How fickle financial market pundits are. Just a few weeks ago many experts were saying that the worst of the credit crisis was behind us and that company valuations were looking extremely attractive. In fact, a number of these so called experts were saying that people should even get back into financials and other distressed sectors. Just browse Marketwatch.com, WSJ.com, CNBC.com or any other media source for articles from earlier this month and you’ll see what I mean. Anyway after last week falls, it is all doom and gloom again with some pundits saying that we are heading into another great depression with stock markets poised for a crash into bear market territory. So where does this leave all of us non-professional investors? Listening to what we hear and read we should buy when markets are high/rising (optimism rules) and sell when they are falling/low (pessimism is the flavor of the day). This is precisely the best way to lose money – sell low, buy high!

Apart from watching our portfolio’s drop in value faster than the price of oil is rising, a sense of apprehension, confusion and gloominess is how I would characterize my outlook currently. I reviewed my investments over the weekend and still believe the companies I hold (portfolio details to be published later this week) are good for the medium to longer term. However, there are three broad options I and other every day investors have going forward:

1. Panic, buy into the market depression and sell everything we have in equities. Take what cash we get out of this and put into a money market or high interest savings account. Then sit back and watch our cash grow at a slower rate than inflation. At least this way we will see some positive growth in our net worth, rather than the current red all over the stocks in our portfolio. Much less stress, but we will be working for the rest of our lives with this approach.
2. Buy more equities over the coming months if you believe that stocks are bargain buys at current prices and are an eternal optimist. If all goes to plan and markets stay true to past cycles you could be a very rich person at the end of the next decade. Of course if things get worse or we are in fact in a once in a 100 years depression, then you are going to loose a lot of capital and eventually the shirt off your back.
3. Proceed with Caution. Hold on to your current portfolio. Keep cash for now and look for good buying opportunities in strong, yet beaten up, companies. Don’t feel compelled to buy or sell during market rallies and there is no need to rush in or out of stocks. Time is your friend and patience is the key.

Guess which option I prefer! I am sure that the market experts via the various media sources will see-saw with their opinions as markets stay volatile. After all they are paid a lot of money to have opinions and current conditions are great for selling media, whether it be online or offline. From an investing perspective , I say keep alert but don’t panic. If you still believe in your investments and the underlying companies futures then ride out the current volatility. If you are losing sleep at night and getting into real financial distress with your investments then considering taking some or all your investments of the table. Some cash in hand may be better than none at all.

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The number of millionaires (high net worth individuals) in the world hit 10.1 million last year according to the 2008 World Wealth Report. A high net worth individual (HNWI) is someone with net assets of at least $1 million, not including their primary residence. It would be great to join this list someday, though with the way my investment portfolio has been hammered from falling equity markets, I still have a long way to go. Here are some interesting statistics from the report showing the trends and distributions of these high net worth individuals

The number of high-net-worth individuals grew by 6% to 10.1 million worldwide. This is also a slower pace than the 8.3% increase seen in 2006, due to weakening global economic conditions. The combined wealth of these individuals is now estimated at over $40 trillion, with the average HNWI wealth surpassing US$4 million for the first time

The number of ultra-high-net-worth individuals (people with net assets of at least $30 million, not including their primary residence) grew by 8.8% to more than 103,000. This group also saw a 14.7% jump in their combined wealth to $15 trillion.

North America remains home to the highest number of wealthy people, with 3.3 million high-net-worth individuals, but the wealthy populations in some emerging markets continue to grow at impressive rates.
[I wonder how long America will stay on top of the list, my guess is that by 2025, the US will be surpassed by China or India]

In 2007, India, China and Brazil saw the biggest increases in the number of wealthy people. India was the leader with an impressive 22.7% increase in the number of high-net-worth-individuals. China also saw a 20.3% jump in its population of high-net-worth individuals, while Brazil¹s population of millionaires increased by 19.1%.

The projection is 7.7% for the annual growth in the number of high-net-worth individuals globally until 2012.

Given the data is based on 2007 figures, I imagine that the next report (for 2008 data) will show a much slower growth rate or even decline in the number of HNWI; due to the weak economic conditions experienced around the globe. In fact equity markets around the world are at 2006 levels which means a significant erosion of wealth for all, even in US dollar terms. The report authors acknowledged that any recovery was dependent on global markets regaining its footing quickly. "There's a risk if we see continued weakness in global economies and dysfunction in global markets for an extended period,".

However, with the average wealth of $4m for these HNWI, I don't feel to sorry for them if they lose a million here and there. It is the people who earn less than $100,000 that will be hit the most in any downturn or recession. As wealth is redistributed from western (developed) economies to emerging economies around the world, the rich will get richer. It's just that they are living in different places.

The full report from Merrill Lynch Capgemin can be downloaded here.[2.5 MB file]

Picture courtesy Tracy Olson
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A few months ago ComScore, a company measuring Internet usage and traffic, came out saying that Google was losing on-line market share to rivals. Given ComScore is a reputable source for Internet traffic data, their findings resulted in a significant fall for Google Stock. Google executives came out crying foul that the way ComScore calculated usage is flawed and that their numbers are not accurate.

Well, today Google (GOOG) has come out and confirmed a new Ad Planner service (based on its Trends for Website service) that would compete directly with ComScore's service measuring Internet usage. Google's service would measure Internet traffic using data taken directly from Web servers, as opposed to ComScore's service which measures Internet traffic based on information gathered from pools of Internet users. By going directly to the source, Google's service would arguably be much more accurate. The street agreed and ComScore stock lost almost a quarter of its value after the news as their main source of revenue (they charge a subscription fee for their Internet usage data) could be lost to Google's potentially free service.

Given how closely Google guards its search and advertising algorithms, a lot of people will also raise questions around the usage/traffic data - especially if it shows their market reach growing and allows them to charge higher ad rates. Roger Baron, director of media research at the advertising agency Draftfcb, said he was concerned about where Google's demographic data was coming from but was attracted by the price. "That's the bold thing, that it's free," Mr. Baron said. "I think a lot of people will be taking a look at it."

Even though I am a Google share holder and use their Adsense service on this blog, I do believe in open competition and transparency of information. Google's new service is clearly aimed at bolstering its ad-sales business, in which it is already the largest and most dominant player. It is also a potential conflict of interest for advertisers who are using data from Google to make advertising decisions through Google's own advertising channels. "For an advertiser, the last thing you want to do is to have your adviser be the same person you are spending your money with," says Sarah Fay, chief executive of Aegis North America, an advertising company.

While I agree that Google's algorithmic server based approach to measuring usage statistics is going to be more accurate, I think it shows another example of Google's changing corporate attitude and how it can crush potential competitors (aka Microsoft in the 80's and 90s') that threaten or question it's on-line dominance. They have so much money that the can offer this service for free making it hard to resist for advertisers.

So for future competitors to Google, beware their wrath. Revenge is a dish best served cold and ComScore future is the main course.

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I recently returned from a trip via Europe and flew United Airlines on both legs to and from there. I can honestly say that it was one of my worst experiences flying an American carrier. Over the last year I have flown on a number of American and non-American airlines and it is unfortunate to say that I have found American based airlines to be the worst relative to their international peers. What's more is that they seeming to be getting worse - both in terms of service and price.

I booked my trip quite late so the cheapest and most convenient option for where I wanted to go was with United. I had flown United to Australia (a 24 hr flight!) a few months ago and had vowed never to fly them again - even though I had premier frequent flyer status. However with no alternative choices in the price range I was looking for, I went with United convincing myself that the transatlantic sector has more competition and so United should be a "better" in this sector. How wrong I was. Here are some examples of my poor experience just on the latest flight I took:

1. The staff, both before you board and on the plane, seem disinterested when it comes to customer service. I know the last few years have seen a lot of layoffs and even wage cuts, but it clearly looks like the staff are unhappy in their jobs and this was clearly reflected in their service and attitude. I even heard this first hand from some crew members who openly discussed the poor work conditions they have.

2. On board their audio-visual equipment is terrible and far behind their competitors. They have small TV screens and provide headphones used in the 80's. In fact I had to use my iPod headphone to get decent sound quality. I recommend you bring your own entertainment if you fly the friendly skies with them.

3. Food is mediocre and in both flights they ran out of food options, so if you were at the back of the plane you had no food choices. On my return sector, they even ran out of plastic cups, so everyone had to reuse theirs. Great for the environment but it is annoying to have coke, orange juice and water in the same glass over a 9 hour flight.

4. The bathrooms were in terrible condition and even though passengers complained, nothing was done.

5. The seats are tiny and legroom is designed for a person around five and a half feet tall. I know they have old planes, but they pack 'em in like sardines in a can.

I know that the American aviation industry is going through some very tough times, primarily due to high oil, but they really are falling way behind the global competition. United and other American airlines can still compete on price with other global airlines, but with recent baggage fees and other fare increases they are losing on that front as well. It is sad to say, but the American aviation industry is going the way our automobile industry is, in that consumers will choose the non-American option when ever possible to get a lower price and better flying experience. The next time I fly, I rather pay a few extra dollars, and avoid United whenever I can.

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As a consumer I am constantly feeling the pain of rising oil prices whenever I fill gas in my car. As an investor though, I regret missing out on the run up in companies that benefited from higher oil prices. It seems that apart from energy related stocks all other equities are generally heading south. Despite ongoing volatility, oil prices don't look like they are going down anytime soon. As I currently have no investments in oil sector or related companies and don't want to miss out on further potential gains, I had decided to do some research around good oil related investing options.

After researching and reading about various oil and related services companies I was still not sure which stocks should I invest in. A number of companies look good, but are they too over priced or risky? So rather than pick a specific "hot" company like some of my recent forays, I decided to take a less risky and more diversified approach by investing in an Exchange Traded Fund (ETF) that I recently read about. It could also provide a good way to use put options on the ETF in the expectation that oil prices will fall - though I don't recommend this unless you are comfortable with options.The ETF I am talking about is the Global Energy iShare (IXC).

Bullish analysts and oil veterans say that oil only has one way to go and that is up - "We are now deep into a monster, generational bull market for energy. This is making recent manias -- like the dot coms and real estate -- look like very small beer. The fundamentals are strong. And ordinary people simply must be on board" said a recent WSJ article which was painting a very bullish case for IXC. The author goes on to say "Just buy a small stake in this diversified energy fund, and then keep adding to your position steadily and in small amounts. You won't buy at the bottom -- but you'll avoid buying at the top. This boom, like all others, will see plenty of bumps along the road. But the direction we're taking is pretty obvious"

I will look to take a small position in the IXC ETF in the coming days. However, I also believe that oil is headed for a minor correction so am not rushing in to buy and can afford to wait for a good entry point.

I do believe that in the long term oil and subsequently gas prices will almost certainly rise. The supply and demand fundamentals are too strong and people cannot change their driving habits overnight. Even at $5 gas, people will still drive almost as much as they do now. Oil demand is inelastic and you don't want to miss out on this trend. Rather than place all your bets on one or two stocks, diversify your risk and choose this or another similar ETF.

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The cost of daycare for preschool age children can be one of the most significant expenses parents face. According to information collected in 2005 by the National Association of Child Care Resource and Referral Agencies, a family with a 4 year old child could pay average prices of between $3,016 and $9,628 a year for center-based child care. I pay close to $15,000 a year as I live in a metro area and my child's daycare is near where I work. While childcare expenses may be unavoidable in two-income households, it can represent a significant increase in discretionary income once the child begins elementary school. Public elementary schools are normally government funded (thanks to your tax dollars) and so you lower or no tuition fees. You will ancillary costs like clothing, books, food etc, but even then this is much cheaper than daycare.

This is situation I will soon be facing and so did some research into this topic. Apart from blowing these funds on unnecessary discretionary expenses, here are some ways to use the freed up money wisely and more effectively:

• Pay off or dramatically increase the payments on any outstanding credit card or other high interest rate debt
  
• Consider beginning an investment program using the money previously spent on childcare once your child begins elementary school. There are a number of investment opportunities available that also offer tax advantages while you accumulate funds to help pay future education expenses. 529 programs are a good start
  
• Put it in your 401K or retirement account. If you qualify you can start a Roth IRA
  
• Create or increase your emergency fund using the additional dollars. Especially with kids, you never know what emergencies could arise and in the event of a job loss, having a larger emergency fund will allay some stress.
  
• Increase your life insurance. As kids get older, so do you. So to ensure your family does not suffer financially in the event of a tragedy, make sure you have sufficient life insurance
  
• Invest in the stock market directly via mutual or exchange traded funds. A number of people put off investing in the markets because they don't have sufficient funds to do so with all the other expenses they have to deal with. This should no longer be an excuse. You only need $2,000 to start investing so now is a good time as any to start.
  

You were able to manage without these extra funds while your kid was in daycare, so there is no reason why you should miss these funds now. Use them wisely rather than fritter them away.

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In tight economic times like we have now, many people turn to their credit cards when they need money. But racking up extra debt to deal with financial difficulties is a strategy that's almost sure to backfire. Even when you have less money in your wallet, you should remember that the most important thing is paying off debt should still be your top priority. The following are the three important rules about effectively managing debt: 1. Always pay more than the minimum amount due. If you pay just the minimum, you'll only be paying off the interest, and it'll take you years to pay off your total debt. Even if all you can afford is $20 more than the minimum, you'll be better off than just paying the least amount possible. 2. Pay down your highest interest card first. Figure out which of your cards is charging the highest interest rate and put more money toward that one. Some experts suggest paying off the card with the lowest balance first, but this will end up costing you more money in the long run. 3. Avoid running up unnecessary new charges. This goes without saying during tough financial times. Here are some simple ways to do that: Remember that a home-equity line of credit is still debt -- it just uses your home as collateral. Many people have been taking cash out of their homes to save up for an emergency, but they don't realize that they are actually losing money by doing so. Once you take out a line of credit, you'll be paying at least 5 percent interest, which is far more than you'll be able to earn if you keep the money in a savings account. It just doesn't pay to use home equity to build a "financial cushion." You're far better off restructuring your expenses and saving the cash instead. Cut back on expenses before using credit. Most people can find some place in their spending for cuts. Go this route before you turn to credit cards or a home-equity line of credit to cover regular expenses. Put a freeze on credit. Sit down with family members and agree to not use your credit cards at all for a certain amount of time. This will help you tackle your current debt without loading on new debt. You may find it helpful to remove your credit cards from your wallet or to put a reminder note on your card so you're not tempted to use it. Get help. Again, if your financial situation is so tight that credit seems like the only place to turn, consider getting help from an expert. A financial counselor can help you create and stick with a budget and pay down your debt instead of racking up more. It may not be easy to avoid debt during tough financial times. It might take discipline and sacrifice. But when money is tight, you'll feel better knowing that you're taking steps to secure your financial future, not putting it at risk.

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Financial markets are disintegrating around the world. Professionals and regular investors are seeing red all over the screens and portfolio values are dropping faster than during the dot.com bubble burst or after the September 11 terrorist attacks. Central banks (which includes the federal and reserve banks) around the world, along with governments, are trying to stem the tide - but to no avail. In fact their actions are making investors more nervous and thereby making things worse. Big interest cuts will provide a temporary relief, but the downward momentum will continue.

So what is the cause of this downward momentum? Fear. Plain and simple. Until investor fears are appeased, nothing will stop the deterioration in financial markets. "It doesn't address the fundamental problems, which is that financial markets are just scared," said David Wyss, Standard & Poor's chief economist. "The Fed is trying, but they don't have a magic wand to wave and make everyone confident again."

Some argue that the US Federal reserve is feeding current market fears with emergency moves like bailing out Bear Stearns and the decision to make loans directly to Wall Street firms instead of just banks. "Anytime you act on a Sunday night during '60 Minutes,' (like the Fed did) if you don't think that will engender fear, I don't know what does," said an analyst. "The market is going to stay worried, regardless of what the Fed and other central bank actions. Currently the market is betting It's heads you lose, tails you lose."

But Lyle Gramley, a Fed governor from 1980 to 1985 and now a senior economic advisor for the Stanford Washington Research Group, said that such a failure would have far broader implications for the economy and the financial markets and the Fed has to do what it can to avoid that. "If the Fed had sat aside and let Bear go down the tubes, the cascading effects would have been ghastly," he said. Still, Gramley concedes the Fed has only a limited ability to deal with market fears. And he said that makes this economic crisis the most difficult challenge for the central bank since the Great Depression. "In all past recessions, I was always quite sure that if the Fed stomped hard on the gas pedal, the economy would turn around and start to grow," he said. "But they've now stomped hard on the gas, and credit is not more available, it's less available."

Gramley and some other experts believe the solution to the current credit crisis will have to come from Congress, not the Fed, and that the federal government will have to take steps to bail out both Wall Street firms holding mortgage-backed securities as well as homeowners who have mortgages with balances greater than the value of their homes. Evidence of this can be seen with the recent announcements by the housing department to provide assistance to owners facing foreclosure (Hope for Homeowners program)

But many others think the Fed has no choice but to keep slashing rates. "It helps, even if it doesn't solve the problem," said Wyss. "You need to keep the cost of borrowing down. It's not the optimal solution, but it's better than nothing." And no matter what the Fed does, market fears probably won't go away any time soon. After all, some investors will probably take more Fed cuts as a sign that the central bank sees more trouble ahead.

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You get into work tomorrow and you are told that your position has been made redundant. Are you prepared for this scenario and its likely impacts on your financial security?

In these weak economic times with lower company profits and unemployment rising, you need to be prepared for adverse circumstances such as losing your job. Whether you are in a dual income or single income household, you need to have contingency plans in place if one or more of your main sources of income goes away. Here are four key items to plan ahead for.

1. Get your financial house in order

Emergency Fund - have at least three to four months of living costs close at hand to whether the drop in your household income. If you don't have that kind of cash available keep other accessible sources like your home-equity line of credit untapped. It's a lifeline if you ever need it, and it costs nothing if you already have a mortgage. Pay-off any credit-card debt - normally the most expensive - if possible ahead of time while you have an income.

Here's one tip that a number of others will think is crazy - get more credit cards while you have a job - but don't use them! It is always much easier to get approved for credit cards when you have a job and income. The credit cards would then provide a last resort source of funds. Again I repeat, they are to be your last option, but they could give you some valuable breathing space in case of financial emergencies before you get the next job.

Start keeping a budget so you know what you are spending money on, and where you can realistically afford to cut back. To state the obvious, now is not the time to make non-essential big-ticket purchases or taking that overseas family holiday. If you are facing the real prospect of a pink slip (layoff), then you should start analyzing your budget to see what life would be like if you lose your income source. Will you be able to manage with the funds you have, and what mandatory or discretionary expenses you need adjust or eliminate to live on a lower income.

2. Update your Resume & Networks - Make sure you keep your resume and networks up-to date. In times like these, using your networks to find new jobs is key. 70% of jobs are not advertised so knowing the right contacts in the industry you are in or want to move to is critical. If you have not been keeping up with your networks, start now. Don't wait until you lose your job to start networking. You can also used social media sites like Linkedin for maintaining and extending your professional networks.This should be an ongoing activity and if you know you are going to potentially lose your job then start the search for a new job well in advance. Not only will you be in a stronger negotiating position, you will give yourself some time to evaluate options. Remember the benefit of networking is based on the old adage - "It is not what you know, it is who you know".

Some people have also used losing a job as an opportunity to start their own business or to change career tracks. This is may be great for some people, but remember to have your financial house (item 1) in order before you do this.

3. Family Plan & Support - Be prepared ahead of time. If you are in a job, discuss or think about how you would manage without one. If you have a family, make sure everyone is involved in these discussions because if the worst happens, then everyone will be impacted directly or indirectly. Family can be your best form of support and talking about these issues ahead of time will reduce the stress on relationships when/if times get tough.

4. Know your rights - If you are expecting a lay off or retrenchment, make sure you know what you should be entitled to. Know if and when you will have access to any unemployment benefits. In the US, most people's medical benefits are tied to their jobs, so understand your coverage costs under the COBRA policies (it's in those documents we get when we get hired, but never read). Review your employment contract for relevant termination clauses, notice periods and what payouts (like long service leave and company pensions) you could be entitled to.

Administratively, get direct phone numbers and names of people in your HR, Payroll and benefits department as you may need to contact them after you have left the company and getting to them via your company switchboard/operator can be very difficult.

I currently work in the financial sector and with the turmoil and mass layoffs across a number of companies, I have to be prepared. Even if you are in a relatively safe job, it makes sense to take some of the above steps because there could be other unforeseen circumstances that result in a job loss or big drop in income that you need to be able to manage.

Feel free to comment and suggest any other tips on this topic.

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As a nation our net worth declined by $1.7 trillion in Q1 2008, according to the Federal Reserve's flow of funds report. That’s $1.7 Trillion! A trillion is equal to a thousand billion, or a million millions. To put this in perspective, the market capitalization of America's 3 largest companies (Exxon Mobil, GE and Wal-Mart) is less than this amount. Simply put, its like wiping out these companies in one quarter, or 4 months. This is the biggest drop in wealth since 2002 and is mainly due to declining home prices and a very sluggish stock market, resulting in steep declines across our investment and retirement accounts.

Here are some more statistics from the article that paint a very bleak picture of the economy and the country. If this trend continues the US may become an economic basket case akin to some of our South American neighbors, which we use to once upon look down for their national financial mismanagement.

The amount of equity people have in their homes fell to 46.2%, the lowest level on record. The net worth of U.S. households fell 3% to $56 trillion at the end of March.

The value of real estate assets owned by households and non-profits declined by $305 billion, while financial assets fell by $1.3 trillion, led mainly by a $556 billion drop in stocks and a $400 billion decline in mutual funds.

Household debt grew by 3.5% in the first quarter, down from 6.1% in the fourth quarter. The growth of home mortgage debt, including home equity loans, cooled to an annual rate of 3%, less than half the pace of 2007. Consumer credit, which includes credit cards, rose at an annual rate of 5.75%, the same as the 2007 pace. [Even as people get poorer, they continue to pile on the credit card debt!]

While these statistics are at a macro or national level, I can speak from personal experience and say that my net worth has definitely declined and I do actually “feel” poorer. At least my wife and I have a decent household income and low debt levels; I can only imagine how tough it is for retiree’s, folks with large debts or those out of a job (that rate also recently went up to 5.5% on Friday!).

As people begin to feel poorer, jobs and wage growth decline and subsequently growth in consumer spending slows the specter of a prolonged and deep recession looms large. I had thought the worst was behind us and being an investor I was hoping this was the case. But I may have been wrong and 2008 could end up being a very disappointing financial year for me and millions of others around the country.

The full CNN article, from which the data in this post is drawn, can be found here.

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I have seen a number of articles recently on ways for people to combat rising gas prices. One of the more practical ways coming to the fore is employers subsidizing driving costs to work or to allow employee telecommuting - i.e. working from home. The average U.S. commute is now about 30 miles and with gas at a record $4 per gallon, it's hard for most people not to feel the pain. Unfortunately $4 gas is only the next stop as $5 gas is just around the corner, given the clip at which crude oil futures are going up.

A number of companies are making efforts to help their employees out with the commuting gas burden. According to a survey by Chicago out placement firm Challenger, Gray & Christmas 57% of companies said they've launched at least one program, and usually several, designed to beat the high cost of commuting for their employees. The most often cited, at 23%, are policies allowing - or even encouraging - people to work a compressed workweek of four 10-hour days. In addition, about 20% organize employee car-pools, 18% subsidize the cost of public transportation, and 14% let people telecommute from home at least one day a week.

Why are companies doing this?

Companies are always looking for ways to attract and keep the best staff. So using discounted fuel programs or flexible work hours and locations is a way to keep or lure potential employees. I won't be surprised if this makes it as a criteria in "Best places to work Surveys" as commuting costs affect a vast majority of workers. While only a few companies so far report losing a valued employee because of high commuting costs, more than one-third (34%) say they've had coveted candidates turn down job offers because of long commutes.

Telecommuting, which cuts carbon-fuel use to zero, seems at first glance to be the most attractive option of all, especially when you consider that two independent researchers, Kate Lister and Tom Harnish, analyzed the American workforce and found that 40% of us have jobs that could be done remotely - yet only 4% actually work from home on a regular basis.

Most employers still hesitate to let people work from home and for that Challenger blames the uncertain economy: "Telecommuting is a tough sell when business conditions are as weak as they are now. In a slowdown, managers want all their workers on the front line." That's a pity for the planet: If all the U.S. workers who could telecommute actually began to do so, Lister and Harnish estimate we would conserve 625 million barrels of oil annually, cut greenhouse gas pollution by 107 million tons of CO2, and save almost $43 billion at the pumps.

Another alternative is compressing the five-day work week into four, 10-hour days. Condensed work weeks are the most popular program for employers trying to reduce workers' commuting costs, according to a recent survey by Challenger, Gray & Christmas. Santa Clara, CA based Sun estimates that its more than 18,000 employees who can choose to work at home or the nearest office avoid buying 135 gallons of gas a year, which at $4 a gallon would save $540 each.

How to approach your employer for helping with higher gas:

If you employer hasn't woken up to the fact that higher gas prices are adversely affecting its employees, you should take the initiative and ask for some concessions. Here's how:

1. Get a group of people together who are suffering from commuting costs and document the increasing costs and pressures resulting from this. Approach Human Resources (HR) to discuss this first and if possible use them to escalate this issue to senior management and key decision makers. If HR are unresponsive, find a senior manager or someone influential who can take this request to the company's leadership. They key thing is to be organized, document the facts and state the case. Provide alternative options for consideration, like working from home, flexible hours (to avoid driving in traffic) or a condensed work week. Most important for the company's leadership is to show how these measures will not impacts operations, its customers or the bottom line.

2. If you are looking to have flexible work schedule or even work from home then you will need to justify how you could be just as effective working away from the office. You would also need to show you have a suitable home office and network connectivity. Most companies have telecommuting or work home policies already drawn up. So make sure you look for these first. When proposing a alternative work schedule/location make sure you document and prepared to show you it won't change your productivity.

Of course, if you don't want to drive at all you can always bike to work. The American Automobile Association estimates the annual cost of owning a car and driving it roughly 15,000 miles is about $14,000. It costs about $120 a year to maintain a bike . Best of all riding a bike is a very cost effective way to get in shape as well

Parts of this article were based on a recent CNN.com article

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I recently bought $16,000 worth of Apple stock, which I covered in a post two days ago. The way the post was written, and based on some of the comments I got on it, may have led to the impression that it was a speculative or uninformed buy. It definitely wasn't. Firstly, I would not invest that amount of money without doing some real research, following the stock for a while and be comfortable with the company's outlook. Secondly, I have a medium to long term outlook for the stock and believe it offers the best risk/return in the technology sector, along with Google - another one of my investments. My overreaction in the post was more due to the sudden price drop a few hours after I bought the stock. Luckily two day's later, the stock is above my purchase price.

What was my reason behind buying the stock? Well, apart from researching the stock (fundamentals and technicals), I recently got an Apple iPhone as a birthday gift. I have been using this new generation smart phone for about 2 months and overall am very impressed with it. I have used BlackBerry's and Treo's before as well and this smart phone really stood out. Here is a quick review:

Pro's
- Very user friendly in terms of navigation and usability
- Easy synchronisation of music and MS Outlook mail/calender through itunes
- Quick WiFi connection that is easy to use and automatically picks up nearby wireless networks
- Browser navigation by smart phone standards is quite good and screen rotation and zoom in/out are cool features. Definitely has the best browser for smart phones and competitors are scrambling to catch up
- Camera and email functionality have great integration. You can take a photo and email it in 2 clicks
- Even though keypad maybe a bit small, its intellitext feature of completing words for you is quite good

Con's
- Can't copy lines of text. So have to retype everything
- Battery life is not that great, so need to recharge daily. Some reports say the next iPhone model is going to incorporate solar power
- Limited external applications relative to Window or Palm OS based devices. This will change with the release for their full software development kit
- Current iPhone is restricted to AT&T network, though there are various ways to get around this limitation
- Not yet ready for business usage due to limited exchange server integration and other technical limitations. When it is (next model), it is going to be a real threat for competitors RIMM and Palm

Final verdict: 7/10. A great phone, but needs a few improvements.

So why did the current iPhone make me buy Apple (AAPL) stock? Well, because I believe their next model (2.0), which Apple CEO Steve Job's is announcing/launching at next week's developers conference, is going to be awesome. I believe Apple will fix a number of the common user complaints (some of which are on my cons list), upgrade the Operating System (OS) and add key new functionality which will make it relevant for both the business and broader consumer market. More importantly, Apple is launching this new 3G capable model in international markets (across multiple wireless carriers) which should be a huge boost for sales; based on most analyst projections.

So there you have it, the main catalyst for why I decided to buy this stock. My target price for this stock is $225 by the end of summer and $250 by year end. From my research and first hand use of the first iPhone model, I think this stock is going to rock.

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This is the final in my three part series around the myths of buying a franchise. All this is based on real experience and I hope it helps folks out there who are looking to buy a franchise, or want to know more about the franchising business model. Thanks to the readers of this series for all your feedback and making it a popular search item.

~ Myths 1 to 3 can be found in part one of the series at "Top ten myths about buying a franchise - Part 1"

~ Myths 4 to 6 can be found in part two of the series at "Top ten myths about buying a franchise - Part 2"

Myth #7 – Long-term leases are great, because they protect me from substantial rent increases in the future - In an ideal world this is true. It is much easier to run you business if one of your major fixed costs is relatively static. Most leases have 3% increases build in per year. But, as I said in myth #4, most leases are – at a minimum – five years. And most leases for small players (new franchisees) are required to be personally guaranteed. Therefore, these long leases are more to protect the landlord than the franchisee. When things go bad, the only way to get out of the lease is to sell the store to someone else AND get the landlord to agree to release you from the personal guarantee – something that is not in there best interest. After all, they can take your house (assuming it has equity) if needed to payoff the five years worth of rent payments. So you could lose not just your business, but also your home.

Myth #8 – The franchise I am looking into has only a 4% failure rate – How could a smart guy like myself with a business degree and a reasonable amount of capital fail. After all, there is a 96% chance of success. As with Myth #5, this falls under the “Lies, Damn Lies, and Statistics” category. The reason the failure rate is so low for most franchisors is because they do not count distressed stores, which are sold at a loss. They only count stores that go completely out of business. For instance, my store was sold two times before the final owner went bankrupt. Therefore, although my store was bleeding cash, I was able it sell it for 50 cents on the dollar to a person that though they could turn it around. Likewise, that owner sold the store for 20 cents on the dollar (from my original investment). Therefore, from a failure rate perspective, my store was considered successful for almost four years, when in reality it was a failure from the beginning. So there are many stores that are sold to new owners for free (just take over the lease) and therefore are never reported as a failure.

Myth #9 – Be your own boss, control your destiny – Make no mistake, you are your own boss, you have all the responsibility and are accountable for your business. But you do not control your own destiny. The franchisor has a significant amount of control over how you run your operations and related expenses (as I eluded too in Myth #3). When the franchisor introduces a new product, you must buy it, whether your “personal” market will support it or not. If the franchisor decides that all stores need to have new wallpaper, guess what? You are buying wallpaper. Sometimes these upgrades are subsidized by the franchisor, but you will be paying for some if not all of it. The irony is the fact that many people have more “freedom” working in corporate American, than by owning a franchise. After all, if you don’t like the way your company is treating you, you leave. With a franchise, if you don’t like the way the franchisor is treating you, be ready to hire some expensive lawyers, because you are stuck.

Myth #10 - Increasing my net worth by building equity in the business – This is my favorite. I have an MBA degree from a top 30 university and I believed that buying a franchise was a good investment, not necessarily because of the cash flow, but because I thought the business would increase in value over time and become a valuable asset. Major mistake. Below are the three reasons why most franchises cannot be considered “appreciating assets” and thereby do not increase your net worth.

1. Most franchisees rent their locations. As the land and building increase in value, the build-out (the money you spent to “decorate” the inside of the location) drops in value. So as the landlord gets richer, you get poorer – asset wise. In addition, since most commercial leases are from 5 to 10 years, your ability to increase the value of the franchise has a definitive and limited timeline. As the lease term end date comes nearer, the value of the franchise will deteriorate because – assuming the franchise is making good money – the landlord will most likely increase your rent by a substantial figure when you sign a new lease, thus making the business less valuable.

2. In some ways, franchises are like cars, as soon as you drive them off the lot, they drop in value. The reason - why buy a used vehicle when you can a brand new one for just a little more. The same is true of franchises. After all, franchisors are in the business to expand the brand; that means they will authorize as many units as the market can bear – and a few more, just in case they guess low. Therefore, if you own a franchise in an average location, you are the equivalent of the used car. A buyer will look at the price of your unit and then the price of a new unit and determine that a new unit is a better buy, unless the “used” franchise is sold at a discount. Discounts don’t help when you are trying to increase your net worth.

3. Time is your enemy. As I said earlier, your lease affects the value of the business. Also, time in general is bad for franchises. The older your location gets, the more maintenance it will require. A one-year-old store is going to be in significantly better space than a 10-year-old store. We have all visited “older” McDonald’s and Wendy’s…they are looking pretty beat-up after all these years and eventually, someone is going to have to put a lot of money into a major remodeling job.

So there you have, my experiences distilled into 10 myths about franchising. I hope my findings and views help you in your decision making process. Buying a franchise is a viable option in the business world, but make sure you go in with your eyes open and not be fooled by all the marketing and statistical gimmicks that franchise companies try and sell you. Feel free to leave questions (via the comment option) on any of the 3 parts in this series.

This was a guest post by Tony Parker, an experienced investor across various asset classes and a past franchise owner.

Here are three recommended books on franchising worth reading if you want more detail on buying a franchise and the pro's and con's of doing so:

1. Street Smart Franchising
2. Franchising For Dummies
3. Real Franchising Stories

Related articles links:

Top ten myths about buying a franchise - Part 1
Top ten myths about buying a franchise - Part 2
The meaning of work
Results from 2008 IT Salary Survey

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I bought the 85 Apple (AAPL) shares this morning at $186.88 (see screenshot below) based on what I have been reading over the last few weeks and on the potential growth from their upcoming new I-phone, launching next week. The stock is now below $184, three hours later so I am already down $300+. Did I pull the trade trigger too early and make investing mistake 101 by buying at the top of the market and into the hype like I did with Visa a few weeks ago (luckily that stock has recovered a bit).

I am now watching the market and this stock very anxiously.....perhaps this was too big an initial investment, given it is now making up almost 40% of my current portfolio. I still like it for the medium term though and believe it is a $225 stock by the end of summer.


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[See an Update to this post here : My shiny new iPhone and why I bought Apple]

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For most people getting or staying in shape brings about connotations of joining a gym, getting a trainer or going on some new fad diet. This can all be quite expensive and act as a deterrent to people who are on a tight budget and don't want to spend on such luxuries. However getting fit and staying healthy has been shown not only to be good for our overall well-being, but even our finances. Luckily you don’t have to spend big bucks to get and stay fit. Here are TEN frugal fitness ways and ideas that you can incorporate into and around your everyday life that will keep you motivated without blowing your budget.

1. Not sure what exercises to do or how to do them. Instead of hiring a personal trainer or joining expensive group classes, check out exercise videos from your local library. Most have a decent collection and if even they are dated, the basic and most beneficial exercises haven’t changed much in the last 30 years. Check out a different exercise DVD or tape each week, and you'll never get bored with your fitness routine. You can even find free exercise programs on TV to record. Turn time in front of the TV into workout time by following along with one of the many exercise programs on TV. Even public television has exercise programs, so lack of cable is no excuse! (Cost = $0, assuming no late returns)

2. Take Steps Instead of the Elevator. I am sure you have heard this tip before, but most people forget it because it is too difficult or use the old “I don’t want to sweat at work” excuse. However, this is a very effective exercise that can be incorporated into most people's lives. Climbing one level of stairs burns as much calories as walking 5 times that distance. So skip the elevator and head for those stairs (going up!).

3. Cleaning your House isn't work; it's exercise. Get out those cleaning supplies; then, scrub and vacuum your way to a more fit you. The pay off: A 150-pound person can expect to burn 216 calories with 30 minutes of housework. Also, like me if you get a cleaner, this can save you $65 per week. So get fitter and save money. A great combination.

4. Walk away the pounds. The simplest way to stay in shape. We all do this everyday, but not nearly enough. Most experts say you should walk 1-2 miles per day to stay healthy and at a brisk pace. The best bet to track this is to buy a pedometer (Cost ~ $25) and aim to walk 10,000 steps every day. One way to get some walking in your daily life, if you mostly drive to work and other places, is to park your car a couple of blocks away from where you normally would, and then walk that extra distance. Or, in a garage park it at the lowest or highest level and then walk up or down respectively. This will force you to walk a bit and who knows, you may save a bit of money on gas as well.

5. Seek Out Used Equipment. If you do want to use weight lifting or other fitness equipment, then don’t buy retail. Check with friends and family who probably have unused or stored exercise equipment they don’t want anymore (most of us do). You can also check out community sites like Freecycle and Craigslist, for heavily discounted or even free equipment. There are two pieces of exercise equipment I recommend is to get for your home based on personal experience. One is an exercise ball (Cost ~ $25 to $40). This is best piece of exercise equipment if you have a bad back like me. You can also use it work on almost all "core" exercises. The second one is a jump rope (Cost ~ $10) for your cardio exercise needs. I used to have this as a kid but hadn't used it in years until recently. It is now making a resurgence in gyms and fitness guides as a 10 minute daily jump rope/skipping routine is equivalent to walking for 30 to 40 minutes. Saves time and you can do it indoors.

6. Avoid Junk Food and Shop Smart. Eating out and having junk food while you’re busy or travelling is one of the main reasons for getting unhealthy. You can kid yourself that it’s cheaper than real food (granted sometimes it might be) but over the long term the costs to your health and savings will be much more. With some planning you can transform your diet to include mostly healthy foods. For example, look at the grocery stores flyers you receive in the mail or newspaper and generally plan out each meal for the week. Cut or get coupons online for the healthy items so you save money on what you buy. Grocery stores that I like include Whole Foods and Trader Joe's, which often have samplers of their healthy food items in case you are looking for ideas. Go to the grocery store when you ARE NOT hungry and earlier in the morning to save on purchasing those unneeded impulse buys.

7. Take advantage of local parks and community recreation programs. Check with your local center (you can search for them on-line) to find out what programs they have to offer. This could range from low-cost exercise and wellness classes to free gym access. Best of all you could meet other people in the same boat as you, looking to get fit and healthy.

8. Following on from the above point you can also use the Internet to help find fitness clubs or groups in your local area. For example: Google search running clubs in your area and you will find various clubs that are free or little cost. This way you will save while also keeping the motivation with the group camaraderie. I have used this to join a local tennis group where we play a doubles competition once a week - great fun and good exercise.

9. Turn on Some Music and Dance. Grab your favorite music or turn on a TV music channel and get your body in motion. Dancing is great exercise (how many overweight dancers have you seen?) – and it doesn't cost a dime. Get your kids involved and make it a family dance affair. It also helps to get the little ones really tired and off to bed early!

10. Got little kids? Well then put them in the stroller and take them for a walk. If it is raining and cold, walk indoors in places like malls. Form a mothers (or parents) group to go walking - you will be surprised what a response you will get to this. You can place an ad at Craigslist or local community centers to start a walking mothers group.


With summer upon us, now is as good a time as any to start focusing on your health if you slipped over the last few months (or years!). Use the above tips to jump start your road to better health, wealth and happiness. Make sure you track your progress as well by keeping a plan and set targets on what you want to achieve. Write them down and you should only have 3-5 fitness goals at most. Keep them simple and time bound as well. For example, Lose 10 pounds by the end of August. Or, be able to walk 2 miles in less than 20 minutes by October. This keeps you motivated and accountable. The reward is a healthier and better looking you.

Feel free to leave a comment suggesting more tips to stay in shape. This is the second post in the monthly “Frugal ways to…” series. The first article in the series was “Frugal ways to keep your home safe”. I have some ideas for the next few posts in this series, but if you have any to suggest please let me know.

Tips in this article are based on personal experience and some I found in Frugal Exercises at the About.com website.

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Smart Money brings us some novel new coupon delivery methods. These are quite interesting and innovative and shows that as times get tough companies are continually finding new ways to lure shoppers to their stores via coupons. Here are some of the methods highlighted leveraging technology to its fullest (and none of them require a pair of scissors)

Coupon Kiosks
Now shoppers can print coupons inside the store. Shoppers at CVS, Marsh Supermarkets and Giant Eagle stores can swipe their loyalty card at an in-store kiosk and receive coupons based on purchase history and current store specials. At at Mesa Riverview Mall in Mesa, Ariz., recently-installed interactive kiosks enable shoppers to look up coupon codes — like 10% off at the mall pizzeria — and send them via text message to their cellphones.
[Editor - I can see this taking off at stores around the country as it allows companies and marketers to get buyers information by having them sign-up for loyalty cards. By knowing their shopping habits they can target advertising specifically at them, for a higher return on advertising spend]

Shopping Widgets
Last month, grocery chain Meijer released Mealbox4, a downloadable computer program that helps consumers prepare shopping lists and find associated deals. The widget alerts shoppers to store sales and automatically attaches any available coupons. Shoppers then print out the list so the coupon barcodes can be scanned at checkout.
[Editor - This is a much more proactive method that users can configure to their requirements. The concern I have is around privacy because of the widget you have to install on your PC, but it would be quite cool to be able to get coupons specifically for your shopping list items and avoid all the other junk]

Cellphone Coupons
The next big thing in coupons: cellphones. According to Juniper Research, a U.K.-based market researcher, marketers expect mobile coupons to generate $7 billion annually by 2011.
[Editor - Google Mobile anyone? This is one of reasons Google is developing new mobile technology software. Even today you can sign up for mobile alerts, but once major department stores and vendors get behind cellphone coupons they will explode. Basically you can go to your local grocery store and SMS a message to a given number and the coupons codes will be sent to you for use at the checkout or directly onto your store card]

The full article can be found here. Get the best web coupons for major on-line and offline department stores at Coolsavings.com

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When calculating your net worth, do you include your car as an asset? What value do you assign to it and what about all the running and insurance costs?

According to accounting definitions, a car can only be classified as an asset if its current value is greater than what you owe on it (car loan). The other reason a car can be classified as an asset is that anything you own that can be sold for cash counts as an asset. However it is a depreciating asset, in that the car loses value the moment you drive it off the lot (up to 20%). So every time you calculate your net worth, the contribution your car value makes will go down.

Even though your car maybe a positive asset it does generate a number of expenses and liabilities over time, which is the reason why a lot of people classify a car as a liability. Ongoing ownership costs include maintenance, lease/loan payments, gas and insurance. These are also the costs (expenses) of owning a car and while not necessarily included in your net worth calculations, they will have a significant impact on your month-to-month finances. For older cars, the annual running and insurance costs may be greater than the value of the car.

When factoring your cars value into your net worth calculations, make sure you deduct the current liabilities from it's current value (i.e. the loan amount from the current car value). In your monthly budget, you need to factor in the various ongoing expenses - something you should have an idea of before you buy the car. In today's society, despite high gas prices, you need a car for transportation needs in most places. So whether it is an asset or liability for you, it is most likely a necessity. Just make sure you know what you are getting for your money and the expense stream you are creating when you buy a car.

Car Lease Problems? Here's a way to get out early

Picture courtesy Lawrence Whittemore

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Occasionally my wife will drag me along to go shopping at our local Walmart. Normally this is in response to a big sale event they are having, where she has identified something that is a great deal and can't be found elsewhere. However every time I go there I think, " Why did I come here - just to save a few bucks?". At the end of the day I even question if I saved any money with all the extras we end up buying. Here are the main reasons why I detest the Walmart shopping experience:

• Cluttered and cramped aisles. You can barely get 2 carts in some of the aisles and the clothes department looks like a tornado has been through it - especially on the weekends when they are all over the place (I found bra's in the men's department!). Compared to the nearby Target and Kmart, which are always much cleaner and spacious, the Walmart was a disaster. Clean up in Aisle 3 anyone?
• Terrible customer service. The Walmart logo has a smiley face. The employees definitely don't. First it is a challenge to find one who can help and when you do find one they either can't speak English (no offense) or they say this is not their department and I should ask someone else. How rude.
• Returns are a challenge. Ever tried returning something at Walmart? I think they have designed the returns department to make it as hard as possible for customers to return goods. I spent 20 minutes in line and then 10 minutes with their representative to return an unused pair of kids shoes. For a similar item at Target, it took less then 2 minutes with no hassles.
• Is price really that much better? I'll admit on some items Walmart prices can't be beat. That's why I end up going there a few times a year. Still on an overall basis with all the items we end up buying the savings are not that great when compared to their competitors and given the experience is so bad I really don't think it is worth it.

I wrote this post soon after a particularly bad experience at Walmart over the weekend so maybe it is a bit jaded. It is America's largest department stores and I am sure some people will say I am being too harsh in my criticism. Fair enough and given it is one of the nation's largest employers it definitely has some good corporate and community attributes. Luckily this is a nation with choices and I will choose (when possible) not to shop there.

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