So what am I doing?  I’m following the CEO’s move and buying more.  While he put around $10 million into his company, I think I’m going to go a little lighter than that.  I am however going to triple my current holdings at around $21 per share.  This will lower my average purchase price and also at the same time make it one of my biggest holdings.

In the future, I’m going to set a target at around $15 where I would consider buying more.  If it doesn’t get that low, then I will hang on to what I already own and see what happens.

In the meantime, I’m going to try and mentally prepare myself for another quarter or two of negative results.  The latest acquisition isn’t likely to show any serious impacts to the company’s revenue in the near term and this is mostly factored in at the current stock price.  On the other hand, if by some miracle, revenue and earnings show some serious improvements this stock could very well take off and I would have bought in at the bottom of the curve (this is a long shot though).

Only time will tell…

PS, I’ve fought the urge to leverage up and buy stock options for this one.

For 2011, I’m going to be swearing off options.  I may participate in some selling of covered calls, but I’m going to stay away from using them as a way to gamble on hunches I have about the future.  Instead, I’ll be sticking with regular, boring old stocks.

This year I have a hunch that AOL (yes that AOL… America On Line) is going to make a come back.  The future earnings projections are pretty abysmal, and I think people are being a little too negative about the company.

While AOL currently relies on old school dial up internet subscribers for a majority of their revenue (approx. $250 million in the last quarter), they are investing in a number of different areas to try and generate new streams of revenue.  At the same time, they are acquiring internet properties with high traffic volumes.  In fact, last quarter they bought TechCrunch.com.

Also, the numbers look especially bad right now compared to the recent history.  I believe most of this is from shutting down operations and  selling off some of their assets.  Hopefully, starting in 2011 things will stabilize and they can focus on expansion instead of controlling the losses.

So, how am I going to play this?  Well, I think the next quarterly statement might be pretty bad as well, so I don’t want to go all in at this point in time.  I’m going to buy 100 shares of stock this week and wait to see what happens.  If the stock tanks after the next quarter, I’ll double down and lower my cost basis.  Otherwise, I’ll stick with my 100 shares and see how the year goes.

PS.  If I had just bought stock for my hunch on Motorola instead of buying stock options, I’d only be down 3%.  That sounds a little more appealing than my current 92% loss.

I think that anyone who has even a little bit of financial sense should be able to manage their own money.  Assuming you’re not super rich, or have some weird circumstances, why should you pay someone else to manage your finances?  Warren Buffett has 2 simple rules to follow when it comes to managing money that anyone can understand:

• Rule #1 – Don’t lose money.
• Rule #2 – Don’t forget rule #1.

While this is somewhat of a humorous take on money, there is some truth to it.  While one of the richest men in the world can get away with joking like this, how could this be applicable to mere mortals like you and I?

Don’t lose money to the scammers. I have a rather broad definition of “scammer”.  A mutual fund loaded with hidden fees, a broker charging Grandma $150 to trade a stock, or a “Free Investing Seminar” hoping to lure you in and convince you to hand over money are all types of things that need to be avoided.

Don’t lose money by chasing the bull. Wayne Gretzky was awesome because he “went to where the puck was going, not where it already was”.  We should try to do the same thing.  A few weeks ago, I was talking with a Program Manager from Apple (he worked on iTunes), and he was literally in love with Apple stock.  While I can understand his reasoning, because he could very well be a millionaire from his stock options, he actually was recommending that I should buy in too.  No thanks!  He said “It just hit $300,  it’s great!”.  I replied that is exactly why it’s the wrong time to buy.

Apple could very well keep going up, but will it go up 1,000% from where it is today?  No way.  Back when Steve Jobs re-joined the company is when we should have bought that stock.  In 1997, the stock was trading for around $17.  If you bought $10,000 worth of Apple stock back then, it would be worth roughly $175,000 today.

Don’t lost money by taking unnecessary risk. I’m one of the worst offenders when it comes to this one right here.  I should have learned my lesson by now, but I keep making the same mistakes and taking the same risks.  While this type of problem could take many forms, my problems is trading stock options.

Stock options are supposed to be used to reduce risk, allowing you to shield your investment from big swings in the market.  Instead, it can also be used to legally gamble with your hard earned money.  This year I made a pretty big bet with Motorola.  In January of last year, I bought about $3,000 worth of Motorola $10 call options with a maturity date of January 2011.  My rationale was that the Android phones were going to rise and take over this year, pulling Motorola up with it.  Unfortunately, this doesn’t look like it’s going to happen and I just wiped out any other gains I would have made this year with other investments.  While if I had guessed right, and gambled on Apple, I probably would think I was sooo smart, at least I hope to learn to leave those options alone.

Maybe there’s other ways to lost money that I haven’t mentioned here, but these were just the few that came to mind as I was writing this.  No doubt, I’ll probably find a way to lose money in the future, and if I do, I’ll be sure to share.

Fast forward to me graduating from college and getting my first job.  I was seriously in awe with how much I was getting paid to basically solve little problems on the computer, and I enjoyed what I was doing.  At the same time, my expenses were ridiculously low.  I think I was paying $500/month for rent, with utilities included.  Needless to say I saved some serious money.  I really didn’t spend money on anything either, besides buying a new truck (which I still have today… paid off).

Today, however, I’m add odds with how I feel about money.  On one hand, I think I should save any extra money I come across, but on the other hand, I have a nice little nest egg.  Should I spend money on material things that catch my eye and not feel guilty about it?

Tonight I’m probably going to go to the Apple store and drool over the new MacBook Air.  If I felt like it, I could throw down some plastic and not think twice.  I wouldn’t have to go into debt to get it, and I think it would be useful to have for blogging, working on websites, etc.  But something inside me feels like I shouldn’t buy it… like I would feel guilty for indulging and spending that much money on something that I don’t “need”.  Not to mention, I spent $550 there two weeks ago buying an iPad, which I still have mixed feeling about, but use pretty much every day.

I guess I have a little guy on one shoulder telling me life is too short to worry about things like this.  If there’s something shiny and new that I think would be cool to own, why not get it.  On the other shoulder is a little guy telling me that I don’t need those types of things and I would be wasting my hard earned money.

Sometimes I wish I was one of those care free types of people that don’t worry about money, except I wonder if they really do deep down.  Do they feel the same way, and maybe even more so, and put on a front of not caring to deal with it?  Not sure, but I’ll let you know what I think about the new shiny laptop that Apple has

One of the main problems as everyone knows is the fact that health care costs are rising at a very high rate.  While there are many reasons for this, one of them is that the industry is treated like a free market, but there is one missing component: information.  Customers (patients) don’t have a clue what the actual price is for the medical treatments they’re receiving.

When I go to the doctor, I really just assume that either a) it will be covered by insurance or b) I will have to pay a small amount like a co-pay or co-insurance.  The true cost is never even exposed to me.  Behind the scenes, the doctors and insurance companies have negotiated ahead of time what they are going to charge and pay for certain services.  This price can even be different depending on what insurance company you have or what groups your doctor is a member of.  And to top it off, if you don’t have insurance, the doctor is going to charge you even more than they would the insurance company!

I thought about what could be a way to help lower these costs and shed some light on how this whole industry is operating, and I decided to do something about it.  I created a website to allow everyday people to share no only how much medical care they received cost, but also which doctor charged them that amount, and what insurance actually paid to the doctor.  If enough people start using this website, eventually we’d be able to come up with serious tools to help insured and uninsured patients lower their bills.

If an uninsured person wanted to go to the doctor, but they were worried about how much it would cost, they could look it up and find the cheapest doctor in their area.

On the other hand, if an insured person gets a new job, how do they know what insurance plan to pick of the 3 or 4 their company offers?  They could look up and compare the different plans according to their age/health and projected medical costs, and pick the one that would mean less money out of their pocket.

Does this sound good?  Check it out and help shed some light on how much medical procedures are really costing by posting your own information.  And if you have any comments or suggestions, post them on this blog and let me know.

The new website: www.ProceedYours.com

I’m going to try and post some insightful articles on finance, stocks, and living in general.  However, I don’t think I’m going to try and be as ambitious about the number of postings I get out there.  I’m a busy man now, so I’m probably going to shoot for about 1 article a week.  Hopefully if I can focus on that, they’ll be a little higher quality and more interesting.

Until then…

We’ll have to see how this plays out…

The first thing to take a look at would be the cost of living adjustment itself.  I found an online calculator here that’s pretty good.  According to it, someone making $50k in Orlando needs to earn $110k in Manhattan, just to keep their living standards.  That’s crazy!  Though it looks like housing is the biggest factor, because you would have to spend 357% more on housing there than in Orlando.

The next thing would be the tax difference.  In Florida, there’s no State income tax, but you can bet most places will.  According to Wikipedia, 7 states do not have a state income tax, and 2 others only tax dividends and interest income.  It’s no wonder all the old people migrate to these states.

Anyways, how would you calculate the adjustment?  Lets say you make $50k in Florida with no income tax and are moving to North Carolina, where income tax is approximately 7%.  Would you just multiply $50k by .07 to see how much extra you need?

$50,000 X .07 = $3,500

So you would need to make $53,500?  Not so fast.  Let’s say you made $53,500 and you had 7% withheld for state income tax.

$53,500 X .07 = $3,745

Something doesn’t add up quite right…

In reality you need to take the current tax free income $50,000 and divide it by 1 minus the tax rate, or (1 – .07) = .93… So:

$50,000/.93 = $53,763

AND

$53,763 X .07 = $3,763

There we have it… So summing up:

(TAX FREE INCOME) / (1 – TAX RATE) = (EQUIVALENT TAXED INCOME)

Then take that and multiply it by the cost of living adjustment to get your total income requirement to keep your same income in a different State.

Many times, I’ve heard of people “paper trading” to test their skills in the stock market without actually putting any skin in the game, so I decided to look around to see if a site would allow me to do just that.  Unfortunately, I couldn’t find one that seemed too appealing.  Either the site was very unimpressive, or it seemed like they just wanted to get my information so they could bombard me with ads.

I gave up on the idea.

A few days later, I noticed an interesting article about a new startup investing website, kaChing.  This site allows you to set up a a virtual portfolio of $10 million and buy and sell stocks.  It includes a hint of social networking, since you can see other people’s portfolios and can share information.  While this pretty cool in and of itself, the real kicker is how the site actually makes money.

If you stick with the site and trade, they assign you an investor IQ, which is basically a automated rating of how good a trader you are.   If you meet some other restrictions, you can then become a “Genius” and people can choose to invest like you.  The customer then sends kaChing money to invest, and whenever you buy or sell in your virtual portfolio, kaChing does the same moves with the customer’s money.

As a Genius, you set your rate for managing money (say a %1 fee for people investing like you) and kaChing takes a cut.  The more money you “manage” the more you and kaChing can make.

Am I the only one who thinks this is really cool?  While I doubt I’ll ever become a Genius, the site is awesome for paper trading.  If you want to follow me, my investor ID is 76659.

Right now, kaChing has around $3 million in actual invested money.  If this idea takes off, those guys are going to make a killing.

The other morning the wife asked me what stock futures were. That got me so pumped up just thinking about derivatives, I probably didn’t need a cup of coffee. I can be such a nerd

Anyways, I figured this would be a great topic to get back into the flow of blogging on FrugalJim, so let’s get going.

The reason this topic was brought up in the first place was because the talking heads on TV and/or the web articles written in the morning like to give a shout out to the stock futures.  They do this to try and give an indication for how the market is going to act once they open up for the day.

Digressing a little, stock futures are derivatives.  These aren’t actually a stock you can buy or sell, but are “derived” from actual stocks.  Just like stock options, they allow you to speculate whether a stock will go up or down at some point in the future.  Not only can you do this with less money than you would need if you wanted to buy the stocks outright, but you can do it outside the normal stock market hours.

The talking heads simply look at the futures to get an estimate of which way the market is moving and act like they know how the market will behave.  The ironic thing is they never go back and see if they were right or wrong.  Just because the market starts off strong, doesn’t mean it won’t tank in the afternoon.