Entering Job Market in Recession

I just read a blog post from The Economist's Free Exchange Blog. It was titled Doomed Forever (http://www.economist.com/blogs/freeexchange/2008/07/doomed_forever.cfm)

Anyways, the post talks about entering the job market in a recession can deeply hurt employees' futures. They typically have to work for ten years or so to earn the salary they would have goten in a time of solid economic growth.

The effect is more persistent for workers fated for a lower-salary career (measured by quality of university and subject studied). Higher quality workers will find the recession effect diminishes after four to five years, while lower skill workers face lifetime costs up to five times higher.

Ultimately, skilled workers will be less vulnerable and more likely to overcome grim economic conditions. The labour market rewards their talents. But the authors only considered university graduates. Their results suggest that the costs of entering the labour market during a recession may be even larger for less educated workers.

So in other words, get something beyond the bachelor degree. Now take my previous post talking about a 5.5% drop in salary in over a year for bachelor degree graduates, and the fact that it may take ten years in order to make up for poor timing. I'd say go to graduate school

Gambling Fund

I was thinking about a Gambling fund, similar to Mark Cuban's idea back in 2004. http://www.blogmaverick.com/2004/11/27/my-new-hedge-fund/

I had a friend who bought a pro picker's march madness program. He made $1500 of betting on the games. From that day its go me thinking. Cuban does a good job talking about sports having more transparency than the financial markets, which is probably true. Betting also has low expense, especially for those with smaller amounts to "invest."

So if a professional picks 60%-70%, on average, then if one can ride out with a pro long enough they will make some good money. I figure a 25% gain a week in the long run. One just has to pay for the pro's picks. Also football (NFL) is easier to pick for pros, and its not uncommon to see pick corrections around 72%.

Where most gamblers go wrong is they don't use risk management with their betting. Setting up a "fund" with multiple people helps minimize the risk. You get your bets spread across what the pro is picking, but never use the whole fund at once. Maybe use 50% the first week, and depending how well that week goes, then reposition the "investing" according to the risk of the fund.

The more games the more chance of reward. So if the pro goes 3-2, we end up ahead. The winnings get spread among the guys in the fund. This in turn lowers expenses and risk, the risk is limited. If you get a pro that picks 60-70% we are golden because we have the capital to bet on every game. Yes, there is less money won, but the biggest pitfall to most gamblers and investors is they need to allocate risk in order to ride out those few storms. If a guy is pickign between 60-70%, the fund will help keeping you in the game and blowing your bank. What makes the gambling fund profitable, is the staying power to take advantage of the pros picks. If you can stay around that 20% weekly return adds up really fast, and keep compounding.

The idea of the fund is not extraordinary results. The idea is the fund makes staying around not as difficult and protects you from as much risk. The goal of the fund is to return 20% on avg bet week. So after four weeks, getting 80% is nice, hell 30% is an amazing return in a month. So yes, less profit in each weekend but having the staying power to continue you to do this will make it so you won't blow your bank on a weekend, the idea is consist returns that are between 15-20 times higher than any bank could get you.

I'm not doing this, but just am brainstorming. I just bought a book on on risk management for gambling, and which hopefully will shed some light on the subject. Personally, like it or not, all gambling, poker, and investing involves risk management. That is a reason why I do have a passion for poker as well as investing. Not a big gambler though.
-La Belle Investor

Some Restaurant Economics

Why are bottle of wines so expensive?

So why are bottles of wine so expensive at restaurants? Is it the scarcity factor? Well it’s actually not really the scarcity, which makes them so expensive. There are many alternatives, you could always just go to a different restaurant, but yet they all charge a lot for wine. Tim Harford (writer from Financial Times) helps answer this question for us.

“one of the big costs in the restaurant business is table space. Restaurateurs would there fore like to charge customers for dawdling, but they cannot do that, they charge higher prices for products that tend to consumed in long meals” (The Undercover Economist).

So wine has higher prices, but so do appetizers and desserts.


Are restaurants changing their menus because of costs?

I really enjoy listening to the podcast called Bloomberg on the Economy, and listen to it daily. Tom Keene one of the editors over at Bloomberg interviews experts in various parts of the economy and puts the economics in perspective in his interviews. Well I just listened to one with a chef, at a high-end restaurant. He said that to try to keep either costs the same or down, they are using less meat and more vegetables in their entrees. It costs money for restaurants to change prices on their menus; prices are sticky. They cannot constantly change them with the market. Beef is becoming more expensive because of fuel prices as well as the feed is becoming more expensive for cattle. Some restaurants are changing the cuts of meats, but increasing the use of vegetables is becoming a common solution to keep costs and prices down.

Tip: Even at home and grocery shopping, follow these chefs and try to cut back a little bit on protein and you’ll keep your wallet is little fatter.

Real College Grad Wages Fall 5.5%

This is important for you college students (like myself). I was just reading up on one of my favorite blogs and found this news. Business Week's Economics Unbound, a blog by Michael Mandel, and he had his most recent blog titled Real College Grad Wages Fall 5.5%.

			real median weekly earnings, 08II
			percentage change over previous year
high school diploma only				-0.3%
some college or associated degree				-0.9%
bachelor’s degree only				-5.5%
advanced degree				2.1%

Yowza. It look like college grads without an advanced degree stepped in a pothole in the second quarter. (Economics Unbound)

Here is a graph from Mandel's blog,


So, what does this mean for you college recent college grads or college students. Get an advanced degree because the BA degree is the new high school diploma. An advanced degree will pay off in the long run. To end with Mandel's commentary on the subject, "Yep, it’s a pothole. Without an advanced degree, you are toast."
- La Belle Investor

Dividend Payers for Your Roth IRA

Alright, time I talked about having a dividend paying investment for your Roth IRA. I’m going to stick with my general style so far as in keeping it indexish and basic. Most stocks that pay high dividends in my opinion have some kind of catch. From not a great long term investment (a cash cow with no future), are paying a high dividend to keep investors around, or are in scary industries. Personally, I’m not a huge dividend nut (instead of paying out dividends, use that cash towards the company to add value), but I am a fan in the scenario or dividends for a Roth IRA. I’ll give some suggestions because at the moment I do not yet have a dividend paying stock or ETF. I will invest in one in the near future.

So lets get our hands dirty on dividend stocks and ETFs. What is a dividend? According to investopedia.com it is , “A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount each share receives (dividends per share). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield.”

Having a dividend paying stock or ETF in your Roth IRA, basically means tax free interest. If your getting 3% a year on your investment tax free, that will add up to some nice bank in the future. So having at least one dividend paying investment is a must in your Roth IRA. Also I’m not going to refer any mutual funds or similar funds. I’m a stock and ETF guy, low fees and more freedom.

What dividend payers to I like? I like SDY the most. SDY is a list of the 50 highest dividend payers in the Dow, and it’s an ETF. SDY does under perform the market, at least recently. However with a 6.84% dividend yield, it won’t under perform the market in the long term in your Roth IRA (Tax benefits do help). Its extremely diversified, has a nice yield and basically performs at the same level as an index fund. Don’t go for the S&P’s 50 highest dividend payer (DVY), its yield is like 2%, not good in an ETF focused on dividends. "Greed is good", right Gordon Gekko.

I’d also recommend BND, the Vanguard total bond market ETF. It’s stock price doesn’t have that much violtility, but so you won’t get rich on a changing stock price, however its safe and returns 4.62%. You can’t argue with that. Another similar type ETF is TIP, and it returns 3.21%, but I like my first two suggestions more.

Here is an idea for a stock, with a good dividend. GE, now I’m not all that gun-ho on this one. It earns a three something percent yield, and is very diversified with products and international exposure. GE has a nice alternative energy play as well. Big downfall though, is GE makes majority or their cash through their banking services. Great company historically and has great management, but the financials are a scary bunch at this point in time.


A dividend paying ETF or stock is always nice in a Roth IRA, and everyone should have at least something that is giving them some tax free cash.
-La Belle Investor

How the La Belle Investor is doing so far.....

La Belle Investor Recommendations
Here, is an Edward Jones Commercial that depicts my investing style.




I prefer long term investing and right now my recommendations have all been for long term and specifics have been for Roth IRA investments. However based on my articles, I made some indirect recommendations, that I’ve been using on my fool.com account.

So lets how see how I am doing in the short run.
I bought GEX at $47.72 for my Roth IRA and 48.23 for my regular investment portfolio. That’s a 2.56% gain and a 1.47%. The market is down 2% since both purchases.

My article on Italy, side they had tough times a head. I was going to write it with Spain in the article originally but I felt a greater focus was more ideal. Both are in similar situations regarding their short-term futures. Had you shorted EWI (ishares Italy index) and EWP (ishares Spain Index) from the open of July 7th (a day after my article) you would have had a 1.04% gain on Italy’s ETF and 1.03% gain on Spain’s ETF. EWI went from $26.94 to $25.89 and EWP went from $54.26 to $52.48.

I’m no stock-guru; so don’t expect these kinds of results in the short run. I’m a generally a long-term investor, but listening to my general statements will hopefully be profitable in the future. Too bad I didn’t short EWI and EWP in real life…. Hmm.

Expect my dividend Roth IRA investments suggestions tomorrow.
-La Belle Investor

Gas Prices

Are high gas prices are solution and demise? I say this because,

"The trade deficit had been expected to widen in May on higher oil prices, but instead it narrowed slightly. The surprise was that the volume of petroleum imports plunged 10.5% to their lowest level since September 2002" (WSJ: Real Time Economics).

Although they think, it will rise from May's levels, it still indicate that people are finally changing their habits. Economics are all about incentives, and the incentive here is the less we drive the more cash we'll have on hand. Or less driving equals less spending. Now gas is inelastic, which means we are still dependent on it and no matter the price we will still have to buy it. However we can still cut our consumption of it. I for one bike to work now, I love to bike but it has three benefits. Keeps me in shape, I don't pay for gas, and I'm also helping the environment.

So high prices at the pump are causing people to finally change.

Yes, $4-a-gallon gas is painful, and $10-a-gallon gas could be catastrophic. That's why you should embrace $4 gas now, and welcome it for the changes it will inevitably bring. Problems correct. Markets work. (Fool.com)

So be glad that we are paying some much, because its force changes in our behavior and what we want. Finally electric cars and other alternative fuels will get the investment they need and help the U.S move off our dependence on oil. If it wasn't for such high prices, we'd have no incentive to change. Embrace the change, oh and by the way makes owning some alternative energy stocks or ETFs a little more attractive, What I want? I want this car now instead of anything else,

Tesla Motors, based in Silicon Valley, recently began selling its first production car, the Roadster. Beyond its stylish looks, Tesla's top selling points are downright revolutionary:

• There's absolutely no gasoline. The car is 100% electric. This isn't a hybrid, folks.
• It can go roughly 221 miles on a single 3.5-hour charge.
• Zero to 60 MPH in 3.9 seconds, enough to put many Ferraris to shame.
• Top speed is 125 MPH. (fool.com)

-La Belle Investor