Round ’em Up

Thought I’d share a few articles I found over the past week or two, that I think are worth a read.

We have two articles from BusinessWeek. The first one profiling great companies with which to launch one’s career. Lucky me I work for one of them ;-).

Content is still King, but it seems that the movers in the content industry have two things in common. They’re leveraging, building, or buying distribution channels. (I.E. Fox and myspace). Keep an eye out for Yahoo to make a move towards Facebook, and there’s stirrings of Viacom heading after facebook. The second thing is doing the opposite of what Time Warner is doing. Here for yahoo/facebook. Here for YouTube/Viacom/content.

New Geeks

As you know we recently put out a call for some new InvestorGeeks. We had a strong response again this time, and after deliberation and discussion amongst the founders we have decided on our new Geeks. There will be six in all. I won’t be introducing you to any of them today, they’ll take care of that themselves over the coming weeks. But you can all look forward to an increased focus on TA and a dedicated real estate writer.

Just a reminder that submissions are now closed, and we’d like to thank everyone who applied. We’d also encourage anyone who applied this time to continue doing their thing, build a great body of work and apply again in the future. Thanks again and we hope that you all enjoy the new Geeks as much as we do.

Business News from Around the Web

From time to time I find things on the web that pique my interest. And from time to time I’ll share those items with you. So here goes.

NPR has some Financial Advice for Twenty-Somethings.

The Baltimore Sun has an article describing what those with interest-only loans set to reset in the coming year (up to half a trillion dollars worth) can expect.

Wired is running an article examining what’s been going wrong at Sony.

CNNMoney has some advice on some investment choices you may want to avoid and what to be wary of as you plan for retirement.

Finally BusinessWeek a piece up that is sure to agitate some of the youngsters among us.

Credit and Debt: Did you know…

Whether it’s due to bad or irrational decisions, youthful naiveté, a bad streak of luck, or situations totally beyond our control, we’re all faced with mounting debt at some point.

If it gets bad enough, some of us may even have to work with our creditors to forgive some of our debt just to remain solvent. But did you know that getting a break on your debt could greatly effect your tax situation? How about the effect accepting a settlement offer has on your credit report?

Michele Singletary over at the Washington Post has written a series of three articles addressing these types of questions. The series was prompted by a reader looking for advice regarding a bad debt.

The first article covers the original question: the reader thought that accepting a settlement offer would negatively impact their credit score. It turns out that could or could not be the case, but the reason had nothing to do with the reduction in the amount they owed. It actually has to do with the account activity date reported on your credit report: the more recent that date, the greater the negative impact on your score.

The second article gives some additional background, including reminding us that forgiven debt must be reported as income to the IRS. That’s right. You are liable for taxes on the amount of debt forgiven.

The final article of the series breaks down how bad debt is collected and who the money actually goes to. As well as defending the actions of the reader and her own advice.

Overall the articles are informative and quite well written. Definitely worth the read if you’re looking to expand your knowledge, whether or not you agree with her advice in this particular case.

Understanding Market Orders: Three Resources

If you’re anything like me then you think that once you click on the appropriate button, or get off the phone with your stock broker, your order speeds off to be filled at whatever price the stock is currently trading at. How wrong I was.

After placing an order to buy a stock recently, I was shocked to discover that my order did not speed off and was not filled nearly instantaneously despite my broker’s “5 second execution guarantee”. This perplexed, befuddled, and scared me to be quite honest. I had placed the order anticipating that the order would be filled almost right away, and had assumed that the order would be filled at a certain price. “What if the stock price jumps?”, I thought. I’d be paying more than I wanted to for this stock. Rather than risk it, I canceled the order before it could be filled. (I won’t even comment on whether I should have been buying a stock that I was so ready to give up on, based on the fact that the stock had actually gone up in price.)

So why didn’t my order go through right away as I expected it too? After all it was a no-fuss no-muss market order. Just buy it at the stock’s current price no worries about the bid-ask spread or anything like that. Right?

Not so much. Turns out that the bid and ask spread *do* effect market orders (in many ways) and that a stock purchase goes through a number of steps and can take any number of paths before you actually own the stock you set out to buy.

For an in-depth explanation from someone who actually knows what they’re talking about Take a look at these Investopedia articles:

Retirement Planning: Do you still rely on your Pension plan?

Pension plans have long been offered as part of employee benefit packages. Long thought to be an integral part of any retirement plan. But in todays environment, with large corporate bankruptcies and massively underfunded pension programs, do you still rely on your Pension plan?

For years individuals have relied of defined benefit pension plans offered by their companies. Years ago it was sometimes seen as all the retirement planning that most individuals would ever need. Between you company’s pension, after working there for decades, and social security what else would you need?

As we all know this is no longer the case. While I’m lucky enough to work for a company that still offers a pension as part of it’s benefits packages, many individuals are not. Even those who have long since retired face the prospect of having their benefits cut. Either by the company as it struggles with it’s underfunded plan, or by the government when the company goes bankrupt and sheds their pension obligations.(Even those benefits are in jeopardy, as the entity that takes over the pension obligations is it self suffering from a funding gap.)

Even the companies that still offer pensions plans are not garaunteed to continue offering those benefits. Even then there are employees, and managers who would prefer some form of “supercharged” 401(k). Myself among them. So I ask, what role does your pension plan play in retirement planning? Is it an integral piece of the puzzle, something that you rely on you supplement your retirement income? Or just a nice to have with anything that comes out of it being just a bonus? Please come join me in our forums for a discussion about this.

Resources
Deal is Near on Pension Proposal (Washington Post)

What do you do with all your billions?

So what do you do with all of your billions?

If you’re Warren Buffet, you give it all away. Warren Buffet has announced that 85% of his holdings in Berkshire Hathaway will be donated to charity in the coming years. With the lion’s share going to The Bill and Melinda Gates Foundation.

More can be found at CNN

Will the Boomers take the Boom with them?

For a number of years now there has been a cloud over Social Security, brought on by the fact that as the Baby Boomers retire the number of individuals drawing on social security will be greater than the number of individuals paying in. This has been used as a justification and impetus for changes to the Social Security system. But what else will be effected by the retirement of the Boomers?

For a good long time now, the stock market has been seen as the most viable and rewarding investment for individuals, over the long term. Boomers have been investing in the stock market for years, and are expected to in increasing numbers as they get closer to retirement. If you need proof of this, just look at the advertising from Ameriprise Financial, and the focus of many of the other financial advisement firms. But as they grow older, they will change their investments, and eventually pull out of the stock market entirely.

How will this effect the market? Their eagerness to invest in the market has assured that any sell offs of older generations are readily absorbed into the market. But their influence could quite possibly go beyond that. Have the Boomers, in their eagerness, propped up the stock market in much the same way that they have propped up Social Security? If so, to what degree have they done so? Will their exodus from the market take a measured pace, at which younger generations can pick up the slack? Or will it happen at such a rapid clip as to create a panic, and send us into a recession or worse? How will it effect the housing market, will Boomers move into smaller more affordable homes as they grow older? How will their retirement effect the rest of the economy as a whole?

Many of these questions I have, at best, a partial understand of and answer to, and there are many more to which I have no answer at all. It is my intention to more fully explore these questions, and the effects that the Boomers will have on our retirement planning and our economy as a whole. Stay tuned.

Vonage’s IPO: An offer you can’t refuse?

As I’m sure you’ve all heard by now. Vonage has decided to offer some of their customers a shot at getting in on their IPO action. I happen to be one of those elligible customers, but should I buy in?

To be honest, when I first heard about the IPO and the fact that I would be able to pick up a few shares, I was really excited. I contacted the other InvestorGeeks and we all chattered about how cool it would be to get in on an IPO. But not just an IPO, an IPO of a company  that offers a service all of us believed in.  

But before we all jumped on board, we decided to check it out. We downloaded the prospectus and did a bit of poking around, and a bit of thinking. We discovered some very interesting things in only a short amount of time.

What did we discover? Well some of it is solid fact, some of it is a feeling about the business environment, and some of it is unsettling conjecture. We’ll start with the cold hard facts however.

After looking through the prospectus three things stood out. The first, that Vonage is currently (about) $500 Million in the hole. Why? Their spending on marketing. It’s understandable that a company such as Vonage needs to get their name out there. But they readily admit “this strategy will have the effect of delaying or preventing us from generating net income in the near term”. Which is not something I enjoy hearing.

The next thing I noticed was their laundry list of risk factors. In which they mention their unprofitability, their competition, and their dependence upon their customers existing broadband connections. Which may as well read, “we depend on our competition”. In the absence on net neutrality legislation, this is a huge issue. At any given time, the companies which Vonage is competing against, could decide to block access to the service. Vonage would have little if any recourse. While the legality of such a move on the parts of Vonage’s competition is still legally grey, it’s worth noting that Verizon has, in the past, been fined for not providing  “the same level of service to competitors as it’s own retail customers”.

The last intriguing tidbit was that, apparently, the founder and Chairman of the company, Jeffrey A. Citron has been fined for securities fraud in relation to Datek Securities Corporation (page 118 of the Prospectus). Not exactly confidence instilling. Now, on to the conjecture.

Why, exactly, did Vonage decide to offer shares to their customers? In most IPOs, the vast majority of shares are offered to underwritters, and other big players. So why would Vonage offer lowly customers the opportunity to purchase lots as small as 100 shares in size? In my opinion there were a number of reasons.

The first of which was that it would create a buzz. VoIP is not exactly a hot topic right now. There are a number of reasons for this, tech’s out of favor for one. But more importantly, most people just don’t care about it. VoIP is a change in the underlying architecture of how phone calls are made. Not a change in how people use their phones. So lacking any sort of buzz, by offering shares to their customers they created their own. Whether or not it worked is debatable. It barely made a blip in tech circles, and I’m not even sure it registered anywhere else.
Second, I feel that a good number of customers will be excited by this opportunity and buy into the IPO. This will help Vonage sell additional shares and, perhaps, avoid an immediate drop in share price.

While I’ll keep an eye on the company, overall I am not impressed with what Vonage has to offer at this time. I will not be buying into the IPO. The company’s history, it’s leadership, and the fact that it’s entirely dependent upon its direct competitors to provide its service all leave me with a sour feeling regarding this offering.

Credit Cards: A new bag of tricks…

Today I got an offer for a new Visa credit card. Now, most credit cards offer you incentives for signing up, a low introductory APR, low interest rate balance transfers, gift cards, and the like. But this offer was different, by signing up for this card. I could get a free Dell laptop. Needless to say, my interest was piqued.

The card, the “Upfront Rewards Visa”, is offered by Universal Savings Bank F.A. is an interesting creature. As we all know it’s never as simple as just getting the gift, there are terms and conditions, as well as the fine print of the card itself.

Well, in order to qualify for this card, you have to incur $5000 of debt with the issuer. That’s right folks, just to get the card you need to make a balance transfer of at least $2500, at which point they’ll graciously allow you to take a cash advance for the remaining $2500.

But wait, it gets better. After incuring this debt, you have to maintain a balance of at least $3500 for 18 months! If at any time your account balance during those first 18 months drops below that $3500 limit, you will be considered in default and will have the opportunity to experience all of the joys that come with being in default. Including a $600 one time charge, termed an “early pay down” fee. Fun times. But, hey, at least there’s no annual fee.

All this for a $950 laptop? Heh, no thanks! If you think for an instant that they won’t recoup their money in interest over that period of time, I have a cold fusion reactor sitting in my closet that I’d be willing to part with for a nominal fee.

Just think about what their terms will be for people they aren’t trying to woo into signing up for a card, once you’re an actual customer. I imagine it will be as pleasant as dealing with a loan shark. On second thought, it might actually be better to deal with a loan shark. At least Vinny and Bruno won’t break your knees for paying on time or early.