Ongoing saga at carmaker Porsche

Here's another interesting story about risk and reward.

Starting back in 2005, carmaker Porsche started purchasing shares of VW. It currently owns a majority (>50%) of the company directly by shares. They also controlled additional shares with options. Speculators had been betting that the shares of VW would go down. Once the news got out about how much Porsche owned, there was a squeeze because of the following:

• Porsche shares + Porsche controlled via options + Shares short by speculators was greater than outstanding shares of VW.

I can't find the articles, but it was one of the first times where profits exceeded operating revenue (sales from Porsche cars). Comments at that time were that Porsche had turned into a hedge firm. This was all because of the large VW position.

• Click here for the TimesOnline article in March, 2009 reporting Porsche profits.

Now it appears that risk is starting to catch up to Porsche and they are looking for a bailout via either a merger with VW or loan/investment from a Qatar investment company.

• Click here for the Yahoo! Finance article.

Another risk and reward issue. Porsche received a huge reported reward earlier this year, but now may suffer some risk. We'll have to see how the reporting profits go in the next few quarters.

One response to remove "bonuses" from compensation structure

I think most of us could see this one coming (and it makes sense).

Since the government is going to restrict or eliminate bonuses from companies who have received TARP funds, one company (Citibank) has decided to restructure their compensation so that the bonuses are built in to their base pay. Citibank has received $45 billion from the government so far. It appears the govenment does have a final "veto" of compensation structures before it is implemented.

Here are some of the risks and rewards for Citibank to do this.

• Reward: keep "talented" employees and prevent them from going to other firms where bonuses are not scrutinized (TARP funds already paid off).
• Risk: now if cash flow is tight, the choice won't be whether or not to give the bonuses, but whether or not to keep the employees. If it was a base + bonus structure, the company could opt to cancel bonuses. Now if more is shifted to the base salary, the company will need to play accordingly.

Click here for the full report on Yahoo! Finance

What I love about the Sonos "Multi-Room Music System"

Earlier this year, I converted my existing CD collection into MP3s. The huge question in my mind is what do I do with it. It's great that all the music is readily accessible, but how do I get it from my computer(s) to the rest of the house?

I have been keeping an eye on the system that is available by Sonos. The key features Sonos offers are the following:

• Source music typically is a Network Attached Storage device. This means your computer doesn't need to be on in order for this system to work. You do need a wireless router (or network).
• There is virtually no size limitations when ripping music. Since your music is stored on a hard drive, the limits are based on how large the hard drive is and how many CDs you have. You could save your music in lossless formats and not lose quality with compression. There are minimal problems streaming uncompressed file formats. I'm sure there are limits at some point (IE, you probably can't stream 16 different lossless music files simultaneously).
• You can access all Internet Radio stations and also access Rhapsody (requires subscription).
• There are options for amplified and non-amplified Zoneplayers. You can have up to 32 of these in your house! Non-amplified Zoneplayers need to be connected to some sort of audio video device (like an AV receiver with their own speakers) in order to work. Amplified Zoneplayers will need only speakers.
  
• Option to have each Zoneplayer playing different music or all of them playing the same music simultaneously.
• Free iPhone app that can control all of the Zoneplayers. (You would obviously need an iPhone).

Now with the above comes a cost. The starter bundle is just around $1,000 and that includes a controller, an amplified Zoneplayer and an un-amplified Zoneplayer. Additonal amplified Zoneplayers are about $500 each and un-amplified Zoneplayers are about $350 each.

To me, this is a luxury. Sure, it would be cool to be able to "pipe" the same piece throughout the entire house or play one genre of music upstairs and another downstairs, but at what cost?It would also be nice to control the volume of each room's music. But, you could easily fork out about $3,000 to outfit a house with a Zoneplayer in nearly every room. This would get you 6 Zoneplayers (5 amplified and 1 that is not) in total and one controller.

Look for future posts on some possible cheaper options and their limitations as compared to the Sonos system.

If any of you do explore purchasing the Sonos system from BestBuy. Please shop through the following link and type in "Sonos" in the Best Buy "Search for" section:

Buy Online, Pickup in Your Local Best Buy® Store.

60 minutes: Nevada stops outpatient chemotherapy

In an earlier post, I referred to an article about six states that were having significant budget gaps.



Several months ago, the CBS television show "60 minutes" had a segment on cutting Oncology services. Click here to view videos and read information about that loss (to patients) . They stopped outpatient chemotherapy for new patients as of December 31, 2009.

CA, NY, FL, MA, AZ, NV be prepared for tax hikes / loss of services

This article is says that California, New York, Florida, Massachusetts, Arizona, and Nevada will be likely cutting services and increasing taxes.

The estimated deficits are as follows:

• California: about $25 billion


• New York: about $17 billion


• Florida: $6 billion


• Massachusetts and Arizona: about $3 billion


• Nevada: $1.2 billion

Click here for a brief view of the deficits, how large a percentage it is in relation to each respective "general" fund, and how each state may help narrow the gap.

I have posted a brief link to a "60 Minutes" segment regarding cuts in cancer treatment in Nevada. Click here for that post.

Things must be betting better, right?

Seems like a lot of the banks are paying the "TARP" funds/loans back. Goldman Sachs is the most recent announcing that they are prepared to pay the government back.

This means that things are better, right? In order to pay back, they had to prove that they could raise capital in the open market. During the "crisis," liquidity was a concern and no one (read institutions) was loaning to each other. They were holding on to their own capital because of the unknown.

So...either things are truly getting better or maybe institutions are creating loans to each (fabricating?) just to show that they can borrow...just so they can get out from TARP scrutiny...just so they can continue to pay executives and other key staff what they want to pay them.

I think everyone hopes that it's the first.

Click here for the article.

Five reasons to start a business during a recession

According an article that can be found by clicking here, the following are five (5) reasons to start a business during a recession:

• Extra protection from pink slips
• Set your own income
• Start-up costs are lower at this time
• It's easier to find partners/vendors
• It's gratifying

Homes for less than $10,000 on sale in Detroit

Hmmm. Sounds like there's an opportunity and lots of people are taking advantage of this. It reports one person from California has purchased nearly 200 homes.

Click here for the article on CNNMoney.com.

Remember that Real Estate is not a liquid investment. This means, it takes time before you can access or convert it into something that is usable (think sell or borrow against). Compare against a highly liquid asset such as a bank account where you can deposit money into an account and withdraw the same money five (5) minutes later. After you make this purchase, how long will it take for you to "get out" of this investment?

Risk/Reward: Need to weigh the risk of needing liquidity and management issues (dealing with tenants, property management companies, trips to location of property, insurance, tax, liability or legal issues, etc) vs. the reward of potential monthly cash flows from rents and appreciation of the underlying asset.

Uhhh... Honey we need to talk. Couples disagree over retirement plans

Click here for the article.

502 couples were surveyed. 38% make decisions together. 60% don't agree on retirement ages. 44% don't agree whether they'll be working in "retirement." 42% disagree on whether they'll be well-off or scraping by.

Costs associated with getting a "Fender Bender" if you have a microcar

$3,700 to repair a fender bender? Obviously you want to avoid any collisions entirely, but these were based on speeds of 3 to 6 miles per hour.

They save you on gas, but try to avoid crashes and take total (potential) costs into account when making these purchases. Weigh it against some conveniences such as easier to find parking spaces.

Click here for the article.

Chart by BillShrink.com: iPhone 3GS vs. Palm Pre vs. Android G1

Ran into this chart briefly comparing some of the key features of these 3 phones.

Click here for the chart. Click here for the article.

Still dragging my feet to make any jump. I need tethering and my Palm Centro is still working. I know there are hacks to tether, but would rather wait at this point. View my previous discussion of iPhone vs. Centro by clicking here.

Can you ever save too much?

Since our U.S. economy more dependent on our own spending, what's the balance between saving and spending and how fast our economy recovers (or grows)?

Click here for a recent USNews article on Yahoo! Finance.

There are also discussions about whether you can also save too much for retirement. For example, if you maximize your yearly contributions for retirement plans such as 401(k), 403(b), and 457 plans, would you end up with so much money that when you start making mandatory withdrawals, you may end up hitting the top Federal + State income tax brackets?

The other side note is (like I always say) that it's nice to pay taxes, because that means that you earned/made money. The more taxes you pay, the money you earned/made.

Buy a Mac, get an iPod touch

Apple is running a special from May 27, 2009 to September 8, 2009. Buy a Mac via your education discount and get up to $229 back on the purchase of an iPod touch.

Click here to go to the Apple site for more details.

Remember: Don't buy the Mac just because you're getting an iPod touch. Get a Mac because you "need" it and it's great that "oh by the way" you're getting an iPod touch. Just as an FYI, at this time, I haven't felt the need for any mp3 player.

PIMCO launches their first ETF

PIMCO (Pacific Investment Management Co.) is famous for Bill Gross, one of the co-founders and his storied successes. Now they've launched their first ETF, stock symbol TUZ. Additional ETFs planned by them in the future. For the first 2 years, their expenses are 0.09% (current average of other ETFs is 0.16%), then will go up after.

Click here for the ETFguide.com story on Yahoo! Finance.

Remember that for ETFs, it's not necessarily the annual expenses that will erode your return, it will be the commissions. For example, even if you could buy a position using a broker with a $4 commission on a trade, even a $10,000 trade would be about 0.04% hit on return (if held one year) just to get in. There will be another hit when you exit the position.

Remember: The benefits of an ETF trade need to outweigh the risks and costs. Some of the potential benefits are: ability to enter/exit at anytime the market is open (most Mutual Funds are business end), leverage/margin, shorted, and maybe hedged with options (if a market is created). The only issue with options is that some of these option markets for ETFs are not very liquid.

Surprising jobs that make six figures ($100,000) or more

Click here for this Forbes.com article on Yahoo! Finance.

The top 5 surprising jobs were:

Human Resources Manager
Top 10% Minimum Annual Income: $163,220

Astronomer
Top 10% Minimum Annual Income: $156,720

Art Director
Top 10% Minimum Annual Income: $154,840

Pharmacist
Top 10% Minimum Annual Income: $131,440

Film or Video Editor
Top 10% Minimum Annual Income: $112,410