Friday, November 27, 2009

San Francisco Hard Assets 2009 Conference

This past weekend, I attended the Hard Assets 2009 Investment Conference in San Francisco. Once or twice a year, I make the trek from Silicon Valley to downtown San Francisco to attend either this conference or the San Francisco Money Show. These investment conferences are held each year at the downtown San Francisco Marriott Hotel.

Usually, the Hard Assets conference has a carnival-like atmosphere with subject matter that generally focuses on precious metals, mining, oil, and gas. Many of the exhibitors in the investment conference are foreign mining companies. These are largely listed on the Canadian stock exchanges, most notably the Toronto Stock Exchange (the TSX). For several years, many of the exhibitors touted penny stocks of questionable quality. There were a lot of dotcom exhibitors, and even mining companies that actually became dotcoms to feed off of the associated hype. This came at a time when the prices for gold, oil, and other commodities were depressed.

One would think that with gold prices near record highs, that the conference would be far more upbeat.  But,  the conference is definitely toned down compared to past years. The world economy in general decline has overshadowed the focus of the conference, and there was little to celebrate among the exhibitors.

Among the speakers at the conference, the flamboyant James Dines stands out among the crowd. Mr Dines has been touting something every year since about the late 1960s, whether it is gold, dotcom stocks, or uranium stocks. Mr. Dines is the publisher of The Dines Letter, and the author of the book Mass Psychology. While his booth is usually rimmed by half a dozen blond, blue-eyed assistant (i.e., bimbos), I counted at most two this time around, and didn't even see Mr. Dines there. So, if James Dines in cutting back, you know times must be tight.


Tuesday, November 24, 2009

The Squirrels Club

I remember opening my first bank account when I was about 7 years old. It was at a bank called Glendale Federal Savings, at the corner of 25th Avenue and Geary Boulevard in San Francisco. They offered a special account for children called the Squirrels Club account. The club would send a newsletter every few months and gave me a bank for saving coins in. The newsletters featured squirrels as cartoon characters with the head squirrel named Filbert. The materials included games, puzzles, and tips on such things as saving money. The educational part of the newsletter would explain things like interest compounding. I believe that the Squirrels Club was run by an association of different savings and loans.

I was a Squirrels Club member until I was 12 years old. After that, my account was changed to a regular savings account. Looking back, I think that it is a pity that more banks don't offer this type of club for young savers. The educational material that they offered really formed the foundation of how I think about money today as an adult. Actually, the Squirrels Club still exists in a different incarnation. This was the only information that I could find on the Internet.

As far as Glendale Federal is concerned, it went through different incarnations in its history. I think that they changed the name once to West Coast Federal Savings, and then back to Glendale Federal. In the late 1990s, they advertised that as a small bank, they were able to give superior customer service. This was largely a true statement. That was before things started to change.

Glendale Federal was acquired by California Federal Savings which was for the most part acceptable. Then CalFed was finally bought by Citibank. So, what was to me a small bank with good customer service was replaced with one of the biggest, most impersonal banks in the country.


Friday, November 20, 2009

Calculating Net Worth

I thought that calculating one's net worth would be pretty simple. Add up the value of your assets and subtract your liabilities (debts) to arrive at your net worth. Having looked through a few blogs, however, I see that the definition is neither simple nor consistent. I've seen one guy who has listed over $50k in automobiles and the value of jewelry as "assets". On the other hand, some people deliberately exclude things such as cars and other depreciable assets from the calculation.

I agree with the latter formula. I don't include what I would call non-financial assets as part of my net worth. I wouldn't consider stamp and coin collections, or jewelry to be financial assets. The reality is that while these items do have value, it is not as if I would be willing to sell any of them, or that I would rely on them for income. Similarly, I don't consider my primary residence an asset for the purpose of calculating net worth. In fact, I've seen a few questionnaires (that brokerage houses use to determine the suitability of certain investments) that specifically ask for net worth excluding one's primary residence.

Getting back to the question of net worth, I suppose that if one would exclude the value of their home from the calculation, then one could also exclude their primary mortgage (but not their second mortgage since that is not usually used to finance the house, but to buy other consumer items instead) from their liabilities. Why do people try to inflate their net worth by including miscellaneous non-financial assets? My guess is that is like the game people play with inflating their resumes when applying for a job. You may be able to fool other people into thinking that your net worth is more than it is, but just be certain you aren't just fooling yourself.


Monday, November 16, 2009

Wealth According to The Millionaire Next Door

To answer the question of whether one is wealthy, I will take a quote from The Millionaire Next Door, by Thomas Stanley and William Danko, which I read several years ago. I consider this book to be a classic. Here, the authors discuss what one's expected net worth should be at any given point in life.

Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.

To give an example, suppose one is 45 years old and makes $100,000 per year. Then, by the above formula, one's expected net worth is $450,000. The authors then go on to describe the wealthy (prodigious accumulators of wealth, PAWs) as those who have at least double this expected net worth based on age and income. Conversely, one who has accumulated less than half of their expected net worth is known as an under accumulator of wealth, or UAW. (I have always found it peculiar that this acronym is the same as the one used by the United Auto Workers union, but that is another story.)

In any case, the suggestion by the two authors is a broad rule of thumb. I would caution one against putting too much weight into the usefulness of a rule of thumb. Nevertheless, armed with this knowledge, you can at least have a rough idea of where you stand with regard to what your savings should be at any point in time.


Wednesday, November 11, 2009

Stock Pick: Pfizer (PFE)

I'm ready to make the first stock pick on my blog. I am now recommending Pfizer Inc. (NYSE: PFE) for purchase. This pharmaceutical giant is a member of both the Standard and Poors 500 index, and the Dow Jones Industrial Average (DJIA). Pfizer is one of the largest makers of prescription drugs.

This stock closed on Tuesday at $17.56. Pfizer's stock price has been trading in a range in between $11-$19. However, PFE has recently begun upward price movement, with Friday's close being a new 52-week high. My opinion is that Pfizer (and several other large pharmaceutical makers) are coming off of a period of depressed stock valuation.

I have picked Pfizer because it satisfies the following criteria:
  • Profitable for the last 3 years, and consistently profitable for several years (Source: S&P Stock Reports): In general, I will not recommend an unprofitable company for purchase.
  • Current dividend yield of 3.64%: I like to know that if the stock price stagnates, that I will still receive some income for having my money tied up.
  • Large capitalization stock: PFE has a market capitalization of over $140 billion. As a general rule, large companies are less volatile than smaller ones.
There you have it, my first stock pick.


Monday, November 9, 2009

Citibank Dividend MasterCard

One of the credit cards that I carry is called the Citi Dividend MasterCard. The feature that I like most about it is that I get 2% cash back for purchases at supermarkets, drug stores, gas stations, convenience stores and utilities on this card. They call these "everyday" purchases.

The way that this credit card works, one accumulates Dividend Dollars for the above mentioned "everyday" purchases. For all other purchases, a 1% cash reward is earned. Whenever $50 or more is accumulated, I can request a check from Citibank. They will pay out the entire balance, not just the minimum amount of $50. Believe me, this is a lot less hassle than a lot of the other rewards cards. In many other cases, I've found myself browsing through reward catalogs to find something that I had enough points for, and that I really wanted to get. Also, the Citi Dividend credit card is not a tiered award where you have to spend a certain amount (usually a few thousand dollars) before you qualify to get the maximum rate.

These days, I don't really have any better alternative card to use at the time. The 2% rebate is a lot better than most of my other credit cards which pay nothing. I would be interested, though, to see if another better offer will come along.
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Thursday, November 5, 2009


Before I get too far along here, I thought that I would write a disclaimer.

First of all, this is a personal blog, and I am not a financial advisor. The material provided by PFStock is for general information only. This information is not intended as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Readers should not assume that any recommendations made by PFStock will be profitable.

In other words, if you invest in something that I've mentioned here and lose money, then I'm sorry that this has happened, but I can't accept responsibility for your loss. On the other hand, if you do the opposite of what I've suggested and lose money, then I would say that I told you so.

In addition, I may sometimes mention investments in money market funds or in mutual funds. An investment in these types of funds are not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Regardless of how safe these investments may seem, it is still possible to lose money by investing in them. So, don't bombard me with irate Emails if you do.

Lastly, readers accept responsibility for their own investment research, due diligence and decision making. All investments involve risks and are not guaranteed. You may wish to seek the advice of a professional before investing.

Copyright © 2009 pfstock

Monday, November 2, 2009

About Me

I think that it is fair to give some background about myself. I want to give readers an idea of where I am coming from. I am a 40-something engineer working in Silicon Valley (California). I started saving for my future shortly after finishing graduate school. My main focus then was getting the best savings rates from my bank. Even the concepts of 401(k) plans and mutual funds were something completely new to me. I did become seriously interested in investing a little less than 10 years ago. Like many people, I got caught up in the technology stock craze of the late 1990s. Working in the high-tech industry also fueled my interest in these stocks. I rode a few of these stocks down in the early 2000s. And, I would say that my portfolio hit bottom in 2002. Coincidentally, I was also subjected to downsizing not once, but twice, in the past five years. Any employee stock options that I had were essentially worthless at the time.

But, I have been resilient. Each time that I got knocked over, I have gotten right back up and redoubled my resolve to succeed. Since 2002, I have rebuilt my investment portfolio. Although I actually own fewer stocks nowadays, I am better diversified across industry groups. The economy has its ups and downs, and I've learned not to get too overconfident. I am always planning for the worst while hoping for the best.

On a personal level, I have been happily married for over eight years. My wife and I have one child. Recently, I have noticed a prevalence of "under 30" personal finance blogs on the Internet. I am no longer qualified to be in the under 30 crowd. Nevertheless, I hope that the under 30 bloggers would look to me for advice from someone who is only older. My blog hopes to share my experiences with others. On the other hand, I also hope to learn from those who have more experience than I do.