Monday, July 21, 2014

What's on Top of my Finance News Feed?

Let's read some financial news.  I picked the top article off of my financial news feed.

The article to be discussed: this one.
Wall St rebounds from selloff; indexes up for the week
Technology stocks ranked among the day's biggest gainers. Google led the rally. Its stock jumped 4.2 percent to USD 605.11 a day after the No. 1 Internet search company reported second-quarter results that beat investors' expectations.
Numbers and percentages and stuff!  This is an article for the crème de la crème, the real investor types!!!

The article reads like a laundry list of statistics for the: S&P 500, Google, Facebook, Dow Jones, Nasdaq, CBOE volatility index, Russel 2000... 

Sorry, I just nodded off there for a moment.

To save you, dear reader from having to read the article, here is a Q&A with... myself.

What does this article tell me?

The stock market fell on Thursday, before rising on Friday.  Some stocks did particularly well, other stocks fell precipitously.  World events happened, but failed to affect the stock market in any lasting way.  Depending on which collection of stocks an investor had picked on Monday, that investor might have gained or lost money on Friday.

So, basically this article doesn't tell me anything.

What do you mean, doesn't tell you anything?  By reading this article, you learned that:
Market participants kept geopolitical news in focus. US President Barack Obama demanded that Russia stop supporting separatists in eastern Ukraine a day after the downing of a Malaysian airline by a surface-to-air missile, which he said was fired from rebel territory. The incident raised the prospect of more US sanctions on Moscow. 
Investors also remained cautious after Israel warned on Friday that it could "significantly widen" a Gaza land offensive.
What the heck does that mean?

Well, it means that people who invest also read the news.  It also means that to save time, the writer of this article copied the major weekly headlines and added a little market spin.  Here: I'll show you how it's done.

Market participants kept geopolitical news in focus...

Gosh, golly.  It's hard to keep focus, the little tyke is moving so quickly!
Investors remain cautious after...
I'd be cautious, too, but only if I was alone in a room with him.
I read market news to help me invest.  What benefit does this article have for me, the investor?

Do you also have a time machine?  Because if you did, this article would tell you that you should, on July 14th 2014, definitely buy: Google, Facebook and Honeywell International.  That same day, you should sell any of your General Electric Shares.

I don't have a time machine, obviously.

Oh... That's problematic.

Well, have no fear!  The article also gives you some rock-solid guidance for the future:
"It seems counter-intuitive, given the ruthlessness with which the market sold off yesterday, but in the broader context, the markets are generating a lot of attractive themes," said Peter Kenny, chief market strategist at Clearpool Group in New York. 
"We have an economy that is expanding," he added. "We have many data points that support that narrative. We are in the middle of earnings season, and earnings season has given investors reason to believe that what we have seen in the headlines over the last day or two, though very important, isn't what is driving investment decisions."
What does that mean?

It means that you shouldn't pay attention to the news.  When you buy shares of a company, you should pay attention to whether that company is actually earning any money.

That's... pretty decent advice, actually.

I suppose.  So what stocks should I buy?

Now you're talking!  You should, apparently, buy stocks with good earnings.  

Which stocks are those?  

The article is very clear on that point.
S&P 500 companies' profits are expected to grow 5 percent in the second quarter, according to Thomson Reuters data, down from the 8.4 percent growth forecast at the start of April. Revenue is seen up 3.2 percent.
Basically, this article tells you that you should buy all of the S&P 500.

I'm an individual investor.  I can't afford to buy shares in all of the 500 stocks on the S&P 500.

Oh, then this article thinks that you should buy mutual funds.

The whole article boils down to an endorsement of mutual funds?


That's kind of useless.

I couldn't agree with you more.

Monday, July 7, 2014

Debt-mas 2010

A few years ago at Christmas time, money was tight.

My house was continuing to be its spectacularly needy self, I'd just bought a new-to-me car (and snow tires for that new car and a new alternator for the old car which wasn't yet sold) and it was, well, Christmas.  

Christmas was to be a family affair, that year at a rented house near Barrie, Ontario.  My mother, retired, left early so she could gobble up as much adorable time with her grand-baby as possible.  

"My, what pretty teeth you have, grandmother."
My dad and I, employed, left Christmas Eve for the long southerly drive.  We took my new car, its virgin cross-provincial trip.

Because it was my car, we barely even listened to talk radio.
We made it to the gas station in Napanee where I filled the car.  Oddly, the machine wouldn't allow me to pay outside; thinking nothing of it, I went inside.

I'm pretty sure that a dictionary definition of awkwardness is standing in a gas station two and a half hours from home on the phone with your credit card company asking why they will not let you pay for the $20 of gasoline that you just finished putting in your car.

The reason?  My card was compromised.  The credit card company was going to mail a new credit card to my house, scheduled to arrive in the second week of January when their office wasn't on holiday anymore.  None of this was useful to the person who was headed away from her house and who would have great need of the card over that period of time to do holiday things, like skiing and filling my car with gas.

They gave me one glimmer of hope: I could use the card if I used the chip feature and typed in the pass code.  

At the time, the chip feature was brand new to Canada.  Only the newest machines accepted them.  The odds were not in my favour.

We finally made it to the destination and, worries pushed aside but not forgotten, I Christmased the snot out of Christmas.

Unfortunately for me, the city that we stayed in was small and did not have the most up-to-date technology.

"We've got the thingie, but it's not activated yet."

"What in the heck is that chip for?"

"Oh no, we don't take credit."

I still paid for things, but these things were paid for with my Interac card, the money drawing directly from my bank account.

This was a problem.  Because of all the circumstances surrounding that particular moment in time, I was scraping the bottom of the financial barrel.  My plan for paying off my credit card included not only the money that I had in my bank account, but also the money that I would earn from my pay cheque.

I should note that this plan was not a good plan.  It was a terrible, no-good plan that I would recommend to no one (though it was slightly better than not paying my credit card bill at all).  The horrible plan hinged on my continued access to that credit card.  Without it, my finances started to look more like this:

When faced with what seemed at the time like insurmountable odds, I did what any reasonable person might do; I appealed to a higher power.

"Hello, customer service.  ...hello?"
After hearing my tale of woe, the company agreed that I could defer my payment of my credit card bill.  To keep my credit rating intact, they advised me to pay the absurdly low minimum payment.  They promised me that I would be charged no interest.

If this were an epic story, then there would be a twist at this point.  They didn't just agree to do something and then actually DO it, did they?

Which segues into the story of how I turned to drug running to pay off my credit card debt... allegedly.
I was lucky; it rolled out exactly as they promised.

I'm sorry.  It's just how I am.

From this experience, I was able to learn for free an important lesson about credit cards: don't charge more than you have in the bank.  

There are much more expensive ways to learn this lesson.  Please note that I don't advise any of them.