Lazy Man and Money

Bear Sterns Sold For $2 a Share? Fed Drops Interest Rate…

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It looks like JP Morgan is going to buy Bear Sterns for $235 Million dollars. I put the question mark above because I can’t it would drop that much – Bear Sterns closed on Friday at $30 a share. It seems that JP Morgan is getting Bear Sterns at more than 90% off. Even more amazing the stock’s 52 week high is over $159. That means if you invested a million dollars in the company last May, you’d have around $12,500 today.

This is another great reason why it’s important to diversify. I’m sure there are people who were heavily invested in Bear Sterns and not properly diversified. These people would have watched a lifetime of investing disappear in less than a year.

In other related news, the Federal Reserve dropped the interest rate a quarter point – quite a rarity on the weekend. From the report, “The ‘discount’ rate cut announced Sunday applies only to the short-term loans that financial institutions get directly from the Federal Reserve. It doesn’t apply to individual borrowers.”

If the Bear Sterns news came out a couple of weeks from now, I would have pegged it for an April’s Fool Day prank.

Celebrities and Money: Sarah Michelle Gellar

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Today I thought I’d unveil a new series focused on celebrities and their money. It’s not going to be a regular series – I’ll only post when I find relevant articles. If you have a link to a celebrity and money, feel free to contact me.

The first feature comes from an unlikely source (at least for the Lazy Man)… Self magazine. My wife has subscribed to the magazine for the past couple of years. While doing a little re-organization of the junk that I’m too lazy to clean, I came across the October 2007 issue. It features Sarah Michelle Gellar on the cover. As an obsessed fan of the Buffy the Vampire series, I was curious what she’s up to nowadays. I lost track of her career when she started doing Scooby Doo and The Grudge.

Well it seems like Scooby Doo, The Grudge, and some cartoon voices were the big career things. The article focused more on her life outside of work. This is what people want to read anyway. While some magazines make headlines out of Britney Spears or Lindsay Lohan, Self took Sarah (I’ve watched enough Buffy to pretend I’m on a first name basis with her) and her relatively boring life.

Here are the money related from the magazine:

  • Her transportation – For the first season of Buffy, it was a Chrysler LeBaron… “You hear about people… get their first pilot and get the Porsches…, but I just couldn’t do that.” Now she just uses a bike to get around New York City, “It’s bright pink, with the bell and streamers… it has Hello Kitty tires.” You can’t beat the frugality, but the image just made me throw up in my mouth a little.
  • Upbringing – “I was raised by a single mom. Finances were tight.” She took up acting at age 4 in an attempt to make a little extra money for private school. She notes, “100 commercials still doesn’t cover a private school education.”
  • Frugality – While she has birthday parties on two separate coasts (I suppose it’s tough to have half your friends in NYC and half in LA), she saves money just like us. “I take my reusable bag to Whole Foods, so I get a discount. I go to Bloomingdale’s on double-rewards days. I always print my dry cleaning coupons before I go.” I guess all of us can’t afford to shop at Whole Paycheck, but other than that, you have to commend her.
  • Charity – She chooses to support CARE whose main mission is to fight global poverty. The only way Sarah would do the interview is if she got to promote the charity which, of course, Self had no problems with.

One can never be sure if all the things said of stars are true. However, I believe there’s some truth to every story. I’m inclined to believe that Britney and Lindsay have “some issues”, while, in general, Sarah is a money-smart star.

This is the Time that Fortunes are Made

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Last October I asked, where would you put money now. I noted that quite a few things were expensive. Investments that were at full time highs were: Oil, the Dow, the price of gold, emerging markets, and China. I finally decided on a regional banks ETF despite the sub-prime mess. At the time, the price was around $40 a share. It’s a little lower now – I’m happy I didn’t move any money.

I decided to back at some of the comments made to see if anyone was wiser than me. Almost everything has gone down, so I can’t be too hard on suggestions. A few people suggested buying VMWare. I hope they didn’t buy that themselves as it’s way down about 40-50% since October. There were some good recommendations in there as well. One commenter mentioned that you couldn’t go wrote with First Solar. If you listened to him you could have doubled your money – provided you sold at the absolute top.

Enough of dwelling on the past, let’s look to the present and future. The Dow is has dropped from 13892 when I wrote the article to 12192 as I type this. Many China stocks are down from their high. Vanguard’s emerging markets ETF is down. Oil went back down, but close again to it’s highs. This gold ETF just keeps going in one direction – up.

So what do you do now? Do you go buy more gold? Do you buy something that mimics the US stock market now that it seems to be cheaper than it was in October? I’m a value guy and hate paying for things at the top. Here are two places that see possibly making some people a lot of money. You might have to buy and wait 5 years, maybe 10-20, but I feel that they’d pay off quite well in time.

  • Technology Stocks – The Amex Technology Spider ETF is down from around $27.75 to around $22.50, making it seem like a solid choice since earnings have been fairly good in the area. Its odd for me to believe, but Apple, Google, Microsoft, and Cisco as value plays? It’s true. It’s very rare that you get to buy market leaders at a discount. Though some of them have shot up in price over the last year or more, I believe that now is a chance to get them and hold them.
  • Real Estate – This one depends on where you are looking. In northern California home prices haven’t come down much. However, in Boston where I’m originally from, it seems you can find some home prices off as much as 30-40% from two years ago. Like tech stocks, the price may have been inflated in the first place. However, discounted prices combined with extremely low mortgage rates, makes this very tempting. I have a friend who knows he wants to settle down in a Boston suburb in 2-3 years. Due to some life circumstances, he can’t live there until then. He’s thinking of buying a home now and renting it out until he can live there. He reasons that if he just breaks even (or loses a little) with rent, it’s better to get this price than pay 15% more and a higher mortgage rate. This seems like an extremely smart plan to me.

I’ll leave you with the best call of the comments from that October post. The Div Guy said, “I think the Sox can win the next 3.” He wasn’t quite half right, they won the next 7.

Britney Spears: A Small Factor of the Recession?

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Portfolio magazine is reporting that Britney Spears is worth 120 million dollars worth of business to the United States. When she is touring it goes up from there. Here’s their breakdown of costs:

  • Promoters/Licensers – 30-40 million through endorsements
  • Paparazzi – 4 million peddling photos
  • Print, Web, and Video media – 75 million
  • Federline Factor – He gets 1 million a year from her

While I recognize all these things as being true, it’s clearly not as exciting as the magazine makes it.

  • Promoters and Licensers would still make money if Britney didn’t exist – I think their business has already shifted from Britney to Fergie, Beyonce, etc.
  • Paparazzi would focus their efforts on digging for more dirt on Lindsey Lohan – if that’s even possible.
  • Like the promoters and licensers print, web, and video media would like find business elsewhere.
  • According to the magazine, Kevin Federline makes $30,000 for a night club appearance. This was amazing to me. I suppose it’s fair to credit that to Britney, because we know that no one else would pay him if it weren’t for her.

    • So my question is, if Britney continues her downward spiral, would the US workers lose the money? I don’t think so. If anything the tabloids and paparazzi will see record earnings.

    I say it shouldn’t matter and we should focus on more important things – like who has better hair, Britney or Paris? I say Britney in her heyday couldn’t be touched. However, now that Britney wears a wig, I’m going with Paris.

    Oops I Lost 7 Billion Dollars

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    This piece of news caught my eye this morning… a single trader blamed for 7.15 billion USD fraud at French bank, Societe Generale. I don’t know about you, but if I lose $10 through some kind of fraud, I get pretty upset.

    I can’t help to think about the scam in Office Space to sweep the breakage from several accounts. The problem was that it worked too well and the parent company would notice. That was only a few hundred thousand if memory serves. Perhaps they could have gotten away with a billion or two more.

    How do you manage to amass so much money and still be careless enough to lose 7 billion dollars by one man’s action?