NFLX headed down - how much?

Recent few weeks have been disastrous for NFLX. With the peak of around $300 , the stock is down almost 50% in 2- 3 months. Competition and recent pricing of its DVD rental are two main reasons in additions to the recent pull back in the market.

I had previously written about NFLX when it was heading towards in my NFLX technical analysis blog I had written that the stock was in overbought range but never saw such a downturn.

Here is a chart from MarketClub with the fibonacci analysis of the stock since its major bull run since January 2010. Question is how low can this stock go?


Fibonacci suggests around $140 range. What do you think?

Disclosure: I am long NFLX.

Increasing gas mileage by hypermiling

One of the key aspects of investing is also saving. Just recently I was driving my car when I was listening to this show on NPR. They were talking about something called as hypermiling. Never knew an official word for the term that some of us already use.

Back in 2008 when gas prices were at a rise people used Oil ETFs to hedge against increasing gas prices. If you buy Oil ETFs and gas prices move up so does theoretically the price of the Oil ETF. If gas prices take a dive you save money at the pump.

Lately gas prices are not in sync with the crude oil futures graph on gas buddy.

Of course you can go all green and get a electric vehicle. Can you do more with your car running on gasoline?

Yes here are couple of takeaways.

1. Brake less. Slow down from gas when approaching a red light. Caution: Look in the rear view mirror to see if you have someone speeding or bumping against you. Might be worth speeding up to save an extra buck or two. Also check if you can time traffic lights, you might need to accelerate in order to meet the next light. I usually pay attention to the sidewalk blinkers indicating that light will soon be yellow.

2. Start slowly: Dont accelerate and make that engine of your car work hard. Accelerate in stages with the tachometer needle not going past say "2".

Ofcourse maintain your car. Ensure that servicing is regular.
For more check out this link on marketplace.

Beware you might get some strange looks from people behind you and trying to overtake.

You might need to build up on your patience.

Need some practice to get used to the hypermiling rules.

Last but not the least check if you saved anything at the pump :).

Do you hypermile?

Weekend reads and comments

I focus this article on some new terms I came across and an article I stumbled into.

1. Warren Buffett buys some BOA shares: As everyone knows . Warren Buffet bought some BOA shares and that lifted the spirits of BOA investors. While reading on, I also noticed that Warren Buffet bought some preferred shares with a dividend. Since I have been reading about dividend investing these days I looked more into preferred shares. These are a hybrid between stocks and bonds with the caveat of no voting rights including and less chance of appreciation.Investopedia and Wiki have some information on shares. Has any of the dividend investors invested in preferred shares?

2. Gold prices: Although GLD more or less accurately tracks the price of Gold I was looking at different gold miners that track the gold. Taxes for GLD are cumbersome and hence the need to look for alternatives.
I came across a seekingalpha article.
I would like to add RGLD to the mix . As Yahoo finance puts it, Royal Gold together with its subsidiaries, acquires and operates precious metals royalties. RGLD has been closely aligned to GLD than AUY simply based on end price results for various terms. RGLD has a higher P/E ratio: higher 50s. Market CAP is around $4B and average volume is less than a million.

Disclosure: I do not have any positions in RGLD as I write this article.

Dividend investing during bull markets

Continuing on my series of posts around dividend investing here is another one.

With the recent slowdown in economy starting 2008, interest rates started falling short term borrowing interest rates have been near the 0% mark. Average certificates of deposit rates in the US have slumped, with current 1 year CD yielding around 0.9% average annually (according to bankrate.com) . During these times investors look for more return to their money and start investing in dividend yielding stocks. Capital /principal and steady dividend yielding is what investors look for during this time.

The purpose of this post is to check if dividend investing make sense when the interest rates are higher , the economy is doing well and CDs yield more.

Let us start with an example of the recent past. According to this source for this historical CD data Between 2003 to 2007 average one year CDs yielded anywhere between 2.0 to 5.4% annually respectively falling to 3.9%, the average being 4.0% . A CD return is one of the safest investments where the principal is guaranteed not to change.

During the same time let see the yield if a hypothetical investor had put money in the total stock market fund like VTI.

VTI started 2003 with a share price around 42 and finished around the same price by the end of 2008. During this time it gave dividends of 69 c in 2003 to a max of $1.15.
The yield on the above is anywhere from 1.6% to little over 3% and surely not beating the yield of CD. The capital / principal increase was almost negligible for this period.

The reason I selected VTI was to select one of the most stable or non risky investments in the stock market compared to the CD. I did not bring dividend re-investing or compounding interest in my calculations.Yes, one could argue that they could beat the market with another selection of stocks.

I did not compare selection during earlier bull markets however.

What are your thoughts? Are there more ways of looking at these scenarios.

Netflix: Poised to rise higher? Technical analysis

Over the last few days, months and probably years Netflix stock has been touching new grounds and has been on an uptrend. When the stock broke the $200 barrier there were talks of it being overbought. Let us look at some quick technical facts for NFLX.

As you can see from the chart below the stock trades in a pattern from being oversold to overbought. MACD looks to be well in the high range and has been higher. I am beginning to think that the stock is in overbought range and we will see a pullback to the late 200s.

Courtesy: stockcharts.com

Moreover the stock trades or tries to touch is 200 day MA and seems to rise above it or go marginally below and then rebound.
Recently NFLX has been sharing some news about latin America expansion followed by change in pricing.

Is NFLX done with its run?

Disclosure: I am long NFLX

Dividends: Dividend reinvesting calculator

I have seen some investment gurus always mention how good a dividend re-investment strategy could be. Recently I have been following some dividend stock blogs and am a dividend investor myself.

Always interested in mathematics I was curious how the numbers add up and what the compound rate of return would be under different scenarios. Let us start with a simple example:
Investment capital : $1000
Stock Price: $1
Yield : 5%
Dividend growth rate: 5%
Time span: 5 years.

I used the calculator here.

Total value of this portfolio without dividend reinvested would be $1580.88 and with dividend reinvested would be around $1,648.38. The net yield is 9.51 vs 10.51 respectively.

Lets play around with some numbers. Increasing the timespan to 20 years which is typically realistic with dividend or long term investors we can see the difference: 7.4% vs 10.5%.

If the stock price remains the same for 20 years with no variation one can get 5.16 vs 8.35 % for reinvested dividends.


Now if the stock price is 10% down annually in a timespan of 5 years then the ROI for the reinvested dividends is -3.43 which is lesser than -3.16. In my example if I set the stock price move to 5% down annually for 10 years then the dividend reinvestment scheme still proves better.

Overall I feel like a dividend investor should have an exit strategy just like any other investor. If the fundamentals for the company look good then reinvesting in a downtrend might be risky but worth it.

Before I forget, there is a definite tax advantage to these reinvested dividends which is a separate topic itself. But the flip side is that calculating cost basis for re-invested dividends could be time consuming.

What is your re-investment strategy? From most of the examples above it seems that re-investment does make sense unless ofcourse you want free cash flow.

To go , dine in or take out?

Waiting in the line for Olive garden I witnessed atleast ten groups of people marching outside, all of whom had a take out bag with them.

The financial part of me started thinking about the comparative costs of take-outs, dine-in or the to-gos.

A typical dinner menu at a restaurant like Olive garden varies from around $11-$12 to around $20 . This might not include appetizers based on what you chose. For an average price of $15 with taxes and tip we round up around $36 for a dinner for two.


If you take do take left overs home and use it as next days lunch it counts for $36 /4 which on an average is $9 per person which is not that bad. However if your intention is to cover next day's meal with the leftovers then this is not a bad choice unless ofcourse you are too hungry or your whole intention was to spend time together and did not care about take-out.

On the other hand if you go for a buffett at a restaurant at night the pitfall is you pay the price pretty much for that meal and cannot take-out. That being said specials like the Sweet Tomatoes deals for $8.79 dinner specials still end up around the $9-10 average per meal.

Can take-outs be cheaper? Answer is it depends. If you already have some food and want something more substantial to make a meal,say like left over curry, combind with the fact that you want to watch a favourite movie at home then yes it makes sense to take out. Moneywise you might save tip if you are the kind who does not tip take outs.

This is ofcourse comparing restaurants of reasonably similar standards and not comparing fast-food or subway type of food outlets.

Ofcourse at the end it depends where you are comfortable and would like to eat.

Market correction analysis

In my previous blog I mentioned that I was looking for a market correction around 12000. We did not have a correction at 12000 but we went ahead to around 12400 before make a dive and recent earthquake in Japan has left the down below 12000. If you take a look at a six month picture of the DOW we see a similar pattern in the last market correction in Novemeber 2010 when the DOW corrected from 11400 to 11000.

Should you be buying in this market dip?

Long term investors may look at this as a buying opportunity and short term traders may well think of looking to get in for few days. With previous market corrections some aggressive strategies that did well were finding most beaten down stocks in the current market correction.

Recently I have been following James Stewart from Smart Money. In his latest article he suggest these growth stocks when market makes a 10% correction which means a 2541 on the NASDAQ.

Market bears look at the volatility and uncertainty over impact of the Japan earthquake and predict that markets might go down further.

Last few days have seen some selling at high volumes and volatility which means there might be further downside potential. What are your thoughts? Will you be buying in at these levels?


Fibonacci series for this last bull run from 11000 to 12400 for the DOW returns 11544 as the 61.8% mark at which some support could be seen with the DOW bumping on these levels.

As for long investing I would add positions into my long term portfolio.

Market patterns and investing

With the current bull market initiating around March of 2009 we see some dips or selling as the market continues to climb. One of the past two run ups one from February to May 2010 in which the DOW climbed from 10000 to 11200 and then from Sept to November 2010 when the DOW roughly climbed the same amount. If past is any indication of the future then will the DOW have a correction in February around 12000 ?

If you are a buyer: One theory in long investing suggests buying in an uptrend. However as everyone knows market comes down quicker and bigger than when it goes up. Should an investor take a risk in getting in the DOW ride or wait for a correction?

If you are already in a market and want to cash out you might be looking at good exit points:

Technical pundits typically will advise selling a stock when it moves below its 20 or 50 day line. Investors business daily has a small course on sell signals .

15 year vs. 30 year mortgage

NPR's marketplace recently had a clip talking about how mortgages used to be 15 or 20 years and the great depression changed it.
The rationale behind this was ofcourse make house affordable, the catch - pay more interest over long term.
With people refinancing or moving this have changed recently but one is likely to end up in some other 30 year mortgage.
Hypothetically if someone buys a house at 35, and then switches to another one at 45 then the0 move could reset the 30 years till 75 past retirement age.

The goal of retirement at typically 70 is be debt free. If that's the case can someone who can afford the mortgage at 45 still be afford when 71? Who's responsbility is it to pay off the mortgage by 70 or retirement age?

One of the answers before the housing collapse would have been that in 10 years someone could have made some money in house price increase and then earn some equity in the next house. With the housing collapse this might make easier for some people who bought their houses way before the collapse and now get a good bargain for their new dream.

Thoughts?

How long will the market run continue

Hard to say but one can continue to invest in this up market and have stops in the right places. Small caps might be a hit and miss , so for long term I would recommend large caps.
If you do want to get into small caps then ETFs might be worth the play.

Gold May analysis - recent run up !

After my last Gold technical analysis in April gold has a run up.


Market club's monthly and weekly signals had given a buy since the 90 and 89 levels respectively. This may be mainly due to inflation concerns. 99 might be one big resistance that GLD needs to pass through.

RSI has reached around the overbought area but MACD is showing good promise. Going by last times runup ultimate top was formed when both MACD and RSI were at top.


Buy in next dip might be the right thing to do here?

Where is WallStreet headed? Commonly asked questions

Everyone's cheering the upward move in the DOW, S &P and NASDAQ markets in the last few weeks.

There have been various theories as to what could happen next with the market and how long will this continue. I found a few which I can highlight here:

After a spectacular rally from the lows seen last month, the S&P, the DOW appears to be running into overhead resistance.

Click here for the video.

Investor Sajal has highlighted few key points in his blog in Seeking Alpha. Analysts are making different kinds of predictions from this being a bear market rally ready to loose steam or beginning of a new bull market to a bear market rally that will suck in more traders.

Mick Weinstein gives us a good summary at yahoo finance .

The coming few weeks are earnings weeks which is where the market swings in different directions in one-two day intervals.

In my opinion we will see some back and forth in some target area until earnings season is over. The direction of the market will be decided once the earnings season comes to a halt.

Thoughts?

Finance movies anyone ?

If finance or business interests you, then probably you can relate to some movies that cover these topics. These Hollywood movies range from comedy to serious and depict how money can change lives.

1. Trading places: A rich guy and a poor guy end up swapping their positions in the game of finance. Watch Eddie Murphy and Dan Aykryod in this funny 1983 movie.

2. Office Space: This one brings the office to the movie theater. Tech programmers can relate most to this silicon valley comedy.

3. Wallstreet: This is about a WallStreet stockbroker who wants to get to the top by using both legal and illegal methods.

4. Rogue Trader: Ambitious, Nick Leeson finds himself as a futures option trader in this 1999 Hollywood movie. I have not yet watched this one. Any reviews?

5. Lost in America: Money Magazine brought this to my attention. Have not seen this movie yet . This 1985 movie depicts the life of a couple who start on a journey and lose their nest egg.

Do you have more to add to the list?

April Gold technical analysis - is Gold confused?

After my GLD technical analysis in March I decided to take a look at GLD again.
Here is MarketClub's analysis.


Monthly indicator is bullish but weekly and daily are negative.

After being in an undecided territory GLD started its downward spiral making its earlier support now a resistance line.
Using some Fibo and Elliott wave theories I would guess the downward spiral might be of similar length given the one from 98- 89.
If the length of current decline is the same as the one before we would expect ten basis points from 94 which is around the 84 level before some rally.


RSI indicates oversold, MACD is in bearish territory for right now and volume is down. Need some volume to pick up upward trend. Thoughts ?

Tax time for gold or silver

If you have enjoyed GLD or SLV gains in 2008, you might have had a tough time with reporting the taxes. GLD or SLV lists some monthly sells that it passes to shareholders.
They are also referred to as WHFITs (Widely Held Fixed Investment Trusts).
If you are using any software like Turbo Tax and use auto login's to your brokers website all of the above are listed as gains and added to Turbo Tax.
The issue is its difficult to list cost -basis and hence SPDRs shows how to report the gains. Please see here for details on reporting GLD.

PS: I am not a tax advisor/consultant. Please contact your tax advisor for details.

Some great shopping deals and sites

I have been a fan of Fatwallet for quite some time now. Recently came through some good deals surfing around the site.

1. Cash back opportunity: Some participating stores offer cash-back if items are purchased via fatwallet. Common names are HP , Sears, hotels.com , etc. Fatwallet collects money in your account until a certain sum is earned and can then mail you a check. Recently while shopping for laptops I found this deal for HP. A 6% cash back for a $600 laptop amounts to around $36 of cash back. Not bad huh !
There are other sites like ebates.com that also offer cash backs.

2. Lending club is offering free $50 for opening an account. Lending club is an online peer-peer lending site.

3. Bank of America offering $50 on opening a new account.

4. When you sign up for veggie club in Sweet Tomatoes you can be eligible for a 15% discount while dining at Sweet Tomatoes. As I mentioned in my earlier post on Sweet Tomatoes have been known to occasionally send "buy one meal and 2 drinks and get the second meal free". I have been knowing of these deals for some time. This is not one I found through Fatwallet.


Please note that I have not personally verified #2 and #3 above.

Besides the above fatwallet lets you subscribe for alerts by entering keyword(s). For example if you are looking for a shredder you can request fatwallet to send you notification if anyone submits a new deal for shredder.

Other sites which are welknown in the world of deals are techbargains.com and slickdeals.com.

Gold technical analysis - different views

Recent change in Gold price surprised some individuals who were basing their theories on pure tech analysis. Agreed that the gold chart was forming a wedge or trying to make a decision but this time the move was mainly in the up direction due to the recent news of some inflation starting to pour in the market.

Here is stock chart weekly analysis since my last technical gold analysis in early March



Looks like support is now becoming resistance. Lets see how the market shapes up.
Market club's monthly is still a buy:




Weekly is at sell since 88.

Looks like gold is starting is new bull. If it clears its previous highs of around $100 we will have a new target.

Gold technical analysis March 2009

Latest gold charts and movements are here:



Marketclub's weekly, monthly and quarterly signals still signal a buy. The Daily chart which had signalled a sell now moved to a buy territory.







According to Fibonacci retracement we are in the first retracement level. Will we cross it or go down? Elliott wave chartists say this is the wave B?

February 2009 financial links

Here are some cool links for February, more on the trading front since I wanted to follow the market closer. Everyone has their own theory regarding how low can the market go !
1. Carlfutia explains his daily trading lessons with his analysis theory based on George Lindsay.
2. Elliot wave and cyclic theory update in AllAllan's blog posts. The Cycles theory along with techsignal which is a specially designed software that performs scientific market prediction with spectral analysis, synthesis of cycle events, and more.
3. Miranda Professional Blogger's interview by HIB.
4. Michael Lomker trying to make his market speculations in his blog.
5. Dshort comparing bear S&Pmarkets quite nicely.
6. James B. Stewart's theory of buying when the market falls 10% and selling when it goes up 25%.