The Proficient Investor

Are you behind on your credit card payments? Tired of being charged late fees, over limit fees and other hidden costs associated with credit card debts? Need to borrow cash to pay a pending bill? You might consider getting  personal loans from ThinkCash who have ordered this sponsored review.

ThinkCash offers installment loans but unlike a traditional bank loan, no paperwork is required, the approval process is almost instant and the rates are typically 25-75% lower than payday loans. You can get anywhere from $250-$2500 the next business day.

Short-term personal loans can be used for anything from paying higher interest credit cards to using it for holiday shopping. What you do with the loan is up to you. A credit approval is required and loans are offered by First Bank of Delaware (member FDIC).

You can get a loan in 3 easy steps:

1. Complete the online application
2. Get your answer in seconds
3. Schedule payments online anytime with no penalty

Unlike a payday advance which forces you to pay the full amount plus the interest from your next paycheck, ThinkCash allows you to choose your schedule and amount in bi-weekly payments for the life of the loan. Most payments are structured so that you don’t pay more than $100 per payment.

There are some other benefits of ThinkCash as well. With a referral program you can earn $25 for each customer you refer.  Just let a friend know about their low rates and great service. Then, when they get their first ThinkCash loan, $25 is deposited directly into your checking account.

Trying to break the cycle of debt can be difficult. To help you understand how to get out of that cycle are 12 Steps Out of Debt which you can find on the ThinkCash site. The ideas in this 12 step list are similar to ideas other financial advisors like Suze Orman discuss in their shows and books. Following these 12 steps can help you get out of debt quicker than you think and show you how you can save thousands a year by making small changes in your lifestyle.

Unlike a credit card which allows you to carry a balance for eternity, ThinkCash is for temporarily borrowing a small amount of money, knowing you can either pay it in full by the next payday or that you can pay a set amount you are comfortable with that isn’t going to break your bank and be paid off in a reasonable amount of time. A $1000 loan at $1 a day in interest will cost you $150 in interest and be paid off in 5 months at $200 a month ($100 bi-weekly payments). So if you need to pay for a bill you know is coming and you just don’t have enough in your account, consider a loan from ThinkCash.com

The SEC released a comprehensive list of securities that are banned from being sold short. Presumably this will help the affected securities like AIG recover.

What this means is for the next 10 days, possibly 30 if they extend it, you cannot short any of the stocks on the list. Most are financial institutions and insurance companies related to finance.

The whole list is here.

Today, the DOW has recovered nearly 500 points and the tech heavy NASDAQ  is up 81 points. Should we be celebrating in the streets? Is the financial crisis over now because short selling stocks has fixed all problems? Sadly, no.

There are still horribly run companies out there that are failing because of poor management and bad decisions regarding housing, finance and investments. Stopping short selling is only a temporary fix. It’s like plugging a tiny hole in a dam that is waiting to burst.

This financial mess on Wall Street has wannabe financial guru’s coming out of the woodwork with all of their crazy theories on why the market has fallen so quickly and so disastrously but putting the blame in the wrong place and I just can’t take it anymore.

First of all, this statement today by Attorney General Andrew Cuomo is patently false:

Cuomo said the markets “need to be stabilized and the only way to help bring about that stability is to root out and deter short-selling that is based on false information.”

Short selling is a core part of the balance that makes the stock market work. Remove short selling and all you have is people buying stocks in companies that probably aren’t worth their weight in paper.

He also said, “the SEC should freeze short-selling of financial sector stocks on a temporary basis”

Are you nuts? Just because a stock is falling you can’t assume it’s because of short selling pressure, and even if it is, so what? Shorts attempt to push a stock price down, buyers then come in and move the stock up, and shorts cover, pushing the stock up further in what is called a “short squeeze” where the demand overwhelms the supply of available stock. This is a natural part of the market and the way it is intended to work. The flip side of this is that pressure is put on a stock by short selling which can cause longs to panic and sell, pushing the price down further. This isn’t manipulation and isn’t illegal.

What IS illegal however is something known as “Naked Short Selling“.

In a normal short sale, an investor has to reserve shares to borrow from their broker stating they want to sell it at a certain price. The broker acquires the borrowed shares and sells them at the given price. If the stock drops, the short seller then covers to buy at the lower price, netting the profit and the broker then returns the borrowed shares.

In a naked short, the “borrowed” shares don’t exist to begin with but the broker agrees to the short and the transaction occurs just the same as the normal short sale. What then happens is a mess that can create a financial catastrophe. Since the broker didn’t have the shares to short in the first place. Investopedia defines this, “When failure to deliver occurs, either the party with the long position does not have enough money to pay for the transaction, or the party in the short position does not own the underlying assets that are to be delivered. “

What this means is if neither party owns the stock, a naked short sell creates “phantom shares” in the system that belong to no one. Remember all these transactions are electronic these days. These phantom shares then are seen as excess which dilutes the price of the stock and can cause the system to collapse.

Naked shorts have and always will be illegal. The problem is that it’s very hard to track down. It is possible that the recent collapse of AIG, Bear Stearns, Merrill Lynch and others is a result of naked short selling but it’s more likely a result of bad management making bad decisions in spite of their own rules to protect themselves from the inherint risk associated to loaning money to individuals that don’t have the means to pay it back when interest rates change.

Does anyone really think all the interest only, ARM (Adjustable Rate Mortgages) and CDOs (Collateralized Debt Obligations) floating around out there were good for the market? Temporarily yes, these institutions were making money on bad debts but that isn’t sustainable. Billions of dollars in writedowns later we have a financial crisis not seen since the 1930s.

Stop blaming this on short selling and start blaming the management of these poorly run companies.

Unfortunately a lowering tide beaches all ships. This downturn has been broad reaching to the point that we are now seeing some major consolidation. This is becoming reminiscent of the measures FDR took to get the country back on track.

For more information about naked short selling and the danger poses to the markets, check out this presentation. It’s long but well worth the time to understand how this can devistate a market, but also how legal short selling is an integral part of a healthy stock market.

Sure, some of the financial giants are suffering bankruptcy claims or buyouts for pennies on the dollar but it’s not all bad news on the street. Gold related stocks are up as investors move from risky securities to “safer” commodities like gold. Both Yamana Gold(AUY) and GoldCorp(GG) are up as is Pan American Silver (PAAS), Harmony Gold Mining (HMY), Silver Wheaton Corp (SLW), Barrick Gold Corp (ABX) and Newmont Mining to name a few. These stocks will likely continue to go up as the credit crisis on Wall Street continues.

It’s normal for investors to seek safer harbors when they see news like we are seeing this week. We could be looking at the collapse of some of the biggest brokerage houses in the world, but I doubt it. Companies like Goldman-Sachs and Morgan Stanley have no desire to close up shop and have the cash to be buying back their own stock at aggressive discounts which is what they have been doing all morning.

Goldman-Sachs (GS) at $100 a share is way too cheap and it’s rebounded since then to $111. Morgan Stanley (MS) seems to be holding steady in the $20s.

Wells Fargo (WFC) is just off the open for today, but holding steady compared to the rest of the industry.

Gold companies might be a safe haven temporarily, but in the long run we just have to watch the market and see what happens. Gold reached over $1000.00 an ounce in March of this year and is now around $840 an ounce so it’s really only a temporary solution at this point.

I own shares of Wells Fargo (WFC) but hold no other positions mentioned.

After a brief respite Tuesday as the broader market recovered a bit, Wednesday’s trading is seeing more selling pressure hitting most sectors. Sandisk is up after turning down a buyout offer by Samsung, but the Dow Jones average is down another 350 points as the bears roll over Wall Street.

What we are seeing here is still fear over the government’s $85 billion bailout of AIG. Even solid financials like Wells Fargo (WFC) are seeing declines today. Most sectors are down 4-5%.

I believe this is temporary as profit takers exit their positions and short sellers find opportunities to push down stocks further. Looking at tech, there are still cheap stocks out there that I believe are oversold. Investors have to realize that companies like Google and Apple aren’t going out of business and with the holiday season coming up, the Android phone being released, Google’s potential acquisition of Valve and the rumors that a new version of the MacBook are coming out there’s no reason to panic and make a run on these stocks.

Apple and Google are on sale here and I’d like to solidify my position in Apple. I don’t hold any shares of Google but I do own shares of Wells Fargo.

Wall Street saw the biggest decline yesterday since the Great Depression in 1929. Financial giants AIG, Merrill Lynch and Lehman Brothers all tanked. AIG(AIG) which was trading in the $20 range Thursday of last week is now at $2 and change. Merrill Lynch(MER) is being bought by Bank of America (BAC) for $80 billion in stock. Lehman Brothers (LEH) filed for chapter 11 bankruptcy protection.

Although all this news sounds bad, and it is for these companies, it is important to remember that if you have money in these banks, you aren’t going to lose it. Accounts up to $100k are insured by the FDIC and you will get your money if the bank closes its doors. The worst thing anyone can do in this situation is panic. Panic only worsens an already bad situation.

You might be thinking “woulda shoulda coulda” at this point in regards to shorting these institutions but there’s no way you really could have forseen these drastic changes. Instead, try to focus on other sectors that do well in economic downturns. You also have to look at those financials that are doing well and that haven’t been exposed to the same factors that have affected these other banks. Wells Fargo (WFC) is still a solid performer and I recommend them here, especially on any drop.

Ironically, the entertainment industry thrives during times of economic crisis because people want to escape their real lives for a bit.

Some stocks to consider:

• NFLX - Netflix still has a good business model and their online offerings continue to grow. With their set-top box you can deliver dvd quality movies right to your TV. There’s resistance at $30 so this is a good place to set up a core position, buy on a dip below $28 with a price target around $37 based on projected earnings.
• MVL - Marvel Inc, looks strong here. Their new franchises are proving successful and you should buy this on any dip. The recent breakout from $35 resistance means it’s heading higher and I see a $46 target over the next 6 months if their earnings keep up.
• DIS - Disney continues to perform well in its sector. It has a decent dividend but slower growth than I like. With Pixar under Disney control now, they have a solid production company making excellent animated films and can focus on other aspects of their business.

I am sure there are other stocks out there that meet similar criteria, these are just a few on my radar. In downturns like this I don’t like to hastily jump on a stock. Doing as much research as you can will help mitigate your risk and create a better profit margin potential. The other option of course is to sit on the sidelines and wait for the right opportunities, but don’t try to spot bottoms, it’s nearly impossible and past performance isn’t any indicator of future performance. Earnings are a better way to look at things and give you a clearer picture of how a company is doing.

I own shares of WFC, AAPL.

I’m back from a week long trip to New York, and it was amazing. When I travel, I really like to experience things the way people who live there do. For the trip, we rented an apartment in Brooklyn which was nice and roomy for the 7 of us staying there and I think cheaper than 3 hotel rooms for 6 days.

We had a great time exploring the area in Brooklyn where we stayed which was right off the C line at Lafeyette and Fulton. There’s some really good restaurants there including the one we went to for the Rehearsal dinner (we were there for a wedding) called simply No 7. The restaurant is owned and operated by a friend of My brother-in-law and the food was amazing. As it’s a new restaurant, I’m sure they can use the publicity. No. 7 is located at the intersection of Green and Fulton in Brooklyn NY right at the subway exit for the C line at Lafayette. Read the rest of this entry »