 866-443-9777

Basically this sounded like a lender taking advantage of the situation and trying to charge more because more people are applying. Anyway I called them to apply anyway because they were the cheapest on interest.com even after the fee hike but as I started applying I got some cock and bull story – “Interest rates are about to change now and we can’t originate any loans for the next 10-15 minutes. Can I call you back after that?” So I say fine and there is no call. When I call back, I get the story that interest rates have gone up 0.75%. Bullshit. Anyway, I check back on interest.com and I see that their fees have gone up to $995. Also on their GFE which they wouldn’t honor within the hour had title costs that totaled $1764, which is ridiculous. Maybe my mentioning that I want to use my own title company caused them to drop me as a customer? Maybe they get kickbacks?

The second lender I called, United Mutual Funding, was much better and more upfront about everything and I applied with them. Their total costs came out to be a little less than  Atlantic and they pulled my credit report and I was all set. Or so I thought. I get an email some time later that they cannot do FHA loans in Virginia, only conventional. Crap. By the time I see that email, it is beyond 4:30 and I really want to get this done on Friday.

I am not going to be able to secure a FHA loan for you, unfortunately. I just learned that our FHA approval does not extend to Virginia properties. We are only able to originate FHA loans in FL. I will have your credit card reimbursed for the cost of the credit report.

I am terribly sorry about this. I can still offer you the conventional loan but I don’t think that is something you wanted. Please let me know.

Regards,

Erica Guthrie
UMFC

So a quick visit to interest.com to find the next lender I can try and I find Everbank. I call them up because their website doesn’t list FHA rates, I ask what they are and it turns out that they are also at 4.5% (after I asked if they can do 4.5 with excellent credit, the original quote was 4.625), which I was able to lock. Also their fees turned out to be the lowest amongst all the above. They provide a rate lock for 30 days but the agent admitted that they cannot close within 30 days due to high volume but the first lock extension is free and they will close with that time.

Now I’m keeping my fingers crossed that our appraisal keeps our LTV below 97.5%. We’ve paid off  11% of our initial mortgage balance in the last 5 years but our county assessment has dropped 26% from it’s peak in 2006.

If you are also considering an FHA loan with high LTV, keep in mind that FHA charges an upfront Mortgage Insurance Premium of 2.25% (which is generally rolled into the loan, so your new balance will be higher than the previous one). Also whether you go FHA or conventional, you will have to pay monthly mortgage insurance. Since FHA charges the upfront MIP, the monthly payments are lower. They total about 0.5% of the original mortgage amount each month. With the conventional, the monthly payment for PMI (Private Mortgage Insurance) is higher, I’d say about 0.75% but there is no upfront fee.

Another thing to keep in mind is that with FHA, the Insurance stays for a minimum of five years. It can be dropped after five years when you reach 78% LTV. With Conventional, PMI can be dropped at any time as long as you reach 80% LTV. You have to get an appraisal and petition the mortgage company. Either way with a high LTV loan it takes a lot more than 5 years to reach that level unless you pay significant amounts of principal.

I’m glad that somebody bought PALM finally! I own no stock in either PALM, Inc. (PALM) or Hewlett Packard Company (HPQ) but I didn’t want to see WebOS die. I don’t own a WebOS phone but it was a strong contender to be my next phone. Of course my hope was that HTC would take the EVO or the Incredible and slap PalmOS on it, but well HP can do something similar.

Dell is entering the Smartphone market, Asus makes the Garmin Phone and Lenovo has a phone in China. It was an obvious next step for HP to have a phone and HP is a Microsoft Windows Phone 7  partner too. But if HP could have its own OS that is at least equal to if not better than everything that is out there along with PALM’s excellent patent portfolio, that is even better than having the Microsoft deal.

Microsoft has been going after Android device makers to license patents and HP can avoid those Microsoft fees if it has PALM. In fact HP can avoid Windows Phone 7 altogether. Personally even though I am very happy with my current Windows Mobile phone and Windows Phone 7 sounds promising, I expect that it will have teething trouble because it is a complete rewrite and not backwards compatible. Also Windows Phone 7 suffers from many shortcomings of the iPhone such as a closed ecosystem for apps, which are not problems with Android or WebOS.

All HP needs to do now is pair some good hardware with WebOS.

Thanks to it’s meteoric rise in the last year, Apple is now Parchayi and my largest single investment. I was considering taking some profits when it crossed $250, which it did today after the monster quarter of nearly doubling earnings to $3.1 billion ($3.33/share) from 1.6 billion ($1.79/share) same Q last year on a 50% increase in revenues to $13.5 billion from $9.1 billion last year.

The iPad did not start selling in the last quarter and is not reflected in the above numbers. Mac shipments rose 33% and iPhone sales were 8.9 million (worldwide), a lot more than expected and even more than the holiday quarter sales of 8.8 million.

Apple doesn’t comment on rumors but it seems like the question to ask about a CDMA iPhone on Verizon is  not if, but when. Also with the next iPhone (iPhone HD?) in the works with a rumored release in summer and iPad there is no telling what earnings will be like next quarter.

Apple says that margins will be lower next quarter thanks to lower margins on the iPad and lower margins on “future product transition”. That can only mean the new iPhone. Margins are generally always lower on newer products until parts become cheaper as volume increases.

I’m now reconsidering holding on until Apple hits $275 to sell about a third of my holdings. The next iPhone seems to be finally catching up with other phones (HD2, Droid, Nexus One, Incredible etc.) in many hardware specifications where it was lacking such as flash for the camera, higher resolution screen and more.

There are things I don’t like about Apples ecosystem such as it’s fight with Adobe, resistance to Flash, arbitrary app store policies etc. but these don’t seem to be putting a dent in the adoption of the iPhone or iPad. Forced use of Macs to develop for the iPhone is another thing I don’t like but as far as Apple goes that is a great way to sell some more Macs.

For the next quarter AAPL’s guidance is $2.28 – $2.39 a share on revenues of $13 billion – $13.4 billion. Apple is known to provide extremely conservative guidance and has beat its guidance for as far as I know at least five years (don’t quote me on that). Analysts were expecting at $2.70/share on about $13 billion. It is quite likely that Apple will handily beat both estimates unless iPhone sales drop significantly on expectations of the launch of the new iPhone.