Advantages and Disadvantages of a Roth IRA

This is an article that I wrote for Moneycrashers on the Advantages & Disadvantages of a Roth IRA.

Planning your retirement is one of the most important decisions that you will ever make concerning your financial future. Many people have questions about the different types of retirement accounts available and which one is the right plan for them. Let’s take a look at one type of retirement account known as the Roth IRA. A Roth IRA is an individual retirement account which allows an individual to set aside a specified dollar amount of income after taxes. This tax-advantaged retirement account derives its name from United States Congressman William Victor Ross Jr., who was the legislative sponsor of the bill creating this plan.

[Read more…]

Buffett’s 4th Quarter Moves

Buffett sold shares in the following companies:

Carmax                 8 million shares

Conoco Phillips   19.7 million shares

Exxon Mobil         854,000 shares

Gannett                2.2 million shares

Ingersoll-Rand    5.6 million shares

Johnson & Johnson 9.8 million shares

Proctor & Gamble  8.8 million shares

Suntrust Bank      700,000 shares

United Health Group  1.2 million shares

Buffett added to his positions in the following companies:

Becton Dickinson: 1.5 million shares

Iron Mountain: 7.0 million shares

Republic Services: 8.3 million shares

Wal-Mart Stores: 39.0 million shares

Wells Fargo        320.1 million shares

3 Small Cap Dividend Stocks That Pay

These 3 small cap dividend stocks are showing investors the money.

1. American Ecology (ECOL) – I have bought shares of this small cap waste management company in the past for its growth potential but now American Ecology has become a value play. American Ecology has excellent growth prospects over the next five years with a projected 20% growth rate and the company has very little debt. The stock now sports a dividend yield of 4.82%. You can get paid a healthy dividend while waiting for the stock to rise.

2. Brookfield Infrastructure Partners (BIP)-Brookfield Infrastructure Partnership is a limited partnership that was spun off from Brookfield Asset Management in 2008. BIP owns and operates all of the infrastructure assets for Brookfield Asset Management including electricity transmission systems, timberlands and social infrastructure. Brookfield shares are selling for $16.63 and the stock is currently yielding 6.6%.

3. American Software, Inc. (AMSWA)– American Software is a small $100 million dollar company that develops application software that delivers enterprise management solutions. American Software has been profitable for 35 consecutive quarters and the company has no debt. The company is buying back shares which should only help the long term value of the stock. American Software is currently yielding 6.1%.

Access Pharma (ACCP.OB) Product Development Update – Sponsored Post

Access Pharmaceuticals (OTC: ACCP.OB, “Access”) develops and commercializes products for the treatment and supportive care of cancer patients, including:

MuGard, an FDA-approved rinse for the management of patients with oral mucositis, a debilitating side effect of various cancer treatments

– ProLindac, now in Phase II clinical testing of patients with ovarian cancer

– The Cobalamin Platform, a drug delivery system for the oral administration of large molecules that are currently administered via injection (insulin, human growth hormone, fertility drugs, etc.)

MuGard has been commercially launched by Access’ partner, SpePharm, in six European countries, including the UK, Germany, Italy, Norway, Greece and Sweden. Over 15,000 bottles of MuGard have been used by over 2,000 patients to date. Access is now conducting pre-marketing activities, including ramping of commercial production, with the goal of a U.S. commercial launch by April 2010.

ProLindac is a next-generation DACH platinum anti-cancer compound which includes a proprietary nano-polymer drug delivery vehicle that allows for over ten-times the dose of platinum to be delivered in a targeted manner to cancer cells, with a much better safety profile compared to standard platinum-based drugs which cause significant and cumulative neurotoxicity.

Access will conduct a combination study evaluating ProLindac with Taxol (paclitaxel) for second-line treatment of platinum pre-treated patients with advanced ovarian cancer. This is a multi-center study being conducted in Europe in up to 25 patients with primary efficacy endpoint goal of achieving at least a 63% response rate. Access expects to begin patient dosing by April 2010.

The Cobalamin Platform is a drug delivery technology that involves coating a nano-particle with a vitamin B-12 analog (cobalamin) that binds to intrinsic factor in the gut and triggers binding to cellular receptors which absorb the entire package, resulting in exponential increases in absorption through the gut of large molecule drugs/hormones typically administered by injection.

In June 2009, Access announced that two bio-pharmaceutical companies would conduct preclinical, proof-of-concept studies in animals (rat and dog models of diabetes) before proceeding to more formal negotiations for the Company’s oral, long-acting (basal) insulin product candidate. Final results from the non-exclusive collaborators are possible during Q1 2010.

For more information on Access, visit the ProActive Capital Newsroom at www.proactivenewsroom.com.

This post was placed by IR GRO.

New Credit Laws for 2010

The last few days have not been good for the major banks. First, the Fed raised the discount rate 25 basis points which will increase the interest rate at which banks are able to borrow money from the Fed. Secondly, Bank of America, the largest bank in the US, has to pay 150 million dollars in a settlement with the SEC over the bank’s Merrill Lynch purchase in 2008. Now the major banks are facing potential losses in the billions due to new credit card laws. JP Morgan Chase, Bank of America and Citigroup are the three largest credit card issuers in the US. Although the new credit card laws aren’t good for banks, they are great for the cash strapped consumer. While the new credit card laws don’t solve all of the problems with credit cards; it’s a good start.

Here’s how the new laws affect you.

1. Credit card companies must wait 60 days before raising rates on delinquent customers. Under the old rules paying your bill 1 day late meant that credit card companies could raise your interest rate to the highest default APR.

2. No more over-limit fees. Customers must opt in to approve over the limit transactions which would generate fees.

3. Anyone under the age of 21 must have a co-signer to qualify for a credit card or be able to show proof of income. This should protect students from being preyed upon on college campuses. Students are often offered free food and clothes in exchange for filling out a credit card application.

4. Fees are limited on popular “fee harvester” cards offered to individuals with bad credit. I have written posts on fee harvesters before. Subprime cards have so many fees that they often eat up the available credit before you ever receive the card. These fees cannot exceed 25 percent of the available credit in the 1st year.

5. No more double cycle billing. This should stop card companies from charging interest on debt paid off the previous month.

6. Credit card statements must be mailed 3 weeks before their due date. Due dates can no longer be arbitrary time periods. Credit card companies are famous for picking due date like Friday, January 23rd by 10am. In the past you had no idea of knowing when your payment was received. You had to trust your credit card company’s word. And we all know a credit card company wouldn’t lie…sure.

7. The higher interest rate balance will be paid first. All payments above the minimum payment must be applied to the highest interest rate. This should make it easier for cardholders to reduce their balances.

In response to the new credit card laws, credit card companies have come up with new tricks. They are raising annual fees on credit cards and charging inactivity fees to customers who don’t use their cards enough. It only figures.

Photo by SqueakyMarmot

Apple iPhone vs. Microsoft Windows Phone 7

Apple Iphone

Microsoft just unveiled its new Windows Phone 7. Microsoft is known for its operating systems and had avoided entering the handset market. Microsoft will now have to compete against Blackberry, Apple, Nokia, Google and Palm for a share of the smartphone market. It will be interesting to see how well Microsoft’s entry into the smartphone market is received.

Exact details are not known about the Windows 7 phone. But here is what is known so far. The phone will be released during the 2010 holiday season. Windows Phone 7 will be Xbox live and Zune media and music capable. Windows Phone 7 will be broken down into hubs. Hubs are designed to gather like features and functions in one place. Windows Phone 7 contains the following hubs:

People Hub– social networking integration (Integrates contacts from Facebook, Twitter, Windows Live, Gmail)  

Office Hub – business applications (Office, Outlook, Workspace)

Games Hub– (Many Xbox live games)

Music & Video Hub– (Zune HD Music)

Pictures Hub – (All Stored Images)

Marketplace Hub – (Shopping & Applications)

If Microsoft can pull this off properly, the Windows phone 7 launch might open up a whole new market for the software giant. A successful launch could lead to:

1. Increased search engine market share – It stands to reason that Bing will be the default search engine for all Windows 7 phones. According to ZDNet, the phone will have a Bing button on the display.

2. Increased subscriptions to Zune marketplace.

3. Increased Xbox Live subscriptions.

For a more detailed look at the new Windows Phone 7 check out these sites:

Engadget

ZDNet

Reaping Big Rewards From Trash

I have been a fan of Waste Management (WM) for awhile and recommended buying shares in my post last June when the stock traded at $28. Waste Management now sells at $33 per share and continues to steadily grow earnings. I would like to take a look at another waste management company, Republic Services. It was just disclosed today that Warren Buffett’s company Berkshire Hathaway had been buying shares of Republic Services in Q4 of 2009.

Republic Services, Inc (RSG) is the 2nd largest provider of waste management services throughout the US. Since the merger with Allied Waste in 2008, Republic Services has seen its earnings power increase dramatically. Republic’s sales have grown from 3.68 billion to almost 8.2 billion last year. Gross profit increased from 1.2 billion to over 3.3 billion in 2009. Shares currently trade at $27.42 per share. EPS is expected to be $1.67 per share which means shares are trading at 16 times 2010 earnings. 2011 EPS is expected to grow 20% to $2 per share placing a 14 PE on the stock. The growth rate for the next 5 years is expected to be 16.15%. Republic’s free cash flow increased to 109.3 million last quarter.

I do find Republic’s low current ratio and high amount of long term debt troublesome. Republic Services added 6.7 billion in debt to their balance sheet when they acquired Allied Waste. There are positive signs however that Republic is working to reduce its high level of debt. Republic has retired 750 million in long term debt over the past year.

So how does Republic Services stack up against Waste Management? Waste Management currently trades at a multiple of 15.5 based on 2010 earnings and a 14 multiple for 2011. Future growth rates are estimated at 8.7% for the next 5 years. Waste Management trades at 2.6 times book value compared to Republic’s book value of 1.4. ROA is 4% for both companies. Waste Management’s ROE of 15 is much higher than Republic Services ROE of 6. Both companies are highly leveraged and as you can see have similar PE ratios. Republic has twice the growth rate of Waste Management and has a cheaper price to earnings growth(PEG). Waste Management has the higher dividend yield at 3.6% and has consistently increased their dividend over the years.

I think that Buffett was attracted to Republic Services for the following reasons:

– High Barriers To Entry in Waste Management Industry.

 – Rising Free Cash Flow.

– Favorable Long Term Earnings Growth Rates.

– Easy to Understand Business.

– Consistent Operating Performance.

 

Photo by srqpix

Issuer of 79.9% Interest Rate Credit Card Defends Its Product

Premier Bank is justifying their ridiculously overpriced credit card with an APR of almost 80%. This article was found on yahoo.com.

                 Issuer of 79.9% Interest Rate Credit Card Defends Its Product

If you have bad credit in the new era of credit card regulation, be prepared to pay — dearly — for the privilege of using credit. That’s the message underlying recent credit card offers that feature jaw-dropping interest rates of up to 79.9 percent.

 

The sky-high rates may be a sign of things to come in the market for so-called subprime credit cards as issuers who lend to the riskiest of borrowers try to figure out how to stay in business and comply with the new credit card reform law.

“We need to price our product based on the risk associated with this market and allow the customer to make the decision whether they want the product or not,” according to a statement issued by Miles Beacom, CEO of Premier Bankcard, the South Dakota credit card marketer that mailed test offers in September and October featuring 79.9 percent and 59.9 percent annual percentage rates (APRs) on cards with $300 credit limits. Premier markets credit cards issued by First Premier Bank.

Yes, It’s Legal

A national bank charging 79.9 percent interest on a credit card is legal — as long as the issuer fully discloses the terms as required by the federal Truth in Lending Act. Still, the high rate has been met with shock across the country because it is so much higher than prevailing APRs and penatly interest rates. The CreditCards.com Weekly Rate report national average for bad credit credit cards was 14.15 percent on Feb. 12.

Goldman Sachs

I trimmed my position in Goldman Sachs at $155. I still like Goldman but the stock looks vulnerable. I think I will get a cheaper price to buy back in.

The Lowest Rated Bank

And the lowest rated bank is…….. HSBC. I read an article today in the New York Times about how HSBC is the least trusted bank in America. Apparently a survey was given to customers of 7 of the major US banks and HSBC received the worst score. Only 16% of customers believe that HSBC operates in the best interests of its customers and does what is best for them. HSBC customers believe that the bank only does what is right for its bottom line. This is the lowest score in the history of the survey. It sounds like HSBC has a lot of work to do to rebuild customer trust. Surprisingly Wells Fargo and Bank of America scored the highest of the national banks. 40% of Wells Fargo customers approved of the bank. Despite all of its high fees, 33% of customers believe that Bank of America does what is best for them. This was a shock to me because I hear so many complaints about Bank of America from its customers.

All of the major banks scores are relatively low when compared to credit unions. The survey found that credit unions had a 70 percent approval rate. Customers were quite satisfied with credit union practices and felt as if credit unions looked out for their best interests. In my opinion credit unions are still the best value for your dollar. It looks like the big banks better improve on their customer relations or they are going to be in big trouble when it comes to maintaining their deposit base.