I am hooked onto Twitter

I am so much on micro-blogging with Twitter that I am ignoring this blog. For folks who are new to twitter, here is small intro: it is one line blogging application. Twitter is a service for friends, family, and co–workers to communicate and stay connected through the exchange of quick, frequent messages.

It is easy to use. You can send messages via web browser or SMS via cellphone or blackberry or Iphone etc. I also linked my facebook account with twitter. Soon I will be updating this blog to show my updates via twitter.

Warren Buffett says this is time to buy stock

A simple rule dictates Warren Buffet buying: Be fearful when others are greedy, and be greedy when others are fearful.He is looking ahead for 5 to 10 years. In short term stock market will be flat or negative but eventually it will over come. Only people who are investing for long term can make use of this time. More here: http://www.nytimes.com/2008/10/17/opinion/17buffett.html?em

Bye Bye Investment Bankers

Last of 2 surviving big investment banks in wall street Goldman Sachs and Morgan Stanley converted into regular banks. The change means they will be work and regulated like other banks and can get deposits a/c (saving & checking etc).

For decades, firms like Morgan Stanley and Goldman Sachs thrived by taking bold bets with their own money, often using enormous amounts of debt to increase their profits, with little outside oversight. They were the envy of Wall Street, dominating the industry’s most lucrative businesses, landing headline-grabbing deals and advising companies and governments on mergers, stock offerings and restructurings.

That will make them more financially sound but will also significantly limit their profits. Today, both Goldman Sachs and Morgan Stanley have $1 of capital for every $22 of assets. By contrast, Bank of America’s has less than $11 for every $1 of capital.

NY Times

Do you use Amazon logo on this page?

One of my friend regularly uses Amazon logo on this blog to do start his Amazon shopping. If you also use it for your shopping Umrika blog will generate more referral fees. So enjoy Amazon and use link on this blog to do shopping.

Enjoying new Sling Box

We now can watch many new channels on internet by using Sling box. Sling box is pretty cool for extending your cable/satellite tv connection to internet. So far quality of video streaming is pretty good even on a wireless internet reception.

Life events and finacial planning

You need to revisit your financial plan if any of the major life events happens:
1) Move or change job
2) Purchase a house
3) Have a baby
4) Get a lottery :)
5) Kids starting college etc

On any major life events you need to see:
1) Your spending budget
2) Your saving goals
3) Your income tax impact - recheck your w-4
4) Insurance - health, life
5) Estate, trust, wills etc.

Using mutiple credit cards

If you use multiple credit cards and payoff the balance every month here is one trick to extend your balance:
1) Use 3 credit cards with 3 different billing/statement dates spread across month. i.e. 1st card bills you on 5th, second on 15th and third on 25th etc.
2) While doing purchase use the card which is past bill/statement date. for example on 16th use second card.

Using above formula you can extend usual 25 days of interest free balance up to 55 days. This helps a lot specially when you are making major purchase i.e. buying airline tickets or big ticket items.

Inflation everywhere

After price of gasoline and food grain going up in 2 digits, it is time for other commodities. Soon you will get high electricity bills, high cost of consumer goods and services.
As per IMF Inflation is emerging as a threat to economic stability after years of ``quiescence,'' and officials must be wary of policies that stoke consumer prices.

Taking Risk

If you had bought Visa stock on first date of trading and sold it today you would have made 51%. If you were lucky to get Visa stock in IPO than you could have made almost 100% gain.

V

Investing in Rice

Price of food grains are going up > 8% year. The latest data show cereal prices rising by more than 8% a year. Both flour and rice are up more than 13%. Milk, cheese, bananas and even peanut butter: They're all up by more than 10%. Eggs have rocketed up 30% in a year.

And if you are hoping they will pass, here's the bad news: They may actually accelerate. The reason? The prices of many underlying raw materials have risen much more quickly still. Wheat prices, for example, have roughly tripled in the past three years.

You can't easily stock up on perishables like eggs or milk. But other products will keep. Among them: Dried pasta, rice, cereals, and cans of everything from tuna fish to fruit and vegetables. The kicker: You should also save money by buying them in bulk.

Stocking up on food may not replace your long-term investments, but it may make a sensible home for some of your shorter-term cash. Do the math. If you keep your standby cash in a money-market fund you'll be lucky to get a 2.5% interest rate. Even the best one-year certificate of deposit you can find is only going to pay you about 4%. And those yields are before tax.

Stuff Your Pantry to the Gills -- Your Wallet Will Thank You

Cool features on iGoogle

iGoogle allows you to personalize your google home page. I found some of its feature very cool:
1) Very lightweight portals and lots of sources including stocks, weather, joke, gadgets, news etc.
2) Click on "Add A Tab" and just type a keyword. It will generate whole page with many portlets. For example click on "Add a Tab" and type "India" it will generate web page for you with many India based content.
3) Theme - select a theme for your page, it changes the color scheme of the page depending upon your theme.

Gold vs Dollar

new car for $1200 ?

Beating Inflation

Last month rate of inflation in U.S. was 4%. That means purchasing power of dollar was reduced by 4%. It also means that if you have cash or saving accounts with less than 4% APY is actually reducing your purchasing power. How to beat inflation ? No quick way but there are few ways:
1) TIP Bonds - Treasury inflation protected bond generally gives returns almost equal to inflation.
2) Diversify - buy commodities like oil, gold, foreign exchange etc
3) Loan - if you take loan and invest into income producing assets. let say you take loan at 10% and rate of inflation is 4%, you have to just make 6% income to beat inflation.
4) Stocks - most volatile way to beat inflation. over long run > 5 year stocks of large cap companies beats the inflation.

Best Mortgage Rates

After federal reserve bank cut interest rate, it is good time to refinance mortgage. However most lenders are reducing only short term interest like credit card, auto, HELOC etc. This rate cut effect has not been visible in 30 yr or 5 yr ARM mortgage. As of today best rate on 30 year fixed is around 6% APR and 5 year ARM is 5.25% APR.

Generally best source for 30 year fixed mortgage are Credit Unions. At DCU the rate is 6%. For 5 year ARM ING Direct has rate is 5.25%. Both banks has 0 points and very less closing costs. For me a good rate will be 5.75% or less on 30 yr fixed loan and 5% on 5 year ARM. I am hoping to see that in coming weeks.

Visa Stock Price

Visa raised $17.9 billion late Tuesday to complete the largest initial public offering in U.S. and sold 406 million shares at $44 apiece. The price $2 more than $37-$42 price range. The stock will start trading on Wednesday with on New York Stock Exchange under ticker symbol "V". So if you missed the IPO you can buy V stock tomorrow early morning.

But analysts say Visa priced its IPO more aggressively than MasterCard, making it less likely that its stock will appreciate as dramatically in the months ahead.

A better strategy will be to divide your investment in 5 installment and buy every time price go down below $44 (or tomorrow closing price). This is very long term investment so plan to invest for 5 to 10 years to get good returns.

More at Yahoo.

Time to Sell Gold

Gold is investor's choice Whenever U.S. economy went into recession or dollar lost it values. It is no surprise that gold, long viewed as safe heaven is now selling above $1000 an ounce. So if anyone has gold locked up in bank lockers it is best time to sell it. A gold in bank locker or home almirah is not worth any value if a person not sell it. Like every commodity gold prices are cyclic in nature and historically gold price has not beaten inflation. So think again and sell that extra gold hidden in your almirah.

Summary from Economics Times:
MUMBAI: Gold’s dream to scale a historic peak turned real on Friday. Price of the yellow metal crossed Rs 13,000-mark for the first time in Mumbai on the back of a strong rally in global market. In international market, gold breached the psychological $1000-mark to touch an all-time high of $1005.50 an ounce after the dollar hit a record low after weak US job data and worsening financial trouble in that country.

Advice from Business Week:

It could be a wild ride in the coming months. Speculators and hedge funds made large bullish bets in the futures market starting in August as the Federal Reserve started to cut interest rates. Once the Fed stops paring rates and the dollar stabilizes, gold becomes a less attractive investment. That should happen early next year, says Suki Cooper, a precious-metals analyst at Barclays Capital. Wall Street leader Goldman Sachs (GS) even recommended selling gold as one of its 10 best trading ideas for 2008.

Travelling with your TV, Phone, Internet

With help of some easy to use technology you can now travel with your TV shows, Phone etc.
1) For phone Vonage router can take your phone number anywhere. I do get calls from my friends who have taken Vonage to India and keep US number. However, Vonage has $25+/month cost, which is not so useful if you are talking very few times. Skype do not have monthly charges it is cheaper than Vonage. A better options is Skype router from Phillips
Features:
* Use Skype freely. No need to have your PC on.
* Installation free
* Traditional and Internet phone. Give Landline and Skype calls on one handset
* See your contacts in color on the LCD display
* Skype around the house with the DECT cordless technology
* Speakerphone - Talk handsfree and share your calls with your family and friends


2)For TV an efficient option is a small device called a SlingBox (www.slingmedia.com, $129 to $229). Plug one end into your Internet connection and the other into your home TV’s cable box or DVR or both, and you can watch television and your recorded video library on a computer, cellphone or laptop. The new SlingCatcher (an add-on device, about $250) lets you view all that on an actual TV.

More options on NY Times

Tax savings through parents

1) If your parents are frequent visitor to USA and stay with you more than 183 days in last 3 year you can claim them as dependent on your tax return. Each dependent gets deduction of $3400 in tax year 2007, which translates into $850 in 25% federal tax savings.
2) Even if they are not staying with you, it is good idea to have ITIN applied and kept for future use. ITIN can be used to open saving, trading accounts etc.

IRS 501
Ask Me Help Desk

More on Visa IPO

MSN has new article about upcoming Visa IPO. Some of the interesting points are:
* Large IPOs -- and this will be the biggest ever in the U.S. -- typically don't rocket higher the moment they start trading.
* Don't buy Visa expecting a repeat of the phenomenal gains in MasterCard .... MasterCard was underpriced when it first came out.
* The risk of having to pay out huge amounts in legal fees is so high that analysts like Tom Taulli of DealProfiles advise avoiding the Visa IPO altogether.

Finally some numbers:
* Assuming Visa enters the market at the top of its $37-to-$42 pricing range, the stock would trade for just 19 times the upper end of the $1.80-to-$2.20 earnings per share projected by Nick Einhorn, a research analyst with Renaissance Capital. MasterCard currently trades for 25 times 2008 projected earnings of $7.50 a share. So if Visa's earnings really do advance 20% to, say, $2.40 to $2.50 a share in 2009, and assuming it closes the valuation gap with MasterCard, it could easily trade for more than $60 in a year or two.

Visa's IPO

Credit card giant VISA is coming up with U.S. largest IPO on March 16-20. The stock is expected to start trading March 19 or 20 under the proposed symbol V, at anywhere from $37 to $42 a share. Here are my take:
1) After successful IPO of Mastercard everyone is excited about Visa IPO. However, Mastercard IPO was well priced.
2) Visa IPO is priced according to Mastercard current stock market value. However, IMHO Mastercard stock is overpriced now.
3) Visa IPO will be used to cover litigation and will try to help all banks which are part of Visa networks. However, most banks are in subprime mess and overall economy is slowing down.
4) Buying or not buying is tough decision. Stock market in next 20 days will decide faith of this IPO.

More at Kiplinger.

Increase your finacial knowledge

Here are some financial websites frequently used by me for U.S. market (not in particular order) :

1) Yahoo (lots of information on stocks, banking, tax, mutual funds etc).
2) MSN - same as yahoo
3) Google (not so great but easy to use)
4) Businessweek

For trading:
1) Scottrade: - low price $7 for each trading, but you can not directly link with any bank account.

2) Sharebuilder: - $10/trade, link to bank account, buy stock using dollar cost averaging monthly plan

3) Etrade: - $6-$20, powerful, mostly useful for active traders.


Others:
http://www.thestreet.com/
http://www.fool.com/
http://www.stockpickr.com - this site gives you some nice details about what stocks big mutual funds, investors are buying. One interesting one is about Warren Buffett.


For India there are few websites but mostly loaded with flashy advertisements and pop ups:

Rediff

http://www.icicidirect.com
http://www.hdfcsec.com/
http://www.valueresearchonline.com/
http://www.kotaksecurities.com
http://www.sharekhan.com

Good comparison of Indian online trading on rediff.

Start learning. Enjoy!

Rupee crosses 40

MUMBAI (Reuters) - The Indian rupee weakened beyond 40 to a dollar for the first time in five months on Wednesday, as oil refiners scrambled to buy dollars after crude prices hit record highs. "There was a dollar shortage in the market to begin with," said a senior currency trader with a private bank.

http://in.biz.yahoo.com/080220/137/6r3wq.html

Not a surprise for me.

I am not sure when 1 USD will be back 45+ INR as most Indian BPOs, exporters are holding dollars and will convert only when rates are good.

Investing through ETF

Exchange-Traded Funds, or ETFs, are index funds that trade just like stocks on major stock exchanges. In simple way they are like mutual funds but more like stock. Most ETFs track well known index. ETFs are better than mutual funds because of following reason:
1) They trade like stock, hence you have tax advantage on capital gain & loss.
2) Most ETFs fees are less than 1% where as mutual funds fees are 2% and up
3) ETFs gives you more flexibility of trading.

Using ETFs investor can easily do asset allocation. They represent just about every asset class available and are cheap, liquid, and reliable. The primary asset classes in which ETFs are available include:

* Large Cap Stocks
* Mid Cap Stocks
* Small Cap Stocks
* Growth Stocks
* Value Stocks
* Sector Stocks
* International Stocks
* Country
* Emerging Market Stocks
* Long-term Bonds
* Mid-term Bonds
* Short-term Bonds
* Real Estate Investment Trusts

Some of popular ETFs from http://finance.yahoo.com/etf are:

Fund Name Ticker Category Fund Family Net Assets down Expense Ratio
1) SPDRs SPY Large Blend SPDR TRUST SERIES 1 84.85B 0.08%
This ETF tracks S&P 500 Index. Most of the large cap mutual funds tries to beat S&P 500.

2) iShares MSCI EAFE Index EFA Foreign Large Blend iShares Trust 47.47B 0.34%

3) iShares MSCI Emerging Markets Index EEM Diversified Emerging Mkts iShares Trust 23.19B 0.74%

4) PowerShares QQQ QQQQ Large Growth NASDAQ 100 TRUST SERIES 1 18.75B 0.20%

5) streetTRACKS Gold Shares GLD Specialty-Precious Metals streetTRACKS Gold Trust 18.74B N/A
This ETF tracks GOLD ! but beware gold prices are all time high and price can go either way.

Are you paying income tax on saving bank a/c ?

If you have interest income from saving, fixed deposit, cds etc it adds up in your income and you end up paying income tax on the interest paid by bank to you. For example if you earned $250 as bank interest in fixed deposit, $250 will add to income and you will normally end up paying both federal + state income tax.

How to avoid income tax on bank interest ?
1) If you have children under 18 you can open joint account with you kid as primary account holder. Any bank interest up to $800 is tax free.
2) if you can afford to wait for 5 years or more, put this money in Roth IRA .

so next time if you see saving bank rate of 4%, calculate your income tax too on it.

Dollar vs Rupee

Last year US Dollar fell against major currencies including Indian Rupee. In year USD fell 10% from approx INR 44 to INR 39. What was main reason of this slide ?

From Yahoo news:
Foreign funds bought more than $17 billion of stocks last year, a key driver of the rupee's rise of more than 12 percent in 2007. But the funds have sold more than $3.5 billion so far this year as weak global markets heighten risk aversion.

Is this slide over ?
Now Indian stock market is flat and does not look attractive to most foreign buyers. Hence dollar flow to India will reduce for next few months. In last one month USD has gain 2% against INR and now looks like it has potential to cross INR 40 in few days.

Google Graph.

Is it time to buy Indian stock ?

Indian stock market is down from its pick of Dec 2007. IMHO, it was overpriced market. Now market is slowly correcting and there may be good opportunity to buy stocks/mutual funds. There are 2 ways we can invest in indian stock markets from U.S.:

1) Buy ADRs, ETF, Mutual funds listed in US markets. Choices are few but this is simplest form of investing from USA. Three main players in mutual funds/etf are IIF, INP and IFN (compare). These funds invest only in indian stocks and benchmark againt Bombay sensex. There are only 15 or so ADRs of Indian companies. Main players are Infosys, Wipro, Satyam, ICICI Bank etc:

• Infosys Technologies Limited (ADR) INFY
• HDFC Bank Limited (ADR) HDB
• ICICI Bank Limited (ADR) IBN
• Mahanagar Telephone Nigam Limited (ADR) MTE
• Patni Computer Systems Limited (ADR) PTI
• Rediff.com India Limited (ADR) REDF
• Satyam Computer (ADR) SAY
• Sify Technologies Limited SIFY
• Tata Motors Limited (ADR) TTM
• Videsh Sanchar Nigam Limited (ADR) VSL
• Wipro Limited (ADR) WIT
• Dr. Reddy's Laboratories Limited (ADR) RDY
• Sterlite Industries India Limited (ADR) SLT

2) Open trading account in India. This step involves lot of paperwork. You need a) PAN number b) Power of Attorney in India to your family member c) DMat account with broker. I am trying to open one with www.icicidirect.com but it is PITA to fill 30+ pages of forms + photographs + photocopies. India may be BPO of world but India's paperworks needs to outsourced to US for more efficient online processing. I generally use Yahoo Finance India to read about India's market.

Some not so common tax deductions

Job related expenses:
1) Books, magazine subscriptions related to job
2) equipment and tools required by jobs
3) tuition and study related expenses
4) job search expenses
5) laundry, uniform expenses
Job expenses more than 2% of income are deductible.

Investment expenses:
Scenario: you earned $1500/year from passive income like bank interest, stocks, bonds, dividends etc.you can deduct some expenses related to above income, for example:
1) Investment advisory fees
2) Deprecation of equipments like computer, blackberry etc to manage your portfolio
3) investment publications including magazine subscriptions
4) Telephone, copying and postage fees
5) Interest expenses to maintain your portfolio.

Miscellaneous expenses should be more than 2% of income and generally can not be more than passive income.

Tax Rebates Check

Finally both house and senate passed the tax rebate check bill. So when will check arrive and how much will we get ? Here is summary:
1) Single taxpayers will get $600
2) Married persons will get $1200 + $300 per child :)

The tax filing status will be based on 2007 tax returns, which are due April 15, 2008. As per press these checks will arrive in May. Start planning :)

Tax filing date

I was in hurry to file tax as I am in need of money. However, when I filed today TurboTax finally says that IRS will start processing tax from Feb 11, 2008. So I am 5 days early and I have to wait another 9-15 days to get refund. Lesson learned, never rush for filing tax. I think best time to file tax when you are expecting BIG refund is by Mar 1st. Also, when you have to pay tax than best date is April 14 and send it by slow postal mail.

Tax tips

Some tax tips I have learn so far:
1) Deduct maximum in your 401K. My range is minimum 6% and maximum of $15500.
2) If your company do not offer 401K, contribute to Traditional IRA.
3) For 401K/Traditional IRA, do most of your contribution in 25% tax bracket and plan to withdraw in 15% tax bracket.
4) Do not e-file if your refund is less than $500. Simply print and send.
5) And if you have refund of more than $1000, you are giving free interest money to federal. In this case, change your w-4 and reduce your monthly tax.
6) Contribute to Roth IRA. It is good for short-term stock trading :)
7) Contribute to traditional IRA if your wife is not working.
8) You can buy properties in India using self-directed IRA :)
9) When you move to India rollover all of your 401(k), IRAs into either self-directed IRA or one low cost IRA provider. You should not withdraw all money at once, but plan to withdraw over period of few years so that you pay taxes in lower tax brackets.

Tax time

Another tax year and again hassles of filing taxes. This year is more complex for me because, I purchased home and sold stocks in ESPP. While calculating tax on mortgage interest on home loan is straight forward, it is ESPP stock which is causing headache. I sold my ESPP stocks before 2 years of "lock-in" period, hence 15% discount on stock price will add to my taxable income. Not a bad deal as stock price where up by 40%. I bought TurboTax Deluxe edition from BestBuy for $39.99 but TurboTax itself is asking me to upgrade to Premier version of $79.99 because of ESPP. After reading few articles on internet I am able to calculate ESPP tax myself.
One more thing, I am doing tax myself over past 7 years using TurboTax and used CPA once. I found doing taxes yourself is better than CPA or H&R. In both way you are responsible to give all paperworks and personal information about your finances. Once CPA take your tax papers and fees they will disappear and you have to chase them to get answers on your tax. Doing tax myself has given me more knowledge and tax saving ideas.