How To Buy - Week of 8/20

Investing In Yourself – Using Pillars to Build Your Core	https://urbanomics.blogspot.com/2015/04/urbanomics-pillars-path-set-for.html
Setting Budgets + Saving for Black Swans	https://urbanomics.blogspot.com/2013/02/personal-finance-budget-101-free-credit.html
	https://urbanomics.blogspot.com/2019/11/hey-henry-high-earner-not-yet-rich.html
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How To Buy - Week of 8/20

TREE HOUSE (THS) This trade started off profitable and then began it's slide. I could've booked a profit but I haven't been paying attention to my portfolio much lately. THS just recently shared their quarterly earnings report (i.e., healthcheck) and it was not was Wall Street was expecting. The stock has slid further and I now have to make a decision to book the losses or buy the stock.

Translate BIO (TBIO) - I decided to trade TBIO on May 6, as it began to drop under $20. This is a example of where I use data to set thresholds for when I want to make a trade. I just felt it wasn't going to drop much below $17.50. Reach out to be a paid subscriber and you'll receive these alerts. TBIO bottomed out around this level and even to my surprise I found out they are trading today at the $37 range. I traded this via options and made a very nice profit here in roughly 3 month. I just wish I also owned the stock.

FOOT LOCKER (FL) - This is my bet on things eventually reopening. Please mask up so my Foot Locker trade will skyrocket even further. Retail is based on our society addressing COVID and things getting back to normal.

ROKU (ROKU) - I've said enough about my best trade in the last year. It is giving Collector's Universe a run for it's money and most of my portfolio is in Roku.

CONTEXT LOGIC (WISH) - I continue to trade WISH options. I want to get rid of it, but as the stock declined these options have helped me earn income against a stock I no longer want to date.

JUNIOR GOLD MINERS (GDXJ) - Yes I own Gold and I think this is the right play as inflation is creeping in from all the stimulus pumped in the Trump and Biden era. It is also the right play if COVID is not contained and economies slow down. This is the old version of Crypto before Bitcoin hit the scene. Gold and oil have been on the decline but I look for Gold to bottom out as masks are up, fall and winter are coming, and things don't look so good at the moment.

INTEL (INTC) - Intel is an oldie but a good. I am playing Intel based on the new CEO, it being a strong value play, and the overall chip shortage. I have a few buddies in my A-Billi squad that were in this name as well and I'll be holding just NOT for the long-term.

AIG (AIG) - AIG is a play on financial stocks eventually rising as interest rates rise. Banks and insurance companies rely heavily on interest rates. They were increasing as inflation crept up, so if we can get through COVID as a collective country and world...financials will be a nice bet on the future.

Happy New Years

Happy New Years from URBANOMICS

I wanted to wish everyone a Happy New Years. To all the first time investors, part-time investors, or people interested in their financial well being: Welcome to the site that explains everything financial in an easy to understand format.  We have it all covered from how to check your credit for free, tax advice, and where to invest in the complex stock market. 

New Tech Titans, Double Dips, & Don't Label Me...

New Tech Titans

The technology field is definitely active as social networking, gaming, movies, and music continue to seamlessly weave themselves into our daily lives. It's time to refresh your memory on the new tech titans on the block.  First off, Facebook leads the charge with their recent announcement of new features: (1) group chat, (2) new designs, & (3) video chat. Many people can't wait for the day this stock IPO's or goes public.  Next is Google, who is offering Google+ a competing social network site and chomping at the bit for more targeted advertising.  And then there is the simplicity of Netflix.  Netflix is now streaming throughout many homes on a regular basis and they are betting that you will stick around even as they raise prices.  Sorry to break the news but Netflix prices are going up for everyone...will you pay up?

Other hot technology firms are Linked In, Pandora, Zynga, Square, and others which are changing the way we interact, watch movies, and listen to music. Then we have Groupon which could be potentially be valued ar roughly $20 Billion dollars when they IPO, or become a public company.  The question often asked is “Do You Remember The Technology Bubble?” and is it happening all over again. I do believe that some of these firms are legit, but I think a few won't be as popular as they are today. Stay tuned for further posts as I tackle which technology stocks will survive the digital renaissance.

Double Dip??

The economy may be suffering from a really bad hangover that was worse than we originally thought.  Financial stocks, housing stocks, and high levels of consumer debt make you wonder if we've learned anything at all from the 2008 crisis.  I just don't have the feeling that we are out of the woods yet and I've been cautious for quite awhile.  I don't think I am alone anymore as there have been rumbling about more stimulus...is there Quantitative Easing on the horizon, well the Fed might think so.  Can you say QE3

Close Position: CIT, AIG

Now that my tracking tool is working again I can update when I anticipate closing certain recommendations from the past.

American International Group (AIG) - As you recall, I already recommended closing this position and I blame AIG on the confusing warrant situation. You remember we exited at roughly $55 a share. Due to the lack of availability in my tracking tool, it will unfortunately show that the position was closed much lower.

CIT Group (CIT) - This pick was from the middle of last year. You'll notice the trend with these trades is we believe in the policies of the Federal Government and many of the early investments they made we built positions in these companies. It is tough but you try to anticipate the turning point where the downside risk is no longer falling dramatically. Time to ring the register on CIT.

Also take a look at last roughly 20 picks that were closed, only 4 closed negatively. Not a bad trend.

Update: No AIG Warrants

Here is a quick update, AIG warrants are confusing. If you used the strategy that I posted you will not receive AIG warrants. Although most of the investing community believed that you needed to be a shareholder on record as of Jan 13, 2011, this was not the case. It turns out there was more hidden language than was originally believed on the warrants. I've learned that there was additional language located in the "tax" section of an SEC filing that indicated that you would have needed to have held your shares until Jan 19th.

So I feel stronger about our exit of AIG even though we didn't receive any warrants. We sold at the top of the range and that was well worth it when comparing the other alternative which is:

~ Still holding shares which dropped to $43 and the rights to a small amount of warrants in the future.

My feeling is when we hit our rock bottom price on AIG again, we can rebuy at a later point. I will repost where I think that is but for now let's use our last buying point as our benchmark for reentry.

Peace

I Got a Warrant...for AIG

Just a quick post for folks playing along at home. I won’t give you my thesis but my take is its time to take our huge profits in AIG. We recommended it here when it was unpopular in the $30s and I’ve taken my position off the table. My simple reasoning is that you should have stayed in the stock until Jan 13, 2011 when they issued warrants to shareholders on record. These warrants will allow shareholders to buy the stock at $45, whenever we want for UP TO 10 YEARS!!!

After that Jan 13th, sell the stock because they are beginning a recapitalization program. To me this is just a fancy term meaning they have to pay the US Government (technically Treasury) back. To do this AIG will take the US Treasury’s preferred shares and convert that into 1.7 billion shares of common stock. This will dilute OUR shares and likely drive the stock DOWN into the low $40 range. More new shares means my shares are now a smaller amount of the whole pie...people don't like that. That's why AIG is giving you warrants to stick around or comeback.

This is why I sold on Jan 14 and locked in those juicy profits. I hope to receive warrants because I was a shareholder as of Jan 13. I anticipate the stock price dropping and I will have to mark a new entry point on when I want to buy back into AIG which will eventually be a company free of government money in the near future. In the meantime I will still have warrants for the next 10 years that allow me to buy this story back in the event it takes off. (Kinda like a break in case of emergency that the stock took off w/o you)

Wish me luck and let’s hope this works. I will keep you posted on the warrants. And now I am wondering if this stock is available to be shorted on the ride down.

American International Group (AIG)

On a positive note today, we saw the shares of AIG rocket up 14%! As you have noted, we have recommended and are still bullish on AIG. The skinny:

~ AIG plans to repay the Federal Bank of New York

~ AIG is selling key assets, like their Asian life insurance, unit to drum up cash for repaying their loans

~ The market is reacting positively because it begins the process the US Treasury converting their shares to common stock

~ On the heels on GM, it LOOKS more feasible that the government may find receptive investors that want to snap up shares on a possible turnaround story

While there is still more room for this stock to run up, we have had a nice move here. I think with the developments highlighted above, this will DEFINITELY be a mainstay for my portfolio going forward with strategic buys going forward.

Like its Dynamite

If you haven't heard the song Dynamite by Taio Cruz you have got to check it out. Great song and it describes how our picks have been lately. My goal is to hopefully post more but write less. In this turbulent market, I think we have the right strategy for investors: wait for huge discounts in stocks and don't be foolish... take gains where they make sense. I try to frequently summarize recent picks and give status updates on older picks:

American International Group (NYSE:AIG) - I am trying to track down the most recent post of AIG. If my tracker is finally up and running I will look to see when I bought the shares. AIG was a pick that practically hit me in the head. I had a hard time recommending this stock but to be honest I listened to Bill Gross awhile back who said buy what the US Government is buying. I will write more later, as to my opinion on why this would be the case with stocks that are basically owned by Uncle Sam.
Disclosure: I own share of AIG

Boston Scientific (NYSE:BSX) - Not a stock for weak stomach. But this company has made an acquisition and bounced high recently on publication about their defibrilator devices. This is one where I would continue to buy on dips. Dollar cost average in and be patient and this company is in a restructuring mode.
Disclosure: I own shares of BSX

Exar Corp (NASDAQ:EXAR) - Appears to have found a nice floor around the 52 week low mark. This could have good upside from here. Moving nicely already.

Audiovox (NADSAQ:VOXX) - Moving above recommend price.

Theravance (NASDAQ:THRX) - This one was a really solid call. It ripped up from recommended level after positive news based on FDA comments.

I also written recently about these stocks and continue to see solid upside going forward:

Iron Mountain (NYSE:IRM) Up very nicely from recommended price. I watched this closely and there was a chance to buy this stock at an even further discount around the $20.80 and above. Doing well so far.

Comcast - Note there are two tickers for this company. Its up over the recommended price. I will write more about the difference in a new post.

Long-Term Stocks:
I love these names and they continue do very well:
Enterprise Partners (EPD)
Radisys (RSYS)
Disclosure: I own shares of RSYS
Collectors Universe (CLCT)
Disclosure: I own shares of CLCT
Visa (V)
Disclosure: I own share of V

You Are What U Read...

Time to play "What the Headlines Tell U"! Again I think reading is definitely fundamental and taking a look at the latest headlines can give you some insight into what's going on in the market and what direction it may be headed. Here are some headlines from today:

Parsons is in as Citigroup's Chairman
GE's earnings results are expected to drop
UK, US having thoughts of nationalizing banks
State Street downgraded
AIG losing key employees
Commercial Real-Estate could begin collapsing
Satyam could be sold
UK Pound hits 23 year low
Cold Weather makes Orange Juice and Nat Gas Prices Rise
Microsoft Earnings to Take a Hit
Dow Gains 280 pts, but at 8200

After going through some of the larger stories of the day. Here is what they mean to me. Citigroup, GE, State Street, and UK & US nationalizing banks all mean that the financial sectors is still heading lower. Note some of these banks received money from the government already through the Troubled Assets Relief Program (TARP). And if there earnings are still dropping then the outlook doesn't appear good.

Microsoft earnings to take a hit cannot be a positive sign for the technology sector. This will affect PC makers, chip makers, and retailers. A mainstay in the home like Microsoft is having softer sales and that can't be a good sign either.

Satyam is exploring options of selling themselves and this further highlights that transparency is needed and greed is bad. This Indian company's CEO managed to distort their earnings for years and billions of dollars were reported incorrectly.

The Dow was up yesterday, however notice the level is at 8200. Let's flashback to my post in November which called for the Dow to fall under 8000...like it did the other day and possibly see some resistance at the 7700 level.

Dow Prediction


Staying the course:

I have purchased the Direxion Financial Bear 3x, (NASDAQ: FAZ) because for a small investment I will be able to mimic the returns of shorting the financial markets...TIMES 3!

With Microsoft sales softening, I think again investors should consider owning the Exchange Traded Funds (ETF):

Proshares Ultrashort Semiconductors (SSG)

Market Meltdown - AIG/Morgan Stanley

I wanted to lead off with AIG and I hope that you had the opportunity to follow along last night when we made the following comment:

" AIG is now in focus and I will take the course of action that I should have taken with Lehman. AIG should be shorted as you see in my STOCKTRACKER PORTFOLIO because they also need cash and the Fed is in no position to lend it out. AIG is considered to big to fail but if I am JP Morgan and Citigroup why should we post $75Billion dollars by ourselves to pay for their mistakes. Even more importantly, AIG's ratings were downgraded tonight and that raises more implications where AIG has to come up with cash really quickly to pay contractual obligations that arise from ratings decreases."

Folks to emphasize the speed at which things are changing, I wanted to point that I learned about these latest developments last night after 545pm central and traded AIG during the aftermarket hours once I got home from work... and sold short AIG for $4.87. Between then and the opening of the market this morning we gained over 50%-80% in less than roughly 14 hours on timely information because the stock dropped to levels between $1.60 - $3.00. Jim Cramer has reminded us that BEARS AND BULLS MAKE MONEY...and PIGS get SLAUGHTERED, so I (bought to cover) the shares for a profit. AIG like most stocks then began to trade on rumors that it could get the funds it needed and moved up quickly to levels between $3.60-$4.40s. Well knowing the information that we obtained last night, all private equity firms had stepped away from the table and AIG was standing by itself unless it received help from the Fed. So I decided for the second time in less than 24 hours to short AIG... AGAIN I think the stock will fall because of the following:

1. There is not enough time for a buyout or AIG to sell assets - which would cause the stock to rise
2. Private companies have walked away and we know they will not fund the $75 Billion - which would have caused the stock to rise
3. The Fed has promised not to provide any more funding - which could cause the stock to rise

It appears our thinking was correct b/c NY Governor Patterson came out on CNBC urging that AIG needing additional capital quickly (Pt. 1), private equity walked away which brought the Fed back to the table (Pt. 2), and because AIG needs so much money and is considered too big to fail...the Fed WILL provide $85 Billion but they are requiring almost complete control of the company to ensure that all $85 Billion and more is returned to the Fed (Pt. 3) Well all these reasons point to the share price plunging because all scenarios leave the stockholders screwed. This stock may be trading below $1 tomorrow.

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Morgan Stanley Breaking News

The street seems to have moved it sights to Morgan Stanley. Is there a RUN ON ALL BANKS!!! Late night reports say that MS is seriously considering whether the firm should remain solo or seek a merger with some large bank out there. There is alot of concern out there as the stock continues to swing back and forth. However, it appears that MS is watching all of this closely and does not want to make the same mistake that Lehman Brothers made.

The Aftermath...

I wanted to develop this post in response to a great comment from a reader, LLROOMTEMPJ:

"here's a stupid question for you. Now that lehman has filed for chapter 11, why would buying lehman now with an understanding that it may go back up in the future be a stupid idea?Is there no return from bankruptcy? Weren't there some airlines that filed chapter 11 that bounced back?i'm really an idiot, but if you could teach me, or direct me to some resources that would help me to make sense of things, it would be much appreciated."

My response: I wanted to say thanks for reading Urbanomics and I will answer you question to the best of my ability. You are correct Lehman has officially filed for Chapter 11 bankruptcy. I believe that buying Lehman now is not a sound decision because to my knowledge this firm as we know it will cease to exist.

Our first indication is that Lehman did not include any of their viable businesses that can still continue operate in its chapter 11 filing. It has businesses that act as brokers - dealers as well as Neuberger Berman (an investment advisory firm) that were specifically left out...because they still have VALUE. These viable businesses will be sold or liquidated to provide for more cash. I imagine other things like the headquarters (real estate) will be liquidated also. I believe that this decision is key because chapter 11 can give Lehman or more importantly Lehman's creditors the ability to reorganize of sell all the assets of the company and we already see the rush to sell those assets mentioned above quickly for their highest value. Unlike retailers, manufacturers, or airlines...Lehman does not have a lot of assets to sell to generate money to pay back all of the money it borrowed from banks (or creditors) so it must sell the businesses that make Lehman money (similar to how an airline might sell its planes) and with each sale of these assets Lehman begins to disappear.

Secondly, reorganization is unlikely because Lehman's biggest asset is it's NAME. People must trust the name to lend it money so that Lehman can make more money. There will be little trust in a company that has failed at managing your money if it came back.

Lastly, buying the shares at this point is not a sound decision because stockholders get no love in the PRIORITY of recovering money during bankruptcy. Anyone holding the stock will receive nothing and only creditors (usually banks who let Lehman borrow money) get PRIORITY. Once the stock is delisted, or removed from the stock market, it can still be traded but terms of the reorganization would terminate your shares...and leave you with NOTHING.

Hope this helps.

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Today's Aftermath:

The only other thing I wanted to point out is that my long shot recommendation on Lehman was purely a high risk - high reward play. There were only two options BANKRUPTCY OR BUYOUT! And after reading my own post the other night I should have listened to myself and known that if the Fed has already promised not to assist in the process that it was a longshot.

AIG is now in focus and I will take the course of action that I should have taken with Lehman. AIG should be shorted as you see in my STOCKTRACKER PORTFOLIO because they also need cash and the Fed is in no position to lend it out. AIG is considered to big to fail but if I am JP Morgan and Citigroup why should we post $75Billion dollars by ourselves to pay for their mistakes. Even more importantly, AIG's ratings were downgraded tonight and that raises more implications where AIG has to come up with cash really quickly to pay contractual obligations that arise from ratings decreases.

Lehman Brothers/Merrill Lynch/AIG

Three words just used to describe the state of what's currently happening in the financial markets: HISTORIC, DISTURBING, and ENORMOUS.

Credit is given to CNBC for breaking Sunday's developments in these three firms. I will update this posting tomorrow but in short summary:

1. Lehman will declare bankruptcy
2. Merrill Lynch has been forced by the Federal Government to sell itself...and Bank of America will be the acquirer
3. AIG is dire needs to acquire capital and is considering selling some of its assets

More to come!