Do What Matters

On March 16, news came out that Peet's Coffee might be acquired by Starbucks. Since then PEET(Peet's coffee stock) went up almost 15% and I was really not surprised but wanted to understand if buying such stocks has any risk associated with it. Here is what I found while researching.. An acquiring company always pays a premium purchase price which is higher than target's stock price. Based on this, target's stock jumps on the potential merger news but not up to the purchase price. So, when do the experienced merger arbitrageurs buy such stocks? - when the deal is announced. They usually hold the stock until merger is completed and then sell. Also if acquiring company uses it's own stocks to purchase then you should sell some/more of the stocks of acquiring company if you own them.  What is the biggest risk? - if deal falls through. In general about 90% of announced deals are completed.  Is there an opportunity? - as you can see from the table below, there is alw...

New financial reform was signed by president last week. So what is in the 2,300 pages law for us the consumer?  After reading some articles on the web, I wanted to summarize few things that might impact our life the most: Keep cash in your wallet - Businesses like coffee shop can impose $10 minimum on swiping your plastic legally now. Congress has allowed them to give discount to cash payers. This will save small business a tons of monthly credit card fees, so expect cheaper coffee and bagel, if you have cash in your wallet. I think, big ticket retail business will also offer discount on cash or bank transfer if paid online. Credit card companies will have to be innovative now. New financial regulatory agency for consumer - This sounds like bigger government, but this is essential. The newly setup Consumer Financial Protection Agency or CPFB will be setup soon and armed with power to deal with shady business practices, predatory landing schemes and other abusive  ...

I recently came across a powerful investment analytic tool called portfoliomonkey.com The website is not associated with any investment house and backed by advisors from academia and investment professionals. I am not sure how much to trust its risk analysis on my portfolio, but at least something is better than nothing, when it comes to quantitative analysis of investment portfolio. To get started, you can sign up and add your investment symbols and value in the system. You can fake it if you are just trying to test the system, I entered correctly and it came back with a PM (Portfolio Monkey) score of 2.5 out of 5. The PM score consists of 3 indicators Average expected return, Volatility and Efficiency ratio(which basically is calculated by dividing Return by volatility. The system then allow users to Optimize, compare and discover the portfolio. I tried Optimize option and it created a graph of expected portfolio value and also suggested actions to achieve optimized return based o...

Money magazine in its latest issue published a survey report that it conducted with home improvement store Lowes about American homeowners and the impact of their houses on their overall happiness. Lowes being involved in the survey, I would consider this more like a marketing thing than a scientific or psychological study, but there are few recommendation made in this article that are interesting and sure to caught your attention: Hide the TV - The report says, more you watch the TV, you tend to overestimate the affluence of other people and as a result you become less happy. Recommendation is to hide the TV behind a wood panel or something so that you watch less TV. Beware couch potatoes:-) Raise the ceiling - Article points out that researchers have concluded that people think more freely and creatively in rooms with 10 foot ceilings than in those with 8 foot ones. Now you know why universities buildings and classrooms have 15 foot ceilings.  Using different ligh...

The popular micro blogging site Twitter has become an avenue for marketers, promoters, technologists, celebrities and now catching on with investors as well. I am not immune to this phenomenon. I subscribe these tweets (micro commentary - junk most of the time) in the search of some goldmine :) See the number of followers some of these tweets have (including some big names):        Twitter                           Followers       Why News & People    ABC News                      7,549              To  get notification about important shows CNN Breaking news       2,848,743      Get breaking news from CNN BBC South Asia News    1,455             BBC south Asian News (primarily Indian sub-continent) NDTV...

We always had lunch table discussion on hedge fund after the credit default swap fiasco, but I must confess, I never understood the characteristics of Hedge Funds until I watched this youtube video. Educate yourself by spending 10 mins: