Archive for December, 2006

A frugalist will spend his time searching the web, newspaper, and speaking with his friends to find that next great bargain basement deal.   Upon finding the lowest price for a product or service he’ll triumphantly cheer as he reaches for his wallet to fork over cash to pay for that item.

A capitalist will spend his time searching the web, newspaper, and speaking with his friends to find that next great money making opportunity.   Upon finding the highest return on an investment, he’ll triumphantly cheer as he reaches for his investment portfolio and adds that extra capital that he’s just earned to his books.

A frugalist will live his life loathing people who pay (gasp) full retail price for a product or service.   He’ll buy second hand, dinged or refurbished items to save a few bucks.

A capitalist will live his life enjoying the fruits of his labor.  He won’t concern himself too much with the cost of an item because he knows he earned the income to enjoy it.

A frugalist will congratulate himself at his ability to pull one over on a corporation by taking advantage of rebates, discounts, sales and other tricks so that a retailer doesn’t achieve full profitability on their sale  -  a win-lose proposition.

A capitalist will improve the economy by helping create new jobs, corporate expansions, product development and a slew of other activities because of his investment capital.  He’ll also improve the economy because he uses his returns to invest further or uses his excess capital to buy products and services -a win-win proposition.

A frugalist will deride you for not following his ways.

A capitalist will try to teach you how to achieve superior returns but will not ridicule you, he’ll simply sigh, shrug his shoulders and move on to teach others willing to learn.

A frugalist will never buy a new car and will advise you to do the same but he doesn’t quite understand that used cars have to come from somewhere.

A capitalist may or may not buy a new car but he carefully considers his options because he knows that buying new cars helps keep people employed and keeps the economy growing.

A frugalist will condition himself his whole life not to spend a penny.

A capitalist will condition himself his whole life to earn an extra penny.

A frugalist will squander the most valuable commodity (time) doing all of the frugalist things above.

A capitalist will invest the most valuable commodity (time) doing all of the capitalist things above.

Main Entry: 1cap·i·tal·ist
Pronunciation: -ist
Function: noun
1 : a person who has capital especially invested in business; broadly a person of wealth
a person who favors capitalism

Main Entry: cap·i·tal·ism
Pronunciation: 'ka-p&-t&-"liz-&m, 'kap-t&-, Brit also k&-'pi-t&-
Function: noun
: an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market

Seems like I’ve gotten into a finance bloggers duel with the Prince of Thrift over at DebtFree4ever.net regarding whether borrowing money for a home and/or education is a good idea.  Perhaps the finance blogger community can chime in and help settle the dispute.

I contend that borrowing money for a home and college is a fairly prudent (and often necessary) move in order to get ahead in life.  While the Prince of Thrift is adamant that you shouldn’t buy a home or start college unless you have cash in hand to pay for it entirely.

What do you think?  Please comment here or over at DebtFree4ever.net.

Back on November 1st, I bought 200 shares of GDX (gold miners ETF) for $7700 ($38.50/share). I immediately sold 2 contracts for November 17th expiry at $38 strike price for $1.30. I profited $245 (3% return) and the contracts ended up expiring worthless on the 17th so I kept my 200 shares of GDX.

On November 21st, I sold 2 more contracts for December 15th expiry at $39 strike price for $0.90. I pocketed $165 (2% return). Currently, GDX is trading at $40.50 so I will likely get called and have to sell my 200 shares of GDX at $39.00 which means I’ll pocket an additional $0.50 from where I bought it at $38.50. I’ll earn an additional $70 (after commissions).

My initial investment of $7700 has yielded $245+$165+70=$480 (6.23% return) from November 1st thru December 15th.

The trading day isn’t over, the possibility exists that GDX can still dip below $39 in which case I’ll write more contracts for January 07 expiry but if it doesn’t I’m happy with my 6.23% return for the past 45 days 😉

UPDATE:  GDX has closed at $39.76 so I will be called out.  Final return is 6.23% in 45 days.   I’ve updated ETFCoveredCalls.com with the lastest possibilities for January 07 & February 07.   Good luck and happy hunting.

I ran across a blog which listed 100 Top Bloggers and I figured this might be a good opportunity to find some good content. I clicked on each blog and glanced at the headlines and a few articles for each blog. I categorized each blog into one of six categories (eight actually because of two rogue blogs) which were:

Frugalists – Bloggers who primarily write about saving money, clipping coupons, getting free products/services, etc.

Headliners – Bloggers who primarily “borrow” news headlines and blog about the headline/article.

Debtors – Bloggers who primarily blog about their debt and journey to escape debt hell.

Finance 101 – Bloggers who blog about general and basic finance topics

Capitalist Level 1 – Bloggers who have moved beyond frugalism, debt, and finance 101 and now focus on earning money (usually credit card arbitrage, opening bank accounts bonuses, prosper lending,  investing in mutual funds, etc.)

Capitalist Level 2 – Bloggers after serious money with interesting, innovative, aggressive and/or conservative investments (real estate, option/equity traders, dividends, commodities, etc). I consider at least 25k in play the starting level for this group but there can be exceptions.

As I went through I put each blog into one of these categories but there were a couple that didn’t fit such as Pfblogs.org and one blog dedicated to credit card blogging which didn’t quite fit. I created this chart in Excel to illustrate the breakdown.

100bloggers.png
As the chart illustrates, there were:

3 – Level 2 Capitalist blogs

9 – Level 1 Capitalist blogs

51 – Finance 101 Blogs

11 – Frugalist Blogs

8 – Headliner Blogs

11 – Debtor Blogs

1 – Credit Blog and 1 aggregator
The list actually contained 95 blogs not 100.

The first thing that popped into my mind as I saw the result was the famous “bell curve” and my goal wasn’t to do graphs or charts to illustrate that point – I was simply trying to find Level 2 Capitalist bloggers.

If you take the headliners, frugalists and finance 101 bloggers and lump them together you get a perfect 70 which represents 73.68% of the group. This was totally unintentional on my part!

bellcurve.png

Research often shows that like minded people tend to want to group with each other and perhaps my unscientific review illustrates that point but I did happen to find a few blogs that I did like and I’ll review them more thoroughly before adding them to my Capitalist Blogroll.

By the way….which would YOU consider the “A” students, the “B” students, the “C” students and the “D” students?

Every winter there seems to be some sad story about some poor old lady who can’t afford to pay for her electric/gas bill and has her lights and heat disconnected for non-payment.  A couple of nights ago, they had such a story on the news and the representative for the utility company had the gall to say something like, “We’re always willing to help the elderly and people who can’t pay their bills they just need to call us and let us know a month before hand.”

How exactly are people who live paycheck to paycheck or on social security supposed to schedule their poverty around the  utilities schedule?   How are the elderly, who often can barely remember to take their medication, suppose to remember to call their utility a month in advance to let them know they won’t have the money to pay the bill?

I don’t think people should receive a free ride but a little more sympathy would be a little nice -especially around the holidays!

The Chicago Board Options Exchange has created a new virtual trading tool to help educate investors on how to trade futures, commodities, stocks, options, and currencies.  If you’ve ever wanted to venture into the high stakes high risk game of futures trading then this is a nice place to get your feet wet.

If you’ve never traded futures or commodities the main item I stress that you learn and understand is that you often trade these contracts with LEVERAGE.  What makes trading so profitable is the vast amount of leverage involved with these transactions.  A single up tick in the price of gold, oil or corn can mean hundreds or thousands of dollars in profit but a single down tick can mean the LOSS of hundreds or thousands of dollars.

Personally, I pretty much stick to currencies when trading contracts and I only do so when I anticipate a major turn in a particular currency but on occasion, I have been tempted to trade so many other things 😉

Happy Hunting.

It’s been a while since I’ve written a Cascading Expenses post and yesterday we purchased our Christmas tree for $100 which gave me the idea for this post. My daughter insisted on a Noble Fir Tree and the only one available was a 9ft tree which we ended up chopping down to 8ft to fit in our home. I took down the holiday decorations from our attic and was amazed that we had SIX full bins of holiday stuff.

Our bins contained:

1. Many, many Christmas lights

  • Outdoor lights
  • Indoor lights
  • Tree lights

2. Ornaments

  • Expensive ornaments (Lennox) which marked special moments
  • Inexpensive ornaments – for the kids to hang
  • Multicolored ornaments – to add color
  • Solid colored ornaments – to add balance

3. Miniature Cities

  • Little Houses
  • Little People
  • Little Trees

4. Figurines

  • Ceramic Santa
  • Snow globes

5. Miscellaneous Stuff

  • Christmas Table cloths
  • Wreaths
  • Beads
  • Nativity Scene
  • Bunch of other stuff

All of these things were purchased over the past ten years so I’m not really sure how much we spent on all of this stuff. I’d venture to guess that it was at least $600 of decorative stuff but we “save” so much money because my wife usually picks up “bargains” the day after Christmas when retail outlets have their “sales” to get rid of inventory.

Christmas, like most holidays, have their own set of cascading expenses that you have to watch out for but this is one holiday we don’t mind splurging on for the kids.

Cash flow, cash flow, cash flow! I just updated www.etfcoveredcalls.com on my recent trades. I liquidated my EXPE position because it was taking too long to recover fully. I still made a small profit but I decided to move forward because so many profitable opportunities were passing me by…

Right now I purchased 1000 shares of SMH (Semiconductor ETF) and sold 10 January Calls to reap a cool 2.4% in a 42 day window. If I get called my total return will be 4.7% in 42 days. What I love best though is fact that the “cash is in the bank” regardless of what happens with SMH! Immediately upon writing a call, you get to collect the premium! Thank you Ron Groenke!