News

Is Snap a Good Investment?

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snapchat ipo snap inc

Today was the IPO for Snap, Inc., the company that makes Snapchat. As one of those people who doesn’t “get” Snapchat I won’t be analyzing the product or what makes it special. Instead, I’m going to take a quick look at the reality of the financials and let you figure those other parts out for yourself. Snap IPO All IPOs are fairly ridiculous when it comes to pricing, subscribing, and issuing shares. They get doubly so when the company going public is famous enough to attract the type of people who don’t usually buy IPO shares, and in fact, those that actually have no idea how it is done. In these cases, one often sees a huge “pop” in the stock price. Keep in mind that as an individual investor without an established relationship with one of the companies underwriting the IPO you cannot get the IPO price at all. Instead, you could theoretically get the “open” price. So, here is how it works. Established customers got the opportunity to buy into SNAP for the IPO price of $17 per share. Regular investors got their first chance to buy at the open price of $23.71. The stock is now (around …

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Apple Stock High Again

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February 14, 2017 Apple stock price hit an all new high. Yea! Cue the people who know me rushing to ask me if I should invest in Apple stock. I’ve written about this before, of course. I also wrote about that Apple earnings miss that made everyone freak out a while back. I took a look and saw that I wrote an Amazon stock vs Apple stock article. I’ll have to re-read that when I get a chance and see if I was right 🙂 As was the case when I wrote those finance articles about Apple, the reality is that there isn’t much different about Apple stock today, that wasn’t also true yesterday, and a month ago. So, just because there is a BIG NEWS story today shouldn’t change your investing strategy. Keep in mind, that this all new high isn’t the result of FINALLY breaking through a long losing streak. The last all-time high for Apple stock was back in 2015. It’s been a few years, but it’s not like this is a long suffering stock, or anything. Is Apple a Buy Here? For years, betting against Apple has been a sucker’s bet. The company seemingly could do …

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Dow 20,000

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This post will not be long, and there won’t be much analysis. Why? Because, the Dow hitting 20,000, or Dow 20K, as some like to say, is not that important. The reality is that Dow 19,823 is not really any different than Dow 20,107. Round numbers are not magic. So, what’s the big deal? Why Does Dow 20K Matter? I’ve noticed an increasing number of financial publications describing the Dow Jones Industrial Average hitting 20,000 as a “psychologically important” milestone. In other words, it matters for really cool newspaper headlines and not much else. Remember, the Dow is just 30 stocks. Those 30 stocks are all large, U.S. companies, and they change them from time to time for numerous reasons, including when that stock just isn’t very good anymore. In other words, it isn’t really representative of much of anything. But, like a fake credit score from Credit Karma or the like, it is a useful way of getting a general idea of whether stocks are going up or down, and to a lesser extent, by how much. This is why the news often states, “The Dow was up 50 points today…” It’s a quick, no effort, way to say …

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Retail Stocks and 2017

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retail stocks 2017

Wheee! Well, looks like 2017 is going to be a lot of fun, and by fun, I mean volatile and sketchy all the way through. First up, are announcements by retail stocks such as Macy’s and Sears, both of whom announced that they would be cutting staff and closing stores. Kohls also announced sluggish holiday sales. That means that the 2016 holiday shopping season was not strong enough for a lot of traditional retailers. Look for earnings on the low side, that disappoint Wall Street for most retail stocks. This is a big deal, because this was supposed to be the “up” year for the economy. The stock market is up, closing in on 20,000. Job reports show that unemployment is as low as it’s been since before the Great Recession. The Fed even finally got to raise interest rates in December. If this holiday season wasn’t good, then things maybe aren’t going as well as everyone might have hoped. Of course, it is possible that there was still plenty of consumer spending and it just went different places like online retailers, or specialty stores, but so far, no one is pushing that theory. Trump, The Fed, Inflation and a …

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Fed Raises Interest Rates

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fed raises interest rates

As I’ve long pointed out on this blog, the Fed has been dying to raise interest rates in 2016, but each time a meeting came up that they were planning to announce an increase, something happened in the world that made the markets shaky, and rate hike even dicier. As a result, this December 2016 interest rate hike is the one and only rate hike for the year. The current interest rate increase takes the Fed’s main short-term interest rate to 0.50% (officially 0.5% to 0.75%) from 0.25 percent. The Fed and 2017 Ironically, inflation has been very contained for all of 2016 without any interest rate hikes. In face, inflation during 2016, even without a single interest rate increase, has been so low that the formula for Social Security benefits means that there well be no cost of living increase. That makes you wonder why the Fed has been so eager to raise rates, if the whole point of an interest rate increase is to hold back inflation, when there was no inflation at all. There still isn’t any inflation, but the Fed wants to raise rates for other reasons. One that keeps getting floated around is the idea that …

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OPEC Deal and the U.S. Stock Market

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For the past few years, the strategy of OPEC has been to do nothing while Saudi Arabia pumps oil as fast as it can into the market. The idea was to cripple, or drive out of business, various U.S. oil businesses that depend on more expensive extraction methods such as fracking. With prices low, many of those businesses did indeed go into hibernation and most new drilling was curtailed. However, that still leaves tons of capacity sitting idle, waiting for higher prices before flipping the switch back on. OPEC Deal It has become apparent that overproduction will not drive out U.S. oil businesses. It seems a strong U.S. economy, plus a more disciplined approach to lending and spending has left most American producers able to hold out for higher prices for longer than the cartel may have hoped. As a result, the cheap oil is actually causing more trouble for oil producing countries like Saudi Arabia that depend on oil production to fund their government. So, for the first time in over 7 years, the 14 OPEC countries have reached a deal to reduce production. The new deal calls for a reduction of 1.2 million barrels of oil per day, with …

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All The Basics

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Coming this week on the Finance Gourmet, all of the basics in one week of posts. That’s right, all the things you need for a successful basic financial plan, retirement plan, and college savings plan all in one place in a series of easy to read posts. Consider this the intro to personal finance that you always wanted to read, but never really found. We’ll continue next week with some interesting reviews of financial apps, like our Acorns review, and Digit review, as well as reviews of various online financial services such as Credit Karma and Credit Sesame. I’ll probably bail on Thanksgiving, but I’m willing to bet that most of you won’t be looking to brush up on your personal finance knowledge on that day either. So, no harm, no foul. Going into the new year, we’ll get back to what started it all here on Finance Gourmet, a series of financial recipes. These are recipe style financial solutions and personal finance plans that you can implement without an in-depth understanding. Instead, just gather the necessary “ingredients” and then follow the recipe. We’ll cover everything from a 401k plan to more complicated topics. We are also going to start …

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Fed Predictions

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interest rates federal reserve

Predicting the Federal Reserve and the actions it takes for monetary policy is tricky. In no small part, the difficulty lies with the fact that you are actually making a dual prediction. First, you are predicting what economic news, data, and figures the Fed will receive, and THEN you are predicting how the Fed will respond to them. Getting the second part right, is probably easier than the first part because you are dealing with established pasterns of rational beings, rather than the unknowable events of a future world economy. It seems in a speech Wednesday, Fed member Charles Evans said that he thinks there will be three one-quarter percentage rate hikes. That would essentially end up with the Federal Reserve’s Open Market Target Interest Rate by the end of 2017. Curious about Mr. Evans’ track record, I did a search for his remarks in the last quarter of 2015 to see how well he did at predicting what 2016 would look like. As it turns out, Mr. Evans is pretty good at his job (based on one year anyway) having predicted the U.S. economy would grow at about 2.5 percent during 2016, and with the Federal Funds Rate ending below …

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FCC Fake Fines T-Moble $48 Million

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tmobile fine

When is $48 million not $48 million? When it is a FCC fine. T-Mobile was fined $48 million today by the FCC for misleading customers about its unlimited data plans. As it turns out, T-Mobile’s unlimited data plan was actually a 17 GB per month plan. After that the company “de-prioritized” the customer’s traffic making it so slow as to be pretty much unusable. Most unlimited plans work this way, of course, because unlimited isn’t really feasible. The reality is that there is only so much data a “normal” user would use in the course of a month, and racking up 17 GB would require some pretty heavy effort. This is a problem of the cell phone carriers own making. They market against each other in such a way that customers now believe that they must have unlimited data even though many of them don’t use anywhere near that much. So now, carriers work overtime to shout UNLIMITED whenever possible, and then hide actual limits in the fine print. In this case, T-Mobile even tried to not be honest in the fine print, and that’s when the FCC struck with its huge fine, except… It’s Not Really $48 Million The …

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ITT Tech Shuts Down

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ITT Technical Institutes is one of those colleges that you seem to see more on TV commercials than anywhere else. It announced that it is shutting down immediately, blaming the government. Unfortunately, the reality is that this was a long time coming. For years, many of the so-called, “for profit” colleges have been accused to providing their students little more than a big balance of student loans and degrees that weren’t worth the paper they were printed on. Somewhere along the line, enough powerful politicians switched from protecting these colleges to protecting their students, and the die was cast. As soon as ITT’s accrediting agency raised questions, the Feds acted. How ITT Shut Down Despite what you may read, the government did not shut down ITT. That would be an overstep over government power. Instead, it did the one thing it is allowed to do. It removed the eligibility of students to use federally backed student loans, which, are most student loans, at ITT schools. Lower income students make up a lot of the student body at schools like ITT Technical Institute. Without loans they wouldn’t be able to pay tuition, and without federal backing, they aren’t going to qualify …

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