GDP Components

Breakdown of 2008 GDP into CIGX

Gross Domestic Product (GDP)

“Real gross domestic product — the output of goods and services produced by labor and property located in the United States”. This is mainly used as a measure of economic output. You look for GDP going negative to signal a recession. The GDP itself is a huge economic indicator, but it pays to find out what goes into the GDP and look at the components.

The components of GDP are private consumption, investment, government spending, and exports minus imports or as an equation GDP = C + I + G + (X – M). Next time I will explore each of these components.

Bird’s Eye View

I haven’t been updating recently, but I plan to start writing again soon since I need to figure out what to invest in. I’ve been staying out of the market, because it was difficult for me to make sense of anything. To get back into the game, I am going to dissect GDP and look at opportunities there.

The Secret Millionaire’s Club

Check out an episode of The Secret Millionarie’s Club from Warren Buffett.

Female Condoms

Female Health Company (FHCO) is getting a bit of buzz from CNN.

They have a lot going for them according to this article.

It is ranked 8th in Fortune’s Small Business 100 for 2009.

Might be a good investment, but it has already doubled in the last year.

Wolfram Alpha

There’s been some hype about Wolfram Alpha, but most of that has been just the PR machine moving its gears. What is it really good for? It’s good for comparing stocks. You can just type in two stocks and it will do a comparison on them just like this.

Facebook, the next Myspace

It’s official, facebook is a dead property. I recently got my facebook account disabled. It turns out I’m in good company (Guy Kawasaki and others). Not that I’m bitter that my account got disabled, but it is not a good sign of things to come. When your mom is on facebook, you know that it is no longer cool. Twitter is what’s cool now. It has shot up in popularity without a good revenue model. Everyone used to be on Myspace and that was the problem, because of all the teeny boppers. Have you tried to read any comments on youtube?

False positives hurt the user experience. Once you ruin that experience the illusion is gone. RIP facebook.

Tax and IRA Reminder

On this Good Friday, let me remind everybody that it is not too late to make an IRA contribution to 2008. The deadline is April 15, so if you find that you will be getting a nice tax refund, it wouldn’t be a bad idea to contribute to an IRA account. Plus stock prices are on the rise.

Happy investing.

Review: Motorola Z9 Cell Phone

I’ve had the Motorla Z9 phone with an AT&T plan for about 7 months now, and I’ve had a great chance to see the downfalls and highlights of this Motorola slider phone.   In my seven years of having a cell phone, I’ve been able to have experienced Sprint, Verizon, and now AT&T.  I’m a big believer in not paying hundreds of dollars for a cell phone so I usually just try to get a free one from the store or sign up for a two year plan on Amazon and get it for cheap (or free in this case back in August 2008).

The Motorola Z9 is a sturdy slide phone with a nice mahogany color, easily distinguishable keypad to navigate through menus, great volume control, and good overall functionality.  There are a number of improvements that I would like to see Motorola add on, but even though I wasn’t thoroughly impressed with my first slider phone, it is not a terrible phone either.  At about .6 inches think and 5 ounces heavy, this compact phone can easily fit into your pocket,  and I’ve dropped it numerous times on the concrete ground, but the Motorola Z9 has been able to withstand some of those accidents.

Cellular Service

I’m not sure if this is the service of AT&T or Motorola’s (MOT) wireless technology but I have had more dropped calls with this phone than any of my two previous flip phones.  These dropped calls occur even in normal locations like a home or outside in an open area.   I would rank Verizon (VZ) first with Sprint (S) and AT&T (T) tied for second.

Battery Life

The battery life is terribly disappointing as I notice that it gets to low battery status rather quickly.  Cnet rates the talk time at 240 minutes talk time or 312 hours of standby time.  I would more realistically say that the talk time is more like 180 minutes with a 72 hour standby time.  The battery also seems to get overly warm during normal usage.

Extra Features

The features on the Z9 is everything that someone would like for a phone without a data plan.  Whether you’re talking about a 2 megapixel camera phone with decent quality photos, bluetooth compatibility, mp3 music playing ability, a slot for a micro SD card, and a queued history of the last 120 calls.  You can sort your list of calls by incoming and outgoing calls but not by solely missed calls.

Additional Improvements

The “go online” button above the green “talk button” can easily be accidentally pushed (when trying to make a call) which causes unnecessary data fees.  After a couple months of frustration, I figured out a solution to ensure that the “go online” button will never cause you any distress:

1) Press the Menu key
2) Scroll down and select Settings
3) Scroll down and select Security
4) Scroll down and select Lock Application
5) Enter access code (default is 1234 I think) & select “WebAccess” to lock and press OK

Overall Grades

Battery Life: D+
Functionality: A-
Durability: A
Photo Quality: B
Cellular Service: C
Overall Cell Phone Rating: B-

What I Learned from David Swensen’s Pioneering Portfolio Management

I am not going to write a book review for Pioneering Portfolio Management, because many other qualified individuals have already done so, and this book is clearly a worthwhile read. What I am going to do is highlight the main points of the book that would be most applicable to average individual investors.

David Swensen is Yale’s chief investment officer and manages their endowment fund. An individual investor is not too different from an institutional investor, except that he works on a much smaller scale, isn’t sheltered from taxes, and has a finite lifespan. Both types of investors use the same three tools when making financial decisions: asset allocation, market timing, and security selection.

In allocating assets, diversification is key. Diversification is only meant to control risk, not increase return. Investing in multiple uncorrelated asset classes, each with the same risk factor and expected return, will decrease the collective risk factor while maintaining the same expected return.

This is Swensen’s basic formula for an individual investment portfolio:

• Domestic Equity 30%
• Emerging Market Equity 5%
• Foreign Developed Equity 15%
• Real Estate Investment Trusts 20%
• U.S. Treasury Notes and Bonds 15%
• U.S. Treasury Inflation-Protection Securities 15%

After choosing asset allocations, it is important to constantly rebalance your portfolio to maintain these allocations. Swensen recommends rebalancing more frequently with higher volatility assets. For stocks, rebalance daily (but remember that Swensen does not have to worry about tax liabilities). This emphasizes the contrarian approach to investing. Swensen strongly discourages momentum investing.

Where the market is efficient, there are no mispricings for active managers to exploit. Swensen asserts that in such markets, “Good results stem from luck, not skill.” Index funds historically offer better returns than mutual funds simply because they don’t have the active management costs.

Swensen does advocate some allocation into real estate and private and foreign equity. This is more difficult for an individual to directly access, but there are ETFs that track alternative investments.

Finally, trying to time the market is futile.