Financial Kudos Blog

Investors: Is it worth investing in a long shot like ‘Mine that Bird’ who won the Kentucky Derby?

We see it all the time, investors shooting for gold by betting the long shot.  Seemingly, we all decide if the risk makes sense relative to the reward at some point for our portfolios.  We suggest that taking a shot is not the worst thing in the world.  It would be far too boring to just sit back and ‘do the right thing’ and invest for the long term.  In fact, the recent markets results would strongly suggest otherwise.  Sometime it makes compelling sense to invest a little something and go for broke.  Just be careful you don’t bet the ranch.  Isn’t that what the venture capital guys do all of the time?  They always try to swing for the fences and hope that the winners are huge and the losers get lost in the averages.

Please don’t misunderstand, we are not suggesting all risk all of the time, but every now and then to stand at the betters window and go for it can add a lot of excitement – and potentially some huge gains. Cashing in those tickets is a lot of fun!

'Bear Market Rally' or history repeating itself?

CNBC was kind enough to remind us this morning that 100% of their interviewed guests called the recent rally a 'Bear Market Rally', tantamount to a tease or a so called 'sucker's rally'.  Well, April was the single best month for the markets since 1938. Warren Buffet has said that the September Pearl Harbor comparisons are now over.  He went on to say that we continue to fight the war- I would agree, as I am sure war torn investors would agree as well.  By the way Becky Quick from CNBC - great sound bite!

Many market participants think that its always different this time.  Recessions typically last 16 month the history books show. If the current recession, which officially kicked off in December 2007, is any indication, this one is certainly deeper but nevertheless history has been repeated once again.

Long term trends to assess markets are far more important than today's latest gibberish, rant or rave. Although, I would agree that current trends and issues seem to change the look and feel of the root cause for the event and the clean up. The Internet, or rather the speed of the information flow has certainly helped set the pace for a turnaround.

The purpose of this blog is not to call the end bad times but rather to remind investors that the markets have a rhythm (or as my first grader would happily tell me 'it's a pattern Dad') and to think about the big picture and not only 'investorjoe' on Twitter saying he just sold XYZ at a slight profit.  Do we really care about that trade, specially after the fact?

We want you! Beta users to receive free membership!

About a month ago we posted a blog which discussed the fact that we are looking for investors (not just any investors but talented investors) to participate and contribute to the new Financial Kudos website.  We anticipate our launch for beta users to take place in mid-may.  Would you like to join us? 

Following is our post from March 18, 2009.  Please send us your email information (or at least subscribe to this blog) so that we can offer you a spot in our beta group.  Our initial beta users will receive free membership for 3 years!

"Over the last few weeks our team has been actively searching for the talented investors on the Internet.  Not just the “traders” who pat each other on the back or give a short tweet about their latest trade, but investors who truly provide insight.   For sure, smart talent exists but where are you on the Internet and more importantly how can you monetize your insight and get rewarded for your efforts?

We seek to find folks who have decided that it is time to bring together a group of really smart and insightful traders and investors who wish to get paid for their efforts.   If you fit the mold, send us a note and become and early adopter for the next wave in investment information and research.  The subject should say:  It’s about time for me to get paid for my efforts! Send the email to info@financialkudos.com and please include your name, phone number and a sentence or two about how you feel about the current offerings on the Internet for investors.

We look forward to speaking with all of you and hope you join us on the ride towards the next wave!"

Does it take '60 Minutes' to diagnose the problem with mutual funds?

Last night the CBS program 60 Minutes spent some time speaking about mutual funds and 401ks in the wake of the market crash. Hidden costs, poor performance, they touched on everything.  While it is unfair to suggest that all mutual funds are at fault here (we must think about the rough markets as well), it makes sense to discuss the 'new' mutual funds: ETFs (Exchange Traded Funds).  In fact, we would go so far as saying that mutual funds are so yesterday.  ETFs have grown in popularity over thew last several years.  Even though you must watch the cost structure associated with ETFs, the management costs are reduced and there are NO sales charges. You need only pay your regularly low commissions rates to trade. 

If you want to match market performance why not select the market you want (sector, general,S&P, DOW etc.) buy an ETF and be the market?  When Wall Street rights itself after the recent debacles, we believe ETFs will play a significant role and displace mutual funds in 401ks and portfolios in general.  

PS: ETFs make great trading vehicles!

Is President Obama on to something?

Although the effects of the recession are not complete, Goldman's numbers and those of Wells Fargo might suggest that the worst is over.  A few weeks back during a prime time update on the economy, President Obama suggested that technology and communications could broadcast information quicker when things get bad and when they start to improve.  Interesting concept that could possibly create a swifter reaction to the upside for the markets which is inconsistent with history.  Perhaps it is another sign that a faster news cycle and faster communications channels can lead to a faster economic reversal.  

It's great to have a Blackberry toting President.  I think it gives him insight that his predecessors did not have. Now we just need him to shift to a secure iPhone.  Let's hold up our glasses to a V shaped recession and recovery!  Cheers.

Are you a Freethinker?

I recently spent some time reading the Seth Godin book Tribes.  In the wake of the FaceBook and Twitter explosion (or revolution - whichever you prefer) it is timely that Seth Godin focused his efforts in this direction.  I would also recommend watching his talk on TED as well - very entertaining and makes a lot of sense. 

Anyways, Godin makes many references to the 'Heretics'.  Great word! The dictionary refers us to the synonyms 'dissenter, skeptic freethinker'.  The ladder stuck with me and I equate it to the mavericks who find opportunities in the darkest of market days.  It could be  a new short position or a speculative long position it does much matter what the idea is.  What matters is that it is interesting, different and most importantly profitable.  

What we need are more freethinkers, more Heretics posting to forums and investor websites.  Without sounding too self-serving, what we need are more places like Financial Kudos so that freethinker can strut their stuff and get compensated at the same time.

Is the glass half full? Five thoughts on surviving earnings season.

It is earnings season once again.  The four times a year that the market weighs in on the perception of the markets.  Is it good news, bad news or bad news with a silver lining?  The season always starts with Alcoa (AA) and moves on from there.  Perhaps there is a micro perspective and correlation between AA and the tone of the season.  More likely, I would suggest that it’s the tone and sentiment of the markets that decide weather or not the next season’s results will shape up to be bullish or bearish.  It seems that the market feels that current earnings are so yesterday. 

Enjoy the season for the first quarter always seems brighter since the results come in spring, the eternal optimistic season of growth and renewal.  Generally the markets will set our sights on the next economic cycle.

We have identified a few things form our experience to assist you in focusing on the big picture:

1)       Every season brings a few absolute blow-ups.  Deal with it and hope that when your companies announce the chamber is empty.

2)       The market can make excuses to rationalize a mediocre quarter with the hopes of better things to come.  Again, hope the chamber is empty when it gets to your holdings.

3)       The earnings hurdle based on year over year numbers is so low at this point in the economic cycle that my puppy could probably make it over the bar.

4)       Look for opportunities.  It never looks good at the bottom. I was taught a long time ago that “Airplanes on the cover of business week means it is too late.  You want to own them [stocks] when it is dark and grey”.

5)       Be careful, and think about the big themes and the reasons you own what you hold.  If it is based on solid fundamentals, growth and long term concepts, hang on for the ride (good or bad).  If on the other hand you own stocks for a ‘quick trade’ without much knowledge once again hold on – only this time hold on to your shorts.

6)       One additional thought:  New management always gets a quarter or two to rid the company of the dirty laundry without going to the penalty box.  If a company has a new CEO (especially in a recession) recognize that the earnings are going to look awful and that next season the bar will have moved even lower and unless the company has serious systemic issues, the opportunity to buy is probably strong.

Overall we are pretty optimistic going forward but the road will not be smooth. Keep us posted on your progress and your own tools to survive.

Mike Mayo gets a new job.

Talk about taking a position to get attention. As the markets attempt a rebound, Mike Mayo attempts to make a statement in his new position at Calyon Securities. 

Remember the days when analysts only had nice things to say?  Well, it is about time that an analyst takes the opposite position even if it is simply to seek attention.  Perhaps, the most important issue is not the recommendation itself and a potential shift in sentiment but rather the markets ultimate reaction at 4:00 PM - did anyone really care?

We are not here to discuss the merits of Mayo's position - we have to assume that it was well intentioned and well researched.  We are here to discuss the motivation and to open up our readers eyes with respect to track records for analysts and the effects of research on the markets.  

Is there still a correlation between an analyst recommendation and market sentiment and reaction?

The Definition of Financial Independance

We came across the following blog post:  Financial Independence: The Final Stage of Money Management and were intrigued by a quote included from the James Stowers book Yes, You Can...Achieve Financial Independence.  

Stowers writes, "No person is free, in an economic sense, who does not have adequate investment income entirely unrelated to work." The blog post goes on to say "In other words, Financial Independence means that you earn enough from non-work income to fund your current lifestyle."

We like the concept and equate it to all of the social networks, blogs and financial investments information websites that are out there, in that investors are trying to earn enough so they can enjoy their day job and perhaps not have to work so hard.  If nothing else, perhaps financial independence can permit you to quit the job you hate and start working on something you enjoy.  How great would that be?

Well to begin with you need some solid advise.  You need information you can count on to be accurate and actionable.  Look for Financial Kudos to provide the platform to assist you.

Now, let's look at things from another perspective.  If you have actionable ideas and want to help others achieve financial independence we would like to recruit you.  This is not pro-bono work, rather it is an opportunity to participate in what you are good at, what you enjoy, and get paid at the same time.  We suggest you give a little and get paid! 

For more information send us an email to info@financialkudos.com.

CNBC gets the Twitter Buzz

Yesterday was Twitter day on CNBC.  Twitter CEO Evan Williams was on the network a few times during the day and the on-air talent has been plugigng their connection to their Twitter account. In fact we read that Twitter was mentioned 24 times on CNBC yesterday.  It seems amazing that the buzz has grown so significantly over the last few months on Twitter. It has grown even faster than the increase in unemployment.  Does everyone really have so much time during the work day to send mindless text messages to the abyss of Twitter?

Once again we draw you to the question of how we can remain focused on our work and responsibilities while finding the time (and need) to sift through all of the information at our fingertips.  All of us at Financial Kudos really enjoy the Twitter tools and many other tools, but our issues are targeted at maintaining our focus while utilizing these tools in a productive manner.  We think that in the investment community harnessing all of this information in a productive and profitable way is truly the killer app. 

In the meantime, and until Financial Kudos makes its debut, enjoy the Twitter buzz and the CNBC crew making the Twitter family a group of celebrities.