Parchayi.com – Personal Finance Simplified

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Finally today was some slight relief after a long time in the stock market. One breather day between daily drops.

However throughout the housing/financial crisis, foreigners have been slowly buying out America, so much so that America may not remain American anymore! Banks got money from abroad, Automakers are looking at India to buy more brands like Hummer. Even Bud is no longer American.

As an investor, this might be a good time for you to get your own slice of Corporate America. Great companies have their stocks do deep in the red from their highs that it would be shocking if the next few years were not spectacular for those companies. Some examples include Archer Daniels Midland (ADM), Target (TGT), Intel (INTC), GE, Metlife (MET). Considering todays jump in Wells Fargo after some positive news it is likely that other financials will also show significant jumps on any positive news. For many that might be months away but I’m keeping an eye out.

That’s not to say you should ignore emerging markets – Indian stockes fell about 60% from their highs and my next buy will be more additions to my India Funds or a new position in EPI

Discalimer: I own ADM, TGT, INTC and recently doubled my ADM holdings.

What do analysts know? Do they really have the ability to foretell the future of the stock market, the economy or even an individual stock more than you or me? I think the only advantage they have over us is that they get information a little before us but that doesn’t really help in their ratings. Most upgrades/downgrades of stock are too late to do anything about them

Until the housing bubble collapsed, there was no housing bubble. As oil prices continue to rise, today’s opinion is that there is no oil bubble and speculation may (or may not?) play as big a role in rising oil prices. Will Oil hit 200 next or will it hit 100? Are we in a recession? Were we in a recession a month ago? Are we headed towards a recession? Analysts have no definitive answers, you can always find an analysts with contradicting opinions and mostly their guess is not much better than yours or mine.

So what must an investor do? Personally, I’ve stopped listening to analyst opinions. Read the news, separate fact from speculation and you have everything you need. Buy low (I’ve been doing this part correctly for the most part), sell high (this is something I really need to learn, though I am improving). I’m slowly turning into part value investor, buying beated down quality stocks and part speculator investing in emerging markets and small companies with potential.

How much more is America paying for crude compared to Europe thanks to the falling dollar?

Last year Crude was at 60$, 1USD=0.74Euros. Today Crude is at 132$, 1USD=0.63$. Doing some simple math, Americans are paying 120% more for oil, while the EU is paying only 88% more than last year.

What about 5 years ago? I couldn’t find Crude prices for the exact date but the average for the year was 27$. So Americans are paying 3.9 times what they used to for crude, while Europeans are paying 2.8 times what they used to.

However be mindful that inspite of the steep increases in gas prices, Americans still pay about half what Europeans pay for gas at the pump. No wonder they have small cars, more diesels etc. which is what is happening in the US now.

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Just so you know these guys are being sued for misrepresentation of services and their CEO, Todd something or the other has had his identity stolen at least once and maybe as many as 20 times according to some reports. So don’t go posting your SSN online, on TV etc. like him!

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I just ran a morningstar X-Ray on Parchayi and my investments now and the stocks are exactly 60/40 US/International. International investments are 48% in Asia (more than 2/3rds in India) and 34% Europe.

The portfolio is still heavily large cap weighted after I sold off all my stake in Panera Bread. I still haven’t reached my simplification goals to reduce the number of stocks and funds owned because I can’t decide what funds to dump.

In the last post I talked about biodiesel as fuel of the future and mentioned the upcoming Accord diesel. Currently most of the diesel vehicles in the US are trucks, vans and Mercs, however this is changing. Volkswagen is bringing the Jetta TDI to US (was supposed be here this month but keeps getting delayed) before the Accord. Next in line is the Maxima diesel and BMW diesel models of most of their cars. Rumors are there will even be a corvette diesel!

Mileage for diesels rivals that of Hybrid vehicles of similar size. However considering that diesel in the US is about 15% more expensive than gasoline, that advantage might not be much unless the biodiesel refineries popping up all over the country cause a glut of cheap biodiesel and B100 or B99 are usable with future cars.

Here is one blogger who keeps up with the diesel happenings in USA

Most people will answer ‘Ethanol’ to the question, but I say Biodiesel is a worthy adversary. Modern upcoming Biodiesel refineries can produce biodiesel that meets or beats all diesel standards, has lower sulfur and is biodegradable. Also diesel cars have upto 40% better fuel economy and to top it all biodiesel can be made from waste. Currently biodiesel is manufactured from plant based oils but Nova Biofuels, a startup (I own a few shares which got hammered today after NBF posted it’s 10Q results) has constructed refineries which accept a variety of feedstocks to produce high quality biodiesel. Currently biodiesel is only used as an additive to petroleum derived diesel, however if you can make a biodiesel that can’t be differentiated from the petroleum kind and it costs the same, why not? Many big corporations are also investing in Biodiesel, including ADM (I also own stock in ADM – one of the very few stocks I own that has not been severely beaten in the last few months).

The problem with biodiesel, you ask? So far only commercial and military vehicles use diesel. There are very few diesel cars in the US. But that is probably about to change as more manufacturers, including Honda (2009 Honda Accord Diesel) and GM plan to launch diesel cars. There are rumors that the 2009 Accord diesel will get 52mpg! So even though diesel prices have hit a national average of nearly $4/gallon, diesel might make sense. And cheap biodiesel may just be the answer. There is already a network of crazies who home-brew their own diesel and will probably be ready to buy diesel cars?

Forbes billionaire list is out and four out of the top ten are from India. I’ve been hearing rumors for several months that Mukesh Ambani might top the list but he came in at no. 5. Anil Ambani follows close behind at no. 6 and K P Singh who I have never heard of before is at no. 8. Laxmi Mittal is at no 4.

The crown was taken by Warren Buffet from Bill Gates this year.

Mumbai ranks no. 7 in the top cities with 20 billionaires living in Bombay. The top city however is Moscow with 74 Billionaires!

In case you missed it the first time around, now is an even better time to get into financials. WB now sports a dividend of 8.3%. It is unlikely that the bank will cut its dividend and even if it halves the dividend to 4.2% that is still better than the best non-promotional savings rate you can find. The best I found was Amboy Direct at 3.75%.

Also it is likely that the Fed will continue it’s rate cuts and bring down savings rates even further and making large financial stocks even more attractive. e.g. BAC (6.75% Dividend). Even Citigroup after it’s dividend cut yeilds over 5% now (not that I’m recommending it, just pointing out the dividend).

If you feel uncomfortable about financials, maybe you cna look at other dividend paying stocks which have been battered – MO – 4.1%, KFT – 3.45%. Even INTC is paying 2.5% at current prices. So if it pays dividend and is unlikely to cut the dividend, you are probably good for the long run. For the next year or two however, be prepared for a rough ride.