Parchayi.com – Personal Finance Simplified

The original nook was a great response to the Kindle. It runs Android has a few apps and got hopes really high that it would be the open device that would drive innovation in eBooks. One year went by, BN did nothing to help developers make apps, made new versions that annoyed the nook hacking community for a few months. There was no app store, no developer friendliness, nothing. Let’s hope the next software release that is coming in November is better. The nook is a great device for reading but organizing books on it sucks. For a device that can store thousands of books, that is a very crucial feature.

Yesterday’s Color Nook launch just proves the point that Barnes and Noble just doesn’t get it at all. Us readers don’t want a 7″ tablet, an underpowered one at that with poor battery life at that. There are already lots of those floating around (Archos 70, Cheapo Kmart tablet, Cheapo Walgreens Tablet). We don’t want an LCD based reader either  - see failed ones – Pandigital Novel, Sharper Image Reader -  because thats not a reader, thats just a crappy tablet.

What the Color Nook should have been is something like the upcoming Delta Vivitek  eReader, which has a color eInk screen. Or if they couldn’t manage a color eInk or Mirasol, at the minimum the device should have had a Pixel Qi 3Qi screen.

The current nook is a disappointment and the market has shown that with the lack of reaction to the announcement.

Disclosure: No positions in any stocks mentioned.

I’ve been following the Apple “Back to Mac” event live on blogs and news sites and just saw the new 11.6″  Macbook Air. It is a small notebook and starts at $999 – which is the price of the current lowest end Macbook. So it meets my definition of netbook – a small and light notebook that is available in the price range of a low end laptop.

I was disappointed that OS X Lion will come Summer 2011. That is a long way away. But the app store coming in 90 days is good news. If you’ve been following my Apple posts, I sold a third of my Apple stock when it reached $280 and I plan on selling another third at $375.

With the way Apple has been performing, I would say the stock is currently a buy but I’m uncomfortable with being so heavily invested in a single company. So I’m not adding to my Apple holdings anytime soon.

Bank of America recently acquired our mortgage from Everhome. We refinanced with Everhome in July from VHDA. Both VHDA and Everhome let me setup automatic recurring payments and they let me pay until the 15th of the month without any problems.

Here is the table of payment options from Bank of America:

	Mortgage Pay on the Web	Bill Pay	Transfers
Who it’s for	Anyone with a Bank of America mortgage	Bank of America mortgage customers with a Bank of America personal checking or savings account	Bank of America mortgage customers with a Bank of America personal checking or savings account
Fees per transaction	$0 – $6.00, depending on payment date (never a fee if paying from a Bank of America checking or savings account)	None	None
Payment cycle	One-time payments	Make both one-time and recurring payments	Make both one-time and recurring payments
Payment date(s)	Same day1, up to 30 days in advance	Set up same-day, future-dated or recurring payments	Set up same-day, future-dated or recurring payments
Pay From account	Checking or savings account at any financial institution	Bank of America checking or savings account	Bank of America checking or savings account
Payment flexibility	Must make at least the minimum payment due2 You can also add additional principal, escrow or other fees to your payment	Must make at least the minimum payment due2	Must make at least the minimum payment due2

If you notice the above table says that recurring payments are only available if you use a Bank of America checking account, which I do not have and have no intentions of opening another account to complicate my life.

Also to make matter worse, Bank of America does not let me schedule multiple payments at the same time. Since I have one pending payment now, I cannot schedule my next payment. I cannot also modify my current payment without cancelling it and rescheduling it.

The table also implies that there might be a fee for paying from your regular non-BOA checking account depending on your payment date. Here is the fee schedule:

If you are paying from an account at a bank other than Bank of America, this service is available at no charge when scheduling your payment to be deducted on available draft dates during the first 1/3 of your grace period or before. When scheduling your payment to be drafted during the second 1/3 of your grace period, you will be charged a $3.00 fee that will be included at the time of your deduction. For the last 1/3 of your grace period or after, you will be charged a $6.00 fee that will be included at the time of your deduction.

This is provided in a table when I try to schedule a payment:

So in short, Bank of America Mortgage Sucks. I don’t want a Bank of America checking account and I want to be able to pay on the 15th like I always have before and I want to be able to schedule these payments automatically like I always have.

Motorola just filed a very important, in my opinion, lawsuit against Apple premtively defending itself from Apple patents. I think this is the kind of lawsuit that needs to be filed agains most companies regularly to try and get as many patents invalidated as possible. The current patent scenario in the mobile world is beyond ridiculous and in most other industries it is getting there. A lot of mostly worthless patents are being awarded for software some of which are not only obvious to people in the industry but to anyone else who uses phones and software.

Apple is suing HTC, Nokia (Phone tech patents)
Nokia is  suing Apple (Phone tech patents), Qualcomm (Anti-competitive practices, phone tech patents), Hitachi, Toshiba, LG, Sharp (LCD price fixing)
Qualcomm is suing Nokia (Phone tech patents)
Motorola is suing Apple (Phone tech patents)
RIM is suing Motorola (Anti-competitive practices, phone tech patents)
Microsoft is suing Motorola (software patents) (also successfully collects licensing from HTC on Android phones too!)
ELAN is suing Apple (multitouch)
Kodak is suing Sony-Ericsson, Samsung, LG, Apple, RIM (patents related to images)
Sony-Ericsson is suing Kodak (patents related to images)
Oracle is suing Google (java patents)
HTC is suing Apple (phone tech patents)

Here is an image from Informationisbeautiful about this:

What does this mean for us. Nothing at all. We get to enjoy new phones which are probably a few cents or dollars more expensive than they should be because some money that should have been exchanging hands between these tech companies is now going to lawyers. So far amongst all the parties sued for something other than price fixing, Google is the only one who has not sued anybody else. Maybe they are really not evil? Maybe since a lot of these lawsuits are being brought against Android providing manufacturers, they should start trying to invalidate worthless patents.

Disclosusre: Long AAPL, GOOG

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?

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When most people think of a financial market, they think of the stock market.  The stock market is the most commonly recognized financial market around the world.  Each day there is about $75 billion of turnover in the New York Stock Exchange, the world’s largest stock market exchange.  The stock market pales in comparison, however, to the world’s largest financial market—the foreign exchange market.  Ironically, the foreign-exchange market is both the world’s largest financial market and the world’s least recognized financial market.

Daily turnover in the foreign-exchange (fx) market is a staggering $4 trillion.  Average daily turnover in the New York Stock Exchange is between $50 – $75 billion; thus, the average daily turnover in the fx market is 35 times more than the NYSE!  In fact, if you were to add up the daily turnover in every major stock exchange around the world—New York, London, Tokyo, Shanghai, Germany, France—the number would still pale in comparison to the average daily turnover in the forex market.

What is the FX Market?

The foreign-exchange market is a loosely connected network of international banks where currencies are exchanged for one another.  Thus, it is called the foreign-exchange market.  If you have ever traveled outside the United States and converted U.S. Dollars into any other currency, then you have engaged in the forex market.  Most of the activity that goes on in the fx market each day, however, is not someone converting currency for the purpose of actually using it in another country.  Over 80% of currency exchange each day is done by investors speculating in order to gain money as the currency rate changes.

Why Do Most People Not Know About FX?

Until the late 1990’s, most people could not trade in the fx market.  Trading in the fx market was limited to large banks, hedge funds, and very wealthy investors.  The reason was simple.  The minimum contract size was between $100,000-$1,000,000.  This very large minimum contract made it impossible for most people to engage in the forex market.  However, in the late 1990’s the advance of both technology and the internet changed things.  Online forex brokers began popping up in the United States and around the world, and they allowed investors to trade in the forex market with as little as $1,000 or less in their accounts.  Thus, the fx market is still relatively new to the general investing public.  Although most investors are still largely unaware of this market, it is still growing at an exponential rate.  Growth and volume in the fx market is faster than in any other financial market around the world.  Let’s examine why.

Benefits of the FX Market

Leverage

Leverage is a huge reason many investors switch focus from stocks or commodities to focus on the fx market.  Most fx brokers offer at least 100:1 leverage, and many brokers outside the United States still offer leverage as high as 400:1.  100:1 leverage means that an investor can control a $100,000 position in the market with as little as $1,000 in his trading account.  In the stock market, a trader is generally not able to leverage more than 2:1, so the leverage is much bigger in the fx market.  Leverage, of course, is a double-edged sword—it can lead to very quick and dramatic profits, but it can also lead to very quick and large losses as well.

Liquidity

The sheer size of the fx market makes it by far the most liquid market in the world.  This tends to offer relatively smooth trends on the higher time frames, and it keeps the market from falling victim to the price manipulation that tends to happen in stocks.  The fx market is so large that it is virtually impossible for any single bank or hedge fund or even group of large market players to manipulate market prices for any extended period of time.  This makes trading the fx market very attractive for smaller traders since they are somewhat on an even playing field with large players.

24 Hours A Day

Since the fx market is a loosely connected network of international banks around the world, it is open 24 hours a day, 5 days a week.  The fx trading week begins Sunday evening around 5 pm est and runs through Friday evening around 5 pm est.  The most popular times of the day to trade are during the London trading session, the New York trading session and the Tokyo trading session, although London and New York are clearly the best times of the day to trade.

This ability to trade around the clock is very attractive to many traders who still hold regular jobs and are not able to trade during the day.  They can also practice on a forex demo account any time during the day or night.

Low Transaction Costs

Transaction costs in the fx market tend to be significantly lower than transaction costs in other financial markets.  This is a major draw for traders as it increases bottom line profits over time.

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