Propeller Skies

In the days of way back, I was a huge fan of The Motley Fool. Now that they are nothing more than an ad for newsletters, not so much. However, The Motley Fool did clue me in to Sharebuilder, an extremely useful wealth building tool. Sharebuilder is basically a dividend reinvestment plan* (DRIP) on steroids. The following advantages of DRIPs are offered by Sharebuilder:

• Dollar cost averaging - buy more stock when the price is low and less when it is high;
• Free reinvestment of dividends allows your money to compound and grow;
• Regular automatic investments are a powerful way to build wealth over time; and
• Requires a minimal amount of money to begin investing.

Although useful for beginning and income investors, a problem with DRIPs is a separate plan needs to be set up for each company. Additionally, companies that do not pay dividends obviously do not offer DRIPs. Sharebuilder allows DRIP style investing in almost any stock, including those that do not pay dividends, centralized in one account. Sharebuilder also offers real time trading when markets are open. More advanced features, such as margin** and options trading are also available.

Sharebuilder is not, however, a panacea. One key issue is the amount of record keeping required to keep track of multiple automatic purchases. Also, as far as I know, Sharebuilder does not offer real time quotes, which makes real time trading difficult and options trading nearly impossible. That said, Sharebuilder is recommended.

notes:

* For more on DRIPS, see What Are Dividend Reinvestment Plans?
** As far as I know (not having a margin account there), stocks can only be bought on margin and not sold short. So Sharebuilder’s margin feature is pretty worthless to me - to manage risk, I never borrow money to purchase stock. Leverage is a bitch on the way down, as a couple of Bear Stearns hedge funds learned back in the summer.

Prizzo Skeezy readers down with the Countrywide (CFC) debacle will recall Bank of America (BAC) provided them with a two billion dollar capital injection (like a meat injection, except with cash money and no messy clean up) a few months ago. As part of that operation, BAC gained the right to convert the shares at a strike price of $18.00. This seemed like a great deal for BAC, since CFC closed at $22.02 on the day the deal went down. CFC, much to my amusement*, closed at less than half the strike price yesterday.

So what’s a middle eastern retard with too much money and not enough brains to do? Why blow $7.5 billion on convertible Citibank (C) securities, of course - similar to the deal discussed above. Except these fucking morons didn’t even buy securities with an in the money strike price! Unfortunately for our Abu Dhabian friends, they will be paying between $31.83 and $37.24 for shares that closed at $30.32 today. The clue meter is reading ZERO up in this bitch. [UPDATE: As usual, Smoove did a slacktastic job of analysis. Market Ticker notes the actual strike is between $20 - $25 when the interest on the coupon is factored in. However, the basic premise of Smoove's argument, paying good money for a stake in a soon to be worthless company is dumb, holds - Ed.]

Now this might be a good investment, if C was not on the express train to insolvency. Currently, C is having problems maintaining their target capital ratio because of write downs on fucked mortgage investments. This is about to get worse, because C has a fuckton of off balance sheet SIVs (think Enron) that are losing value faster than the Falcons lose football games. When** C has to pull the SIVs back on their balance sheet, the liabilities will roach their Tier I capital ratio. The Feds require 6 percent, and C is at 7.3 percent right now, down from their target of 7.5 percent. Never mind all the Level 3 mark-to-myth dreck with (likely) highly overstated book values C has floating on their balance sheet right now. I highly recommend C change their ticker symbol to F - for fucked.

I wish I was still short C, but I closed my puts for an easy 60 percent profit in October. Had I waited, I would be rolling in the dough right now. However, as the ubiquitous they say, no one ever went broke taking profits.

notes:

* Of course I am shorting those fools.
** Don’t think it won’t happen - our friends at Holy Shit Buffalo is Cold gave up and did it today.

I had the misfortune of being at Lenox Square - a major regional mall in Atlanta - yesterday. While the Apple store seemed pretty happening, the rest of the mall was deader than a freshly grilled Bubba Burger (i.e. about the same size crowd as usual). In contrast, the mainstream media (MSM) keeps ejaculating about an alleged strong start to the holiday shopping season.

As usual, the MSM is full of shit. However, as Lenox Square is anecdotal at best, my experience does not prove a damn thing. What does call bullshit on the MSM, however, are the Port of Los Angeles and Port of Long Beach statistics. Calculated Risk has some interesting historical charts regarding port volumes buried in Roubini on Recoupling. Note the year over year decline at both ports in October, traditionally when volumes increase prior to the holiday shopping season. Somebody (i.e. retail buyers) does not seem to be expecting a cheery Christmas.

Trucking companies have been reporting crap results for a while now, so the easy money to be made shorting is gone. My guess is Union Pacific (UNP) and CSX Transportation (CSX) are going to be reporting some fucked fourth quarter numbers. During good times, both railroads are less profitable than their competitors based on operating ratio and return on assets - making them less likely to do well when volumes are down since fixed costs remain the same. My money is where my mouth is - I have puts on UNP and CSX.

Texas A&M: 38
Texas: 30

People who give financial advice never shut the fuck up about emergency funds. I agree the concept is fantastic, but where the hell am I supposed to come up with three to six months salary to put in? Also, my traditional savings account currently yields less than the rate of inflation - making it a dog.

Ameriprise clued me in to high yield internet savings accounts. These can be easily identified, as direct is usually appended to the name of the bank. For example, I use HSBC Direct. Although their rate is not the highest, I am familiar with the bank from my days in the B-low and they offer an ATM card. Opening an HSBC Direct account was easy and accomplished on-line. So far, I am very satisfied with the account. As an aside, Bankrate is an excellent place to find others. On a monthly basis, seeing the interest I earned on the backs of the proletariat cheers me and encourages more saving.

Setting up the account is easy. Filling it with cash and sending it across the border is not. Prior to opening my HSBC Direct account, I had a two Starbucks a day habit. At four dollars for a cup of coffee, this worked out to 160 clams a month when multiplied by twenty work days. Cutting back to one overpriced coffee product a day hooked me up with eighty extra ducats a month. Although it will take some time, eventually the cheese and interest will pile up into a reasonable emergency fund.

As several banks (e.g. Citi, Countrywide, and Wachovia) are currently learning, liquidity is important. The point of an emergency fund is to avoid selling equities, options, or other positions at a loss when unexpected expenses or job losses fuck up your program.

“Life ain’t nothing but bitches and money”
– N.W.A.

While it has been fun living the $30,000 millionaire lifestyle and hanging out with Atlanta’s doucherati, the time has come to move on. Based on our new market driven business model, we will be right sizing and leveraging technology to concentrate on bitches and money, a.k.a. the meaning of life.

“In this country, you gotta make the money first … then you get the women.”
– Tony Montana

In my brief time as a client of Ameriprise*, one point that was made repeatedly is people with financial goals have more cash than those who lack direction. With that in mind, my goal is to make enough ducats to get this woman:

Yes, I know Ms. Theuriau is Freedom. I also realize that I despise the Freedom and have mentioned this repeatedly on the Prizzo Skeezy. Does this make me a hypocrite? Probably. However, Ms. Theuriau is the hottest newscaster ever and she makes Freedom sound good.

notes:

* Nothing against Ameriprise. My advisers both left, so I did too.

I highly recommend catching a Penguins game at the Igloo. Hurry up, as a new arena is planned to open in 2010. Nothing against shiny new arenas, but they have all the charm of a major regional mall.

For my final dinner in Pittsburgh, I stopped by August Henry’s. While there, I had an East End Big Hop, the worst beer of my stay in the PGH. East End Big Hop might also be the most disgusting beer I have ever sampled. Shit tasted like butt sweat off a dead cat. However, it was on tap, so it is possible the lines were dirty and East End Big Hop is actually a decent brew.

In contrast to the horrible beer, dinner was quite tasty. Because August Henry’s is a pub, I ordered pub food - a bacon cheeseburger and fries - and was not disappointed. August Henry’s is recommended.

The day after the binge at the Ale House, my hungover ass paid a visit to Six Penn Kitchen for lunch. The restaurant was in a great loft style space with excellent fucking ambiance. Fortunately, all this ambiance was in Pittsburgh so no condescending hostesses gave me shit about rolling up unshaven, unshowered, and wearing shorts and a t-shirt.

I ordered the fish and chips, which was good, but not great. However, the waiter was quick with the refills on Coke and water. Overall, I enjoyed Six Penn Kitchen, but not enough to unequivocally recommend it.

As mentioned previously, the bartender at the Grille on Seventh recommended I mosey on down to the Ale House to continue sampling tasty brews. The Ale House is a cleverly hidden hole in the wall on Market Square. One has to be looking to find it - had the previous bartender not mentioned it, I would have missed it.

I walked in to the Ale House and sat down next to an unsavory character. He asked for cheapest beer. Much to my amusement, the bartender told him they specialized in expensive microbrews. He went on his way.

For my first beer, I ordered an imperial India Pale Ale (IPA). As it was mighty zesty, I really wish I could remember what the fuck it was. Next up, some local flavor. I consumed a Pennsylvania Brewing Company Dark Lager. While this beer was all right, I doubt I will ever have another. I drank more beers. Towards the end, I requested another local beer and the bartender dug up a Lancaster Hop Hog IPA. This beer is the shizznit. Everything is blurry after that - the Ale House is highly recommended.

The bartender was super friendly, she sat and chatted with me after a bunch of suits at the other end of the bar left. Fortunately, I was so wasted that it did not occur to me that she might be amiable to going back to the hotel. This saved an embarrassing whiskey dick episode and then chucked corn all over her.