money really matters

In last blog post, we talked about the real reason and importance to attend free seminars and workshops coming to your city. I hope most of your atleast convinced a bit and thinking about checking out few seminars which matches your interest. In this post, I am sharing some Do's and Don'ts while attending these seminars which keep you out of spending money.

Here are few do's and don't which I would recommend.

Do's

1. Go with an open mind to learn something new and ready to participate&share with others.
2. Take down notes of techniques, loop holes, hints, tips and useful ideas
3. Write down list of good websites which might be used during presentation.
4. Ask questions and get your doubts clarified for free.
5. Talk to the host after the meeting if you have further questions and pick their brain.
6. Try to talk to other attendees. Share, learn and create network which might help in future to create a power team of your own.
7. Note down the mileage and keep reciepts of any expenses like parking fee, lunch so you can account and claim.
8. Do take your friends or spouse only if they are interested in sitting with you and willing to learn. Otherwise you might have to leave in middle if they get bored and avoid feeling guilty.

Don'ts

1.  Don't take your credit card or cheque book.
2. Stay away from signup and on't get tempted by their special and attractive offers.
3.  You do not have to sit through the whole seminar. You will know when to call it quits if it doesn't seems to add any value to you.


These tips are some of many coming out of my experience and surely will help you prepared when you plan on attending seminars. If you have few others from your experience, please don't hesitate to share for the benefit of others.

Webinars

Alright!! We are surely in a internet age. Internet is name of the game. It makes our life easier every day in lot of different ways and getting educated is no exception. There are online universities which teaches classes and online seminars called webinars. SO if you don't have time to attend seminars physically, don't worry. Many financial institutions, brokerages firms and even rating agencies provide free webinars.

This is the new trend in the market these days. Webinars and webcast have become so easy for the organizers and also for attendees who don't have to get out of their house.

List of Free Events/Webinars

1. Rich Dad Education - Realestate seminars
2. Ray Lucia Retirement seminars
3. Free Stock investing seminar from TDAmeritrade, Scottrade, Charles Schwab, Moody's and more..

I strongly urge you try attending atleast one free seminar or workshop coming up in your city this summer and venture out. You will surely learn a trick or two. Don't forget to let me know how it went.

In the last couple of posts, we been looking at how Tax planning can have an effect in your tax preparation. We saw the difference between Tax Planning and Tax preparation. We also started digging in deep on how the cost basis and stock selling strategy can save you some money. In the previous post, I started explaining about different types of determining cost basis and will complete in this post. At the end of this post, you will know which methods helps on different situations. So read on.

Check out the cost basis using FIFO method before moving on to read so you can better understand the difference.

Average cost is another method for determining cost basis and is only used with investment/mutual funds. To determine the average cost, the total cost of all shares purchased including any invested dividends is divided by the total number of shares held.

Once this method is used, it must be used each time the taxpayer sells shares in a mutual funds. This method is most effective if the shares purchased first have the lowest cost basis.

Average cost has 2 different ways of calculating according to the stock purchased periods. The single category method is when the investor takes all of the purchase amounts and divides by total number of shares owned. The double category method sorts the total shares owned into a short-term and a long-term holding period. Then, the average cost for each category is identified.

For example, Jan buys the Vanguard growth fund

• 200 shares on January 3, 2001 at $20/share
• 300 shares on September 5, 2002 at $25/share
• 200 shares on April 20, 2008 at $22/share

On Oct 15, 2009 she sold 500 shares at $20/share. What is her cost basis according to the average cost method?

According to the single category average cost method, she would take an average of the purchase prices and divide by the total number of shares owned:

• 200 shares at $20 = $4,000
• 300 shares at $25 = $7,500
• 200 shares at $22 = $4,400
• Total cost = $15,900
• Total shares = 700
• Average cost per share = $22.71

So the gain/loss for this sale was:

• 500 shares ($20 – $22.71) = -$1135.50

Therefore, Jan had a net loss of = -$1135.50

The specific share identification method implies that specific shares are used to apply against the shares sold.

Before selling shares, the shareholder must inform the broker or fund company regarding which shares are to be sold. These instructions must be given at the time of sale or transfer, not later. The broker or agent must confirm this request within a reasonable time after the sale.

This method can be used effectively only if the shareholder has kept accurate records and has followed through on the receipt of confirmations from the broker. It allows the shareholder to control the capital gains taxes that he or she has to pay because this can be determined by selecting the shares to sell. You can tell your broker to sell your highest-cost shares when unloading part of your holdings in a stock. Using this "specific ID method" requires you to identify the shares to be sold by specifying their cost and purchase dates. You must also receive a written confirmation of your instructions from the broker or keep a record of your oral instructions. Put this in your tax file for safekeeping.

Which method is suitable and when?

Specific ID method is the best method for tax purposes because the investor has absolute control over how much the gain from a sale would be. Long term or short term gains can also be controlled. This is the preferred tax basis method for investors who actively manage their portfolio for tax efficiency. It is also not the most cost effective because of all of the effort that is required for proper record-keeping.

If you don't follow th procedure, you must use the first-in, first-out (FIFO) method, meaning the shares you bought first are considered sold first. Those were likely the cheapest — giving you the biggest possible tax hit. The point to remember is that you must take action at the time of sale to use the specific ID method.


Short term Vs Long Term

If you have both unrealized gains and losses in your portfolio, but want to make some sales in a certain way matching them property to get the best effect.  First, the general rule is try to sell long-term holdings (held over 12 months) first to benefit from the 15% maximum long-term capital gains rate. Then, unload your short-term holdings.

Then in order to offer offset those gains, you can sell the loser stocks for loss to balance it out. You will generally get the most tax-saving for the buck by selling short-term holdings for a short- term loss by taking advantage of short-term losses offsetting short-term gains which would otherwise be taxed at the regular income tax rate and any leftovers then offset long-term (15%) gains.

By following the above strategies matching your situation, you can either save some money by not paying to uncle sam way beyond the tax season. That concludes the tax planning - Stock investment strategy by doing cost basis analysis.

Houston MoneyFair 2009 is hosted by BizRadio 1110 AM, and I have with me Dan Frishberg, who is the man behind this network.

Dan, I’ve  known about BizRadio for 3 or  4 years, but many Houstonians are not really aware of your network; let’s talk about BizRadio first, and then move on to the Money Fair.

Vijai: When and how did BizRadio actually evolve to become this very successful network?

Dan: We originally started in Houston radio on the old Business Radio 650.  When then-owners CBS Infinity Broadcasting decided to eliminate the money format in Houston, my listeners were very vocal in their protests.  I promised them I’d somehow continue my broadcasts, even if it meant starting my own radio station.  In fact, many of those listeners literally became owners in the new company we formed, which we now know as BizRadio.  It’s quite rare to see that kind of listener loyalty, but here we are.

Vijai: What was the main vision/motivation behind this radio network?  Was it started to attract wealthy investors or to help people seeking financial literacy? 

Dan: Depends what you call wealthy. Our audience is made up of people who take responsibility and know they must use their brains to survive and prosper in this very complex world.  Some of them are rich, but many are rich people who haven’t received the money yet. They learn how to think rich, and they become rich.

What we don’t offer is invalid, anachronistic boilerplate financial planning ‘Pablum’. Such baloney has no value, and the proof of that lies in the fact that it has never helped create more rich people. BizRadio content is a little more demanding, but it actually makes people richer, by teaching them to think like rich people. There are tens of thousands of salesmen, young businessmen, homemakers, new and experienced investors who have learned to think like the successful people they wish to emulate.

The U.S. economy has changed dramatically, and the ideas behind successful investing from years gone by are no longer valid.  There was a time when anyone with a few bucks to invest could grow that money by buying stocks and holding on to them - the companies were growing by leaps and bounds.  This was especially true in the 80’s and 90’s – the years that saw tremendous growth in the technology industries.  So yes, we do speak directly to what you refer to as ‘wealthy’ investors. (We like to think of them as ‘savvy’ investors.)  On the other hand, we dedicate ourselves to financial literacy and the idea of initiating the uninitiated into the world of investing or “growing their money”.  Education is a big part of our philosophy… education at many levels.  But we consider all of our listeners as members of the union of people who use their brains “To Get a Better Deal”.

Vijai: If the intention is to educate people, I don't see any shows that target a normal or ordinary person.  It all talks about high end investing, trading and so forth.

Dan: Actually, one of our hosts (Vince Rowe) is the president of the Online Trading Academy.  It’s an excellent teaching facility.  Del Walmsley is really a real estate investor, which brings a lot of listeners who aren’t so adept or interested in buying and selling stocks.  Ray Lucia, who’s on mid-days in Houston, refers to himself as a financial ‘planner’… his investment material is about a variety of plans for long and short term investors.  Today, ‘normal, ordinary’ people simply MUST face the fact that knowing what to do about your money means knowing how to plan for your future.  Like it or not, even for ‘normal, ordinary’ people, gone are the days of hiding cash under the mattress. And again, it depends what you consider ordinary. We are probably not right for people who wish to STAY ordinary, but we appeal to people from all walks of life.

Vijai: What are a few shows you like to recommend to listeners -- apart from your MoneyMan Report at 4pm? 

Dan: Wow, that’s a tough one.  Let’s see…. OK, all of them!

Vijai: I know BizRadio has now expanded to Dallas, San Antonio and all over Colorado, etc.  How do you feel about this accomplishment?

Dan: Well first of all, if I may, you’ve understated the reach of BizRadio. Many weeks, we have hundreds of thousands of our segments downloaded via podcasts by people all over the world. Our hosts are constantly invited to contribute on national and international TV, and people find us there – they search for us and become hooked via the internet.

Next, several new stations are in the process of signing up to take our programs through our syndicator, Global American.  We’ve grown this company using the same principals we try to convey to our listeners in terms of how they should grow their business.  We did what everyone should do… we found a niche that we’re very good at, and that no one else was doing very successfully, and we filled that niche.  In fact, our audience is quite the niche audience.  They’re the very cream of the crop, they know what they want out of life, and they’re not so vain as to believe they know everything about how to achieve their goals.  They’re very willing to listen to what we have to say, and conversely, we get some great ideas from them. It’s a great audience.  

Vijai: What about your BizRadio Academy -- what’s the goal behind this educational center?

Dan: Well, using your terminology, it’s to help turn normal or ‘ordinary’ people into ‘wealthy’ individuals.  The whole educational center was built around a Basic Financial Literacy course, and the aforementioned Online Trading Academy.

Vijai: I know The MoneyFair is coming up at the end of this month. What else is online for the Houstonians?

Dan: I have to say that we plan our events, seminars, workshops, and classes around the immediate needs of our audience, which translates to keeping up with the changes in our economy and the flow of money.  Sometimes that means we’ll plan an ‘emergency strategy session’, but typically, we have something going on, generally speaking, at least monthly.  We have these events on a pretty regular basis.

Vijai: Now, moving on to The MoneyFair 2009.  Tell me about it… is it a seminar or a workshop or a discussion forum? 

Dan: It’s a full day of globally famous and successful financial celebrities, giants, icons – whatever you want to call them. It’ll be a combination seminar/carnival-of-the-brain, or any other metaphor you wish to use. It’ll certainly be the largest assembly of famous celebrities and innovators to arrive in Houston in years.

We’re particularly focused this year on the issue of globalization.  The theme in fact is wrapped around the idea that economic borders around the world have fallen - and continue to fall every day.  There’s no longer any such thing as a U.S. economy or a U.S. stock market.  Things that are happening all over the world, especially in China and other Asians countries are affecting all of us much more than ever before.  Some people have a tendency to want to worry about that.  The truth is the doors have been opened to a vast world of opportunities.  The Biz Radio 2009 Money Fair is about those opportunities and how to take advantage of them. 

Vijai: Is this fair only for expert investors or novices who are just starting up investing?

Dan: I’m afraid that most of the real ‘expert’ investors will probably be on their yachts sipping adult beverages, or stretched out on any one of the world’s most beautiful white sand beaches.  Let’s say there’s an ‘intermediate’ group that’s aiming to reach those levels… they’ll certainly be at the Money Fair.  And I suspect that the “start-up investors” will be anxious to see what effect falling economic borders will have on them too. It’s for those who wish to opt in.

I have to say that your questions seem to betray a lack of respect for the average American that I just do not share. In fact, when we started, most media types predicted we’d be gone in six months. They believed there was no audience for such “targeted content.” The people continue to prove them wrong, and our audience continues to get richer.

Lots of our listeners have told me they avoided the recent crash, navigated successfully through the past several years, and they attribute their success to BizRadio. That’s about the best endorsement I could have hoped for. 

Vijai: What can one expect from this MoneyFair? 

Dan: You’ll see hundreds of Houstonians walking around in, somewhat in a state of rapture because of the pure enjoyment, stimulation and excitement to be had from being at a one-of- a kind event like this. There will also be plenty of education - which is not to be confused with free advice.  Advice is a very scary thing in the world of money… you should only take it from your grandfather.  But there will be lots and lots of free information.  And I’m talking about the kind of information you can actually use to make your own decisions about your money.

Vijai: Money fair is advertised as free to register. As you know, nothing is free in America. What is the catch?

Dan: Sorry.  It’s advertised as free - that means it’s free.  Actually, if it weren’t for your driver’s license, you wouldn’t need your wallet at all.  Feel free to leave your checkbook, your credit cards, and your skepticism at home.  The only problem with the fact that it’s free is that when the seats are gone, they’re gone.  We’re actually just about sold out now… if you hear it on the radio or TV later today, there may still be a few tickets available. Oh, I almost forgot.  There IS a catch.  You have to make reservations.

Vijai: Why is this event happening on a week day? Is it to avoid too much of a crowd or any particular reason? 

It’s happening on a weekday because the only alternative is weekends.  Don’t you play golf?

Vijai: What’s your final word to encourage people to attend the MoneyFair? 

Seriously speaking - we’ve been at many crossroads to the future over these past few years, but none like the place where we are today.  Yes, the economic borders are falling all around us, but if you look closely, you’ll find that the people of many, many nations are not hesitating at all.  They’re opportunists.  They saw what we Americans are able to do, and now many of them have learned to do it themselves… in some cases, they’re already doing it better than us.  They came here to be educated, and then took those skills they learned home with them. They’ve become a force to be reckoned with.  You know, there are about six billion people on the planet.  Which means we’re now facing six billion competitors.  But guess what?  We also have six billion new opportunities. We’re going to dissect that thought thoroughly at this year’s Money Fair.

Last year, I posted a blog titled CITIBANK, TOO BIG TO FAIL  and it has been almost 9 months now. During this interim period, we have seen lot more companies face tough battles, some went under and some survived. Even Citibank came very close to be taken over by FDIC. With the help of US government and many other investors, it still stands as big financial company.

These past experiences changed a lot and made many analyst to rethink, "Is there anything TOO BIG TO FAIL?". After seeing many big banks, financial institution, auto companies crumble like pack of cards, the statement doesn't hold value anymore.

During a town hall meeting on Jul 27th, Fed chairman Bernake said, "The problem we have is that in a financial crisis if you let the big firms collapse in a disorderly way, they'll bring down the whole system. When the elephant falls down, all the grass gets crushed as well," Bernanke added. He said he had to "hold his nose" to rescue such institutions during this crisis. As a result, Bernanke said it was his "top priority" to fix the issue of too-big-to-fail. As per him, there is nothing like a company is too big to fail. It just needs to fail graciously without affecting others. To read the full article, go to marketwatch.com

Citibank - Status quo?

Currently Citibank has it's hands tied with U.S. government holding 40% stake(common stocks) after recieving giving  $45 billion in bailout money. Vikram Pandit, CEO who took over his job at tough times is still hanging in there when many big companies vanished from the scenes. He is surviving with big hope to bring the company to his pride. Meanwhile he is named as one of the worst CEO by analyst and government is closely watching  every one of his actions.

In an interview, Vikram pandit was chocked by questions which he struggled to answer. For a question,  When will this crisis be over? Do you see any signs, at this point, of a recovery?

VP: What you have to understand is that, this is a significant shock to the world economy. Just think about it, when you look at the last 5, 10 years there were two engines of growth. There was the U.S. consumer and credit creation. None of those are likely to be the engines of growth going forward. The world's looking for a new business model. It's about new engines of growth and it's not only about creating stability and saying that we're out of the crisis mode. But we all have work to do as we search for what the new business model is for the world. I am optimistic about the signs that we're seeing, suggesting that stability is arriving. 

He seems to be optimistic, that is what he can do right! Click to check out the full interview.  It is hard to say, the worst is over for Citibank. Citibank is under close scrutinty and they cannot make any drastic moves without their Fed's approval. Even today(Aug 8/13/2009), they need goverment approval to pay bonuses and rasies for their energy trader who clinched millions for the company. It is going to take lot of work and patience to get out of the mess. We have to wait and watch.

Big CIT Story

This summer another big financial failure caught everybody attention without much shocking. CIT, a commercial lending institution struggling to get out trouble even after getting $2B bail out money from the government. I am sure many never heard of this company. I only heard when it showed up in the news. CIT serves as short-term financier to about 2,000 vendors that supply merchandise to 300,000 stores, according to the National Retail Federation. Analysts say 60 percent of the apparel industry depends on CIT for financing, so other lenders taking up all the slack would pose a big financial strain.

CIT has been scrambling to raise $2 billion to $4 billion after the federal government refused to bail out the company. On Jul 19th, major bondholders to keep the company out of bankruptcy with a $3 billion rescue loan, the New York Times reported.  Under the deal, CIT's main bondholders would give the company $3 billion at an initial rate of 10.5 percent, the Times reported.

A bankruptcy filing would have threatened funding for scores of small businesses across the country. It also would have wiped out $2.3 billion in federal bailout money injected into the company in December.

Right now, CIT seems to be working on many restructuring plans. The Federal Reserve put the company through its "stress test" last week and found it faced a $4 billion capital shortfall. It also suspended the dividends. Suspending the dividends on four series of preferred stock will improve liquidity and preserve capital during its restructuring, CIT said. The company also reaffirmed that it has received enough offers to complete a debt repurchase program.


There is more to come in the next week blog with final analysis and conclusion on a controversial question, "Should big companies be allowed to fail?" and Lesson learned from this crisis. Watch out...

Content sources - marketwatch.com and npr.org