Investing Lessons To Be Learned From Buying A Car

Over the past week or two I have been diligently searching for a car to match all my innate desires. During the time-consuming process of deciding where to put my hard-earned money, I came to the conclusion that both investing and purchasing a used luxury sedan have many similarities. Many of us have bought vehicles over our lifetimes and the likeness between trading and purchasing a vehicle can lend itself to improve your investing ability. For those of you unseasoned in the arena of car buying this article may also serve as a means to improve your car buying ability ensuring you are not stuck with a lemon in the future.

When one sets out to purchase a vehicle they are often caught up in the moment. The excitement of buying a new car (or pre-owned) is unquestionably extremely exciting. In particular, when you have worked long hours to make funds available to purchase your dream car, the pressure to purchase immediately overwhelms the buyer. Many people fail to realize that they should go into car purchasing the same way in which you came into the funds that allowed you to make the purchase patiently. Patience is a virtue or however that outdated saying goes. Though the saying is overplayed, it suggests that rushing into any endeavor will have negative repercussions. So in regards to buying your dream car, searching diligently and giving the task at hand adequate time are essential. Ensuring you do not rush your decision will net you the best end result. The trading parallel is almost identical. Many traders, in particular new ones, get caught up in the hype, forcing their moves. The best of the trading community can wait out the pressure of needing to make a trade, knowing that another trade (or investment) will reveal itself to the patient stock market watchman. Sometimes the best trades are those that are slow and steady. The big upside movers can reverse on you just as fast as they went higher, look at JCP over the past few months. On the other hand look at another retail giant Nordstrom, where slow and steady served investors well. Patience can take on many forms when it comes to investing, either way you cut it, the best investors are patient.

Many traders fail to realize the importance of price points. When it comes to buying a car one is forced to stick to a price point, spending more than you have is just not an option. Stock prices on the other hand fluctuate often and readily, though the best investor knows what he is willing to pay for a company. When you go into the dealership or meet the guy off Craigslist, you have a set amount you want to spend. The smart car buyer also has researched the vehicle and knows what the car is worth ensuring that he or she does not spend more than the value of the car. When I buy a car I prefer to purchase under the book value, maybe due to my innate desire to get a good deal. Valuing stocks and cars are worlds apart. When it comes to a used vehicle, or new, you simple look up the NADA value and go from there. There is no real valuing tool for stocks. Though many say that the market itself values stocks, undervaluing names that lack future value and over valuing names that have the most potential. The most successful of the investing masses have the innate ability to choose quality entry and exit price points, rather than clicking the buy button and hoping for the best. Don’t be that guy who rides the winner from $20 to $100, then back down to $10, making it a net loser. Know what a stock is worth to you and what you are willing to pay for the company. Learn to have price points that you stick to, that work for you, in both your entry and exit, ensuring you don’t pay too much or never walk away making a winner a loser.

Investigation, one of the more finer points that both traders and car buyers often overlook. I see the story all the time, people buying companies and not even knowing who the CEO is. They see some buffoon on CNBC chat up some company, they buy in thinking they will get rich quick. Knowing details about your CEO is merely scratching the surface when it comes to delving into the company you wish to have in your portfolio, even if it is for a short time. You come across it on twitter and in the blogosphere, many people searching for information about the next big thing, hopping on someones coattails, but doing no research of their own. That my good sir is comparable to driving up to the dealership pointing to what you want and driving off. Yes, I know some of you do that. That may be acceptable when going and buying a new Mercedes. Though for any other car, more thought and investigation needs to go into the purchase of a vehicle. When you purchase a vehicle, maybe you run the carfax, look for issues throughout the vehicle. In my case, I like to take my investigation to the next level. I take my mechanic with me and we run the vehicle through its paces, put it up on the lift, run compression test on the engine, and so on. Similarly, that is how I like to add stocks to my portfolio. A trader who trades on a whim should be in Vegas, a trader who analyses the finer points of a company, will be rewarded. My research and analysis ensures that I don’t get a lemon, because I only like lemons in my lemonade. The same mindset can be the key to your success when trading. Knowing the ins and outs of a company can only lend your portfolio to outperform the averages.

Does your Maserati go 185?

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Housing Remains Everything

The macro tale has had a dark cloud hanging over it, the story has played out time and time again,  investors have been spooked when the housing market looks to die at our feet. Then overnight the investing climate changes, things look up, in turn crushing the shorts. Much of the investor hope and solid returns have stemmed from the hope that the housing market will save us from all of our economic blunders. These returns have resulted from the housing market profits (home builders finding the model for success in the new environment) or the housing derivative plays (people actually spending money) as the economy comes off the bottom. The brilliant economist and market guru’s suggest that the housing market can supply the much-needed crack that the market needs. The experts analysis fail to encompass all aspects of the situation at hand. In their analysis they fail to point out the sorrowing reality, the repercussions of the housing market not bottoming. Housing remains a pillar of hope for the markets and the economy, but on the flip side of the coin, it remains the nail in the coffin if it fails to perform as we all hope.

Breaking down the relationship between housing and our overall economy can be done simply. Individuals, perhaps like yourself, buy homes, or have them built, then proceed to fill them with all the wants and needs one could desire. For generations housing has fueled our economy. For countless years people have bought homes and filled them until their hearts are content. This has fueled profits for many companies, from everything based in technology to your favorite furniture company. Now what happens when the massive amounts of building and moving dissipate as they have over the past few years? All the other attributes of  the economy, everything from big box stores to the local lawn service company suffers from this slowdown.

That’s right, the economy of America remains shaky due to housing.

No, not due to the bubble we endured a few years back, rather the generational shift this bubble has caused and its repercussions on the housing market.

Even in the technology sector, where I see the most growth potential, this growth is hindered by the housing situation. Technology, in particular websites, make their money through advertising. These advertisers are the ones that produce entities to fill your humble abode.These advertisers are the ones that make televisions or furniture,  the stuff we as object obsessed Americans like to buy. Without advertising selling their goods, advertising ceases to fuel the profits of the technology sector. The sorrowing reality punches you upside your jaw, knocking the foolish investor grin off of your face. The future many of us focus on, the growth we all need to make profitable financial moves still rests on the housing sector.

For multiple generations we have put our faith in housing. It has fueled economic growth when war was no longer an option for kick starting the economy. Today we sit amidst a transition period. Today things are different (obviously). We can no longer look at housing to fix the economy for a multitude of reasons.  Most importantly, the housing bubble has destroyed the younger generations faith in housing. Buying a house as a long-term investment does not strike the same harmonious chord with the younger generation as it did with the elder generations.

The game has changed, housing no longer sits to bolster our economy. Instead the housing sector presents itself as a weight, a dead weight on the economics of America. From a patriot standpoint we must reevaluate the basics of our economy and growth we have seen for generations. From the investor standpoint we must watch the housing market like a hawk, because if the housing market goes by the wayside (again) the stock market will go as well.

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Apple Finally Challenges Itself

Recently the hatred for Apple has grown to massive levels. Many of the pros sit on their CNBC pulpits suggest that the Apples era sits behind us. From my standpoint, I undoubtedly see many challenges facing the technology giant in the coming months. On the flip side of the coin, I still believe they have a one of a kind product. Often times I sit wondering what the next big thing is, what will capture the American shopper over the holiday shopping season, what the crazy consumers will stampede for in the coming months. It turns out, that once again the unruly citizens of the world sit awaiting the next round of Apple products. Apple has repeatedly failed to avoid the seasonality of their premier product, the iPhone. On top of the pressure of timing, Apple has many products sitting in the pipeline. That combination of challenges may scream disaster for the technology giant, as Apple rushes out the next round of evolution in the technological world. As we all know, the more products you launch (in particular when it comes to technology), the more chances of failure.

Yes, Apple recently missed its earnings. They still moved massive amounts of product and the growth in the Apple iPads was just monumental. I am not concerned with the previous quarter, I sit fearful of what is yet to come. When it comes to Apples stock, investors have certain expectations, often lofty. In the past Apple has beat earnings but missed selling a certain number of  other products, in turn devastating the stock. My concerns sit on the possibility that Apple will not be able to meet expectations when their portfolio of products becomes more diversified, as it will in the coming months. Apple has for the longest time been able to push out great products and continually beat expectations. What happens when they are unable to sell as many products, because they are unable to be first-in-class in all their product offerings?

This may strike you as an unrealistic expectation. Why would Apple not sell more than expected? People always expect the most and best of the tech giant. I see why these high expectations are justified, but times, they are a-changin’. For years now the staple Apple product has been the iPhone. It has revolutionized they way we interact with the world and most importantly it makes my daily life that much easier. As Apple branches out into other arenas and attempts to change the way we interact with other household electronics, the Apple iPhone story may fall by the wayside. Not only that, but today’s competition is not going out without a fight. With the possibility of three top of the line products for sale by Christmas, what happens if one of these products flops, with minimal sales?

Could Apple stock now have too much risk associated with it?

Apple has served as investors bank for a long time. It has been the safe haven when the storms that is Europe came crashing down with its hurricane force winds and massive flooding. Those that held Apple during the storm of the last few years, were rewarded with an amazing return. The game for Apple may have just gotten a lot harder and much more realistic. Apple now has some real challenges ahead of it. Real challenges exist when launching any new product, in particular in the technology space. Look at the issues that the new iPad had with heat, the 4S had with its battery and software, and the iPhone 4 with its antenna issue. These issues were remedied easily, what if the next issue cannot be? Yes, the win could be huge with record revenues, record profits, and record percentage return for investors. One must ask him or herself,  are the rewards worth the risk?

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Social Media Bears Vindicated Through Naivety

First off, due to the fact that I am a man of sportsmanship, I would like to give the bears their moment of recognition.

Now that you fools have had your moment to gloat, lets look at the reality of the situation the facts. I have heard it now for over 2 days, the masses spitting on social media, treating it like the dirt on their shoes and at this point I am fed up. Not fed up with investors analysis, everyone is entitled to their opinion, I am fed up with the lackluster understanding of the innate details of the social media story.

Do you know what happened with JCP stock on Wednesday? A tweet moved the stock price nearly 10%. That’s right, a tweet manipulated the stock price of a publicly traded company. Now to say social media has no potential, has no place in the modern world, has no merit to any individuals, is to say that you are oblivious to the inner workings of the current world we live in. Possibly your reality differs from mine, I tend to live in the real world while many of those around me are out of touch with it, though in both settings, we check our twitter to get updates about the goings-on around us. Many of you are obviously shocked how a tweet can move a stock price, more likely you are infuriated about the situation, being that you cannot make sense of it. That is correct, your naivety forces you to misunderstand the magnitude of the simple tweet. Your naivety also makes you unable to grasp the potential of social media. So let your naivety do your stock picking, while I sit here knowing that the influence of Nina Garcia will get many talking and shopping about That one tweet reached millions and that in turn will drive traffic into the store, if not at least raise interest of many about JCP new line of products.

Again, I believe that many don’t understand the grandeur of social media in all its forms. Social media allows the people of the world to connect with each other. Facebook for younger generation can be compared to the rotary phone of the past generations. That example was a simple to ensure you got the overall theme, obviously social media has a greater impact than the rotary phone and continues to change the way in which we interact with each other. Investors fail to grasp the earnings potential of social media time and time again. When it comes to browsing the internet, an individual may spend a few minutes on a website, reading an article, or scrolling through a sites info. If you put that same individual on a site dedicated to social media, like Facebook or Twitter, they spend much more time on the site throughout the day, because that information is routinely updated and new information added every moment. This difference in behavior of the individual I am referencing makes the revenue and profit potential of social media unprecedented. Let me put it in number terms, so that you investors understand it better. Facebook comes in first when discussing time spent on a webpage, Google sites including YouTube come in second. Do you know how many times your page changes when you check your email or watch a YouTube video? The ads change minimally, while in the Facebook setting the interface is designed for you to view many pages in a short matter of minutes. Social media lends itself to push ads in your face again and again, ads targeted to your spending habits or interest. This version of advertisement can be described as nothing more than a revolution.

I find solace in the bears analysis, many suggesting that the they knew all along, nice thoughts. Luckily for us bullish on the sector, time remains on our side. As the numbers out of many of the social media companies suggest, growth is still in play. Look at the mobile space for example, Facebook had a %67 jump in mobile access, with 543 million people accessing their platform via a phone. Zynga had both an MAU and DAU increase. Mobile was also a big avenue for Zynga as well with 33 million DAU. You can attempt to cut down the above companies statistics, but that is undoubtedly a lot of people. Mobile is unquestionably on the move and a territory where no precedents are set. Did anyone think that Facebook could manipulate their free products profiteering from the masses  in the matter of one-quarter? Facebook has proven itself a leader in its industry, but impossible expectations are just that, impossible. Zynga, still the social gaming giants still firmly rests its laurels on social gaming, but sees the real growth over all platforms (in particular mobile). All these numbers and stats merely suggest that the growth exist, users are still using, the making money without destroying your user base still remains challenging. But look, just sponsored stories in the news feed made a million dollars a day, and that my good sir is just the tip of the iceberg.

The growth sits there, slapping you in the face. The revenues are growing just like I wanted, just like you wanted, but obviously not up to Wall Street standards. Why does Wall Street have these ridiculous standards? Simple, investors still don’t understand the business and think it’s merely a fad, so for them to believe in these new tech companies they need to have Enron earnings. So I will sit here believing in the story, knowing that these are the companies are the future, that they have been true to their investors, that the manipulations that many are implying are something of the past. Yes many of the CEO’s and early investors have sold out, but most are still tied to the future of the company. Many of them see the potential, just look at the growth numbers. So no these leaders of the tech are not walking away, they are losing sleeping at night looking for ways to make money off mobile. Just as we stay up late analyzing their actions. No these companies are not crap, not ceasing to exist, though they are trading as so. Perception is everything and the perception still remains negative, but just because a company has a negative perception does not mean it is not a business. I can take off the blinders and see the future, see the story, see the growth, see where the profit will come from. So yes the bears have been vindicated, but the story is far from over.

I am usually right, but more often than not I am way too early to the race.

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Can RadioShack Save Best Buy?

We are currently witnessing the movement away from big box stores. This can be attributed to many factors, everything from the growth of Amazon and the Apple stores to the slowing of Television sales. How does this all play into the story of RadioShack and Best Buy, and why are these names even to be spoken of in the same article?  The answer comes simply and surprisingly; large sized big box stores are dying and Radioshack’s small square footage and large footprint could be just the right pump of adrenaline for Best Buy.

You have heard and read about the way in which electronic stores are utterly useless, that no one shops in them. Buying electronics in stores has declined for quite some time now and been replaced by an increase in the buying of electronics online. Many assume that the  previously stated items are the only factors in the lackluster performance of electronic stores, if that was the case than Apple would have never opened its retail stores. Americans like playing with merchandise before they purchase. Yes a movement has occurred towards purchasing online, but the need to see the merchandise in the store still exists. Apple stores have boded well for the company overall and for similar reasons (need to see and feels products) you will find a packed Best Buy on Saturday. Ask any generation or any personality type, before a major purchase, one must have a one on one experience with the product. Many bears will argue that Best Buy is merely a showroom for Amazon, that argument holds merit, but through a strong strategy, huge footprint (with the help of Radioshack), and quality products, Best Buy can continue to be a profitable electronic store giant.

In a faltering business the best move may be consolidation. It appears that their are many options when it comes to buying electronics, this is true to a certain extent. Though, when it comes to quality electronic stores there are just a few and Best Buy presents itself as a giant in the space. Consolidation may be key here, because one of issues that has repeatedly surfaced pertains to Best Buys square footage. These huge box stores have large cost associated with them. Consumers electronics, computing, and mobile phones are the largest aspects of the Best Buy operation totaling almost 3/4 of revenue. The 3/4 of their revenue obviously does not take up 3/4 of their square footage. Through consolidation Best Buy could push their premium, large margin products in a smaller square footage store. With such a large portion of their revenues in such a specified aspect of their company, their large stores are just not doing them justice. Looking back at Circuit City, one can recall that the death of this electronics giant was due to square footage as well, making the Best Buy argument for smaller square footage very real. An acquisition of RadioShack could be just the move to smaller square footage that Best Buy needs.

Einhorn recently mentioned exiting his position in the electronics giant, citing the company for not having a solid strategy going forward. To compete with the online giants Best Buy will undoubtedly have to rethink its game plan, or it will fall by the wayside like Circuit City. The RadioShack footprint encompasses over 7300 stores and unlike Best Buy, RadioShack sits in many malls and smaller shopping centers. The RadioShack footprint is undoubtedly worth its weight in gold. The strategy should slap these execs in the face, take their giant status to that of a god. If Best Buy can go from being a mere big box store to a conglomerate of big and small box stores the opportunities are boundless. Radioshack has the ability to be in any small town or any neighborhood, an ability that Best Buy does not and will never be able to have. Taking the abilities of RadioShack and adding it to the arsenal of Best Buy could revolutionize Best Buy’s strategy and save their dying industry. The smaller stores could suggest margin compression, but when it comes to small stores closer to home, customers have and always will pay for convenience.

The only way that RadioShack will have the best products is through Best Buy. The only way RadioShack will surive will be to have the best products. The only way that Best Buy will compete with the likes of Amazon is to try an approach besides big box stores. The possibilities are endless with a change in strategy, because as I mentioned earlier, Americans are humans at heart and like to touch and feel merchandise prior to purchasing. If there was ever time for Best Buy to come in and buy out Radioshack for the bargain of a lifetime, that time would be now. RadioShack has lost over 80% of its value in the last year and hell, its cheap. Survival is key here when it comes to the fast paced age of the internet consumer and this may just be the edge that Best buy needs.

Last point that I want to drive home many often overlook, brand name. Best Buy has been synonymous for years with quality products and quality service. RadioShack has always been the cousin that no one wants to acknowledge. By re-branding these stores and making them part of the giant that is Best Buy, the traffice alone in these smaller stores will increase dramatically, just by mere Best Buy branding. The potential is there for Best Buy to make moves to smaller square footage easliy and cheaply. With increased competition from online retailers, if Best Buy wants to survive as a big box, it may just have to bring in the little box as part of the team.

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