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
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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.