Harish Raju Musings

Well it’s been one heck of a weekend down at Startup Weekend Columbus II. We’ve had a dozen companies started and enough stories created to fill a year’s worth of posting on this blog. I’ll be sharing some of those stories to come. Here’s the list of companies birthed at this weekend’s Startup Weekend Columbus II. The description’s were pulled from the Tweetstream (#swcii) from the event. Check them out.

TechLife Columbus: Startup Weekend Columbus II - Engaging, energizing, innovating - making it happen - video links

The Federal Reserve has slashed a key interest rate by half a percentage point as it seeks to revive an economy hit by a long list of maladies stemming from the most severe financial crisis in decades.

The central bank on Wednesday reduced its target for the federal funds rate, the interest banks charge on overnight loans, to 1 percent, a low last seen in 2003-2004.

The funds rate has not been lower since 1958, when Dwight Eisenhower was president.The cut marked the second half-point reduction in the funds rate this month. The Fed slashed the rate by that amount in a coordinated move with foreign central banks on Oct. 8.

Fed cuts key rate by half-point - Stocks & economy- msnbc.com

Tags: FederalReserve

Plow money back into the market. Why throw good money after bad? Because over long swaths of time, stocks always do go up, and now is a good time to start buying, while prices are lower. That means maxing out on your 401(k) contributions and feeding an Individual Retirement Account up to $5,000 in 2008 (plus another $1,000 if you’re at least 50.)

Play the Roth card. This could be an excellent time to take your old tax-deductible IRA and convert it to a tax-free Roth IRA. You’ll pay income taxes on the amount you convert, but that amount is probably a lot lower than it would have been without the recent market rout. And given the astronomical deficits that Washington will have to fix sooner or later, your tax rate may be at an all-time low. Once your money is in a Roth, you’ll be able to reap all the future earnings without paying taxes on them.Invest for income.

High-yield stocks and corporate bonds have been among the hardest hit in recent market sell-offs, but they are exactly what you want in your portfolio as you head into retirement, says Paul Sutherland, a wealth manager with FIM Group in Traverse City, Mich. “Lots of companies that are historically good, consistent dividend payers are selling at very low prices,” he says, pointing to nonfinancial firms like Dow Chemical, AT&T and General Electric.

How to Play Catch-Up On Retirement Investments | Newsweek Business | Newsweek.com

Tags: rothira, 401(k)

The Oracle of Omaha has long preached that the long term is the only view for an investment — even if the investor is beyond retirement age. He’s said before that his ideal holding period is “forever” — and the Mars-Wrigley-Berkshire deal is yet another example of Buffett putting that theory into practice.

Yet most investors have not learned this lesson. Recent NYSE data showed that the average holding period for a stock is now less than one year.

Buffett’s abilities did not develop overnight. It’s been a lifelong process — one that began at age 11.

So while he may be a better investor than us today, we can at least learn from his experiences and — like he did — become superior investors over time. That means:

1. Buying for life (or, at least, the long term).
2. Buying small (perhaps our lone advantage).
3. Buying based on thorough research and due diligence.

Seriously, Warren Buffett Is a Better Investor Than You

Tags: warrenbuffett, fool.com

Mint widens halt on gold coin sales as inventories get depleted - MarketWatch

The Wall Street geeks, the quantitative analysts (“quants”) and masters of “algo trading” probably felt the same irresistible lure of “illimitable power” when they discovered “evolutionary algorithms” that allowed them to create vast empires of wealth by deriving the dependence structures of portfolio credit derivatives.

What does that mean? You’ll never know. Over and over again, financial experts and wonkish talking heads endeavor to explain these mysterious, “toxic” financial instruments to us lay folk. Over and over, they ignobly fail, because we all know that no one understands credit default obligations and derivatives, except perhaps Mr. Buffett and the computers who created them. 

Somehow the genius quants — the best and brightest geeks Wall Street firms could buy — fed $1 trillion in subprime mortgage debt into their supercomputers, added some derivatives, massaged the arrangements with computer algorithms and — poof! — created $62 trillion in imaginary wealth. It’s not much of a stretch to imagine that all of that imaginary wealth is locked up somewhere inside the computers, and that we humans, led by the silverback males of the financial world, Ben Bernanke and Henry Paulson, are frantically beseeching the monolith for answers. Or maybe we are lost in space, with Dave the astronaut pleading, “Open the bank vault doors, Hal.”

Op-Ed Contributor - The Rise of the Machines - NYTimes.com

Tags: warrenbuffett, financial wmd, derivatives

How to know when a stock is really a bargain ?

* Step 1 Look at a stock’s forward P/E. This is the price investors are willing to pay for every dollar of expected earnings. Compare this ratio with that of the company’s peers and industry benchmark. The S&P 500’s forward P/E is 13.8. What you want to see: ratio lower than average but not too low (Matthew Sauer, a senior vice president at value-oriented Ariel Investments, is cautious about P/Es below 8).

* Step 2 Look at the trailing P/E, which is based on a company’s past earnings. It will show whether a stock was cheap before the market’s recent free-fall. What you want to see: ratio lower than industry average.

* Step 3 Check the price-to-cash-flow ratio. This shows how much cash a company generates per share. It’s sometimes a more reliable measure of value than P/E because cash, unlike earnings, cannot be manipulated easily by accountants. Again, compare the ratio with the industry benchmark and peers. What you want to see: ratio lower than average.

* Step 4 Look for stability. A company that isn’t highly leveraged (laden with debt) has a better chance of riding out the economic downturn. To find out if that’s the case, see the company’s balance sheet at The SEC’s Web site. Divide total assets by total equity. What you want to see: ratio of 2 or lower (10 or lower for financial firms).

* Step 5 Read the news. No matter what the numbers say, a stock could be a rotten choice if, say, the company is embroiled in a potentially costly lawsuit. Not every stock that appears cheap is a good deal. What you want to see: no obvious problems. Bottom Line: If a stock passes all these tests, you could be onto a good buy.

Money: 9 ways to tough out tough times - Oct. 8, 2008

Under Buffett’s plan, Treasury would lend hedge funds, Wall Street firms or any other investors 80% of the price for distressed assets. Investors would benefit from borrowing at lower rates available to the Treasury. But the government would get first claim on the sale of those assets, which means it would get its loan back plus interest and possibly turn a profit. Only then would investors see a penny.”Now you have someone with 20% skin in the game,” explained Buffett.

“Believe me, I won’t be overpaying if I’m buying with that kind of leverage. And you have someone [the investors] to manage the assets to the extent they need to be managed.”Buffett also noted that the presence of the government in the transactions would raise the price of assets above the absolute firesale levels for which they could now be sold. That would benefit the banks trying to unload them.

Buffett: $700 billion bailout may not be be big enough - Oct. 2, 2008

Tags: WarrenBuffet, $700 billion

On Monday afternoon, Wall Street basically stopped trading to watch TV — mainly CNBC — to see how the House of Representatives would vote on the $700 billion bailout package. When it first started looking like the bill would fail, the Dow plummeted 389 points, or 3.6%, in just seven minutes. If it had continued at that pace for much longer, this would have been perhaps the most harrowing day in stock market history. It didn’t, but things were still really, really bad. The Dow ended the day down 778 points, or 7%, and the S&P 500 — a better measure of the overall market — was down 107 points, or 8.8%, its worst performance since the 1987 market crash. And markets for bonds and short-term loans were, for the most part, nonexistent.

Without a Bailout Plan, What Will the Cost Be? - TIME

Tags: bailoutplan, bailout, dow, 778

To avoid buying or selling a stock at a price higher or lower than you wanted, you need to place a limit order rather than a market order. A limit order is an order to buy or sell a security at a specific price.

A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. When you place a market order, you can’t control the price at which your order will be filled.

For example, if you want to buy the stock of a “hot” IPO that was initially offered at $9, but don’t want to end up paying more than $20 for the stock, you can place a limit order to buy the stock at any price up to $20.

By entering a limit order rather than a market order, you will not be caught buying the stock at $90 and then suffering immediate losses if the stock drops later in the day or the weeks ahead.

Limit Orders

Tags: limitorder