Fashion Friday: Save 30% on Sweaters and Outerwear at J.Crew

Happy almost weekend everyone! Anyone have anything fun on the agenda? This weekend I will be celebrating my cousin’s wedding and I am super excited! It’s also my first time as a bridesmaid so I am hoping I don’t trip down the aisle…

I’m trying to keep things light on Fridays and plan to keep up with weekly budget shopping posts from now on. Would love to hear in the comments if you all want to keep seeing these or not.

With temperatures dropping I’m in the mood for cozy sweaters and jackets. Luckily, J.Crew is to the rescue with a sale to help us avoid paying full price. Today they’re featuring 30% off sweaters, jackets, and blazers. Here are a few items I’m digging:

J.Crew Lambswool zip sweater in colorblock J.Crew Merino wool glen plaid-panel sweater

J.Crew Majesty peacoat Shiny puffer vest

Clockwise from top left: Colorblock sweater / Plaid sweater / Peacoat / Shiny puffer vest

Last but not least, have you all seen the drunk J.Crew tumblr? It’s incredible.

'Drunk J. Crew' Is the J. Crew for All of Us

Netflix’s terrible earnings day explained in one chart

Netflix (NFLX) had a terrible, horrible, no good, very bad day. The TV and movie streaming website reported earnings after the market close today and it was a bloodbath. This chart pretty much sums ups the earnings disaster that was Netflix yesterday:

Netflix Earnings Crash

In word form, Netflix actually beat earnings expectations, earning 96 cents per share on 1.2 billion in revenue, ahead of analyst expectations of 93 cents per share on 1.4 billion in revenue during the third quarter. The issue is that Netflix missed the expectations for the amount of subscribers it would add in the past quarter, coming in about 400,000 subscribers short. Netflix blamed the subscriber miss on increasing its subscription cost by $1 per month.

After this news was released yesterday afternoon Netflix shares immediately went into free fall, and were down about 25% ($120) after hours last night. This plummet illustrates just how volatile the market has been recently. I almost never see a stock fall this much after an announcement, unless the company announces imminent bankruptcy. This insane Netflix hit would not have happened in a more stable market, which is why I urged you all to be very cautious before making market moves right now.

Analysts are also blaming the stock fall on Time Warner’s (TWC) announcement that it is offering a standalone HBO streaming subscription. The thing is, I don’t think that’s very relevant here. The HBO news came out at 11 am yesterday, well before earnings, and the stock even rose during the day in between the HBO announcement and the earnings announcement. Plus, the HBO service isn’t a substitute for Netflix since they carry two different sets of content. If you want Game of Thrones you need HBO; if you want House of Cards and Orange is the New Black you need Netflix.

And even if you have both subscriptions, you’ll still save money over having a cable TV subscription (post to come). I pretty much have this setup right now. I have a Netflix subscription and a Comcast package that gives me internet + basic cable + HBO.

So stop blaming Khaleesi, the crazy drop came from an earnings miss on an over-valued stock (the price to equity ratio was getting quite high at 136). In full disclosure I have 5 shares of Netflix I was hoping to make a quick couple of bucks on after earnings – I figured 5 would be a safe experiment amount but clearly a major fail. I am thinking of picking up a couple more shares at this lower price but will probably wait a couple of weeks on that. When the stock to dipped to $340 in January this year I bought some and it worked out well. I still like Netflix and think it will see more subscribers as 20-somethings move into their own apartments and skip cable.

Finally, let’s close on a happier note. Friends is coming to Netflix January 1st!

How to deal with the market dip: Don’t panic!

Up until two weeks ago the market was all sunshine and butterflies. The S&P 500 was breaking records and Alibaba (BABA) had the biggest IPO ever. Then, all of a sudden, the market mood turned to fire and brimstone. Last week the S&P index had its biggest weekly drop since May 2012 and the Dow Jones Industrial Average erased its gains for the year.

Analysts are running over each other to explain the drop. It’s Ebola, it’s the European economy, it’s Germany, it’s Ukraine, it’s the terrorists, it’s a bubble bursting, it’s the Martha Stewart and Gwyneth Paltrow feud! The real answer is there is no one answer for what is going on. Most likely it is a combination of all of the above (ok, minus the conscious coupling dig).

Honestly, the reasoning doesn’t even matter that much. What does matter is how you react to the situation in the market right now. There are two keys to remember when dealing with a drop like this:

  1. Do not panic!

The media might be over-hyping things a bit. For entertaining examples, check out the post Josh Brown, of The Reformed Broker, wrote yesterday on the dangers of “Correction Twitter.”

The S&P 500 lost 3.1% last week, and 5% from the record high it experienced on September 5th. While this is bad, it is not the imminent crash some articles are implying. The term “market correction” is being used over and over, and yet a market correction technically only applies when the market is down 10%.

For perspective, let’s take a look at the performance of the S&P 500 over the past 10 years.

market sp

First, you can see the big difference between last week’s drop and the pre-recession drop. This is nowhere near a crash situation.

Second, you can see that even if you had invested at the top of the market before 2008, if you stuck with your shares, you would have been at break even in 2013 and be making a good profit today (5 years later). And with earnings reports and the Christmas shopping season coming up there is a good chance for today’s market to stabilize relatively soon.

This brings me to my second point:

  1. Don’t make impulsive moves

The easiest thing to do in a downward market is panic and start selling off all your shares. I’m begging you not to do this.

I know from experience that this can be easier said than done. Over the past few years some of my biggest trading regrets have been selling out of losing positions that would have been extremely profitable had I just held and waited a couple years (see: Facebook (FB), Apple (AAPL)). It’s a reason I am trying to become less of a trader and more of an investor (despite the site title).

Hopefully you have not made these mistakes yet and can just learn from mine. Stocks almost always pan out in the long run. And luckily, one of the biggest assets of young investors is time.

While I urge you not to sell, I also think you should stay away from buying right now. I don’t think we have reached the bottom in the market drop yet, and I honestly have no idea how much farther the market is dropping. I would not try and buy a stock now just because it is “cheap,” since the stocks you think are cheap now may be expensive in a month.

That said, if there is a stock you are truly interested in from a value perspective, you may consider buying it now. You may not get a chance to get in at the bottom, but if you are looking to hold a stock for at least a year, purchasing it at the bottom doesn’t really matter. Just make sure you will have no regrets even if the stock goes down in the next few months. Two stocks I’m considering for this move are Apple and Gilead Sciences (GILD), but I’m going to hold off on buying anything for at least a week.

The easiest way to think about how to treat this bear market is to think about how you would treat a real bear attack. Don’t panic and don’t make any sudden moves.

Bloomingdale’s puts itself on the naughty list with offensive advertisement

I am about to utter 6 words I never thought I would say.  I am really mad at Bloomingdale’s.

Like many mid-20’s girls, I love Bloomingdale’s. The department store, owned by Macy’s (M), has great clothes, and more importantly, great sales. This weekend I stopped into Bloomingdale’s to browse and was confronted with this ridiculous sign:


The sign says, “Groceries? …Maybe. New Handbag? …Definitely. #nationalhandbagday.”  

Those of you who follow me on Twitter have seen this sign already, but I continued to spend much of yesterday stewing over it. It may be one of the worst advertisements I have ever seen and it bugs me for two big reasons.

Number one, it is absolutely terrible life advice. 

As I’ve posted before, one of the absolute keys to financial security is proper budgeting and spending within your means. You should spend your money on necessities (rent, utilities, GROCERIES), then save money, then, and only then, do you spend money on frivolous items like handbags.

For easy recall, you can think of the 50-20-30 rule. 50% of your income should go to fixed costs, 20% to savings, and 30% to flexible spending. Handbags are the definition of discretionary spending and belong dead last on the list in terms of prioritizing your spending.

Don’t get me wrong, there is absolutely nothing wrong with spending money on a handbag. I personally carry a Louis Vuitton tote which I love. The issue is spending money you do not have on a handbag. I got mine as a part birthday present, part paid for via my discretionary spending fund. Your discretionary spending money is yours to be spent however you like, even if it means buying a Chanel bag. But, for money to be discretionary, it needs to have zero impact on paying your bills or contributing to your savings accounts. Bloomingdale’s didn’t seem to get this memo.

This sign also promotes the type of impulsive shopping that can lead to credit card debt. According to NerdWallet, the average US household credit card debt amount is $15,607. I’ve mentioned this one before too, but a handbag is not worth going into credit card debt for. You’ll wind up paying more in interest fees to your bank than you do for the bag.

Bottom line: If you want a new bag, go for it! Just as long as you can afford it and the money is coming from a truly discretionary source.

The second reason this ad bothers me is that it is extremely insensitive to those struggling with hunger. 

According to Feeding America, a staggering 1 in 6 Americans go hungry. For these Americans the choice is not handbag or groceries, it is rent or groceries. And for many still, there is no choice at all.

If this ad was successful for Bloomingdale’s on #nationalhandbagday, I hope they consider making a donation to a food bank with some of the proceeds.

Carl Icahn asks Apple to buy back shares; Apple asks Icahn to STFU

It seems as though Warren Buffett and Carl Icahn are intent on reminding us that though they may be getting older, they are not getting any less feisty. Earlier this week we heard Buffett predict that Hilary Clinton will win the 2016 presidential election (and I’m hoping his ability to pick stock winners applies to politicians too). Then, this morning Carl Icahn was at his active investing again, sending a letter to Apple (AAPL) asking them to buy back some of their stock.

Source: Forbes

Icahn has been on a bit of a streak recently, with eBay (EBAY) essentially confirming he was right all along last week by announcing it would finally spin off Paypal. Today, Icahn turned his attention back to Apple and sent them an open letter. In the letter he said he felt Apple shares are extremely undervalued in the market right now and Apple should take advantage of this by using its huge cash pile – $133 billion!- to buy back more shares.

Backing up for a minute, a stock buyback (or share repurchase) is a company investing in itself by buying shares off of the open market and sticking them back in its treasury. This decreases the total number of shares outstanding, which helps investors in a few ways. It increases the percentage ownership for each investor, it increases earnings per share, and the large purchase of stock drives up the stock price. Thus, just like dividends, stock buybacks are a way for a company to share the wealth with its investors.

Icahn thinks Apple should make this move now while it can get its stock on the cheap. He estimates that Apple stock is actually worth $203, double the amount it’s trading for today. He bases this figure on Apple’s high revenue growth rates (65% in the last 3 years), huge potential sales in 2015 from the new Apple Watch and predicted TV, plus Apple’s extremely low price to equity ratio of 8x. Icahn has made this request of Apple before, and Apple listened somewhat by increasing its capital return program this year.

On the one hand I agree with Icahn that Apple has plenty of room to grow. I stand by my recent recommendation of Apple and am considering adding more to my position. Apple’s P/E is really, really low; even lower than the S&P 500 average. (For context, Google (GOOG) trades at 28x, IBM at 12x, and Netflix (NFLX) at 139x). And as I mentioned in my post after the iPhone 6 and watch announcement, I am very excited for the Apple Watch and think it will be a big winner for Apple.

However, while I think the share price will increase, I don’t buy Icahn’s assertion that the stock will double anytime soon. Average analyst price targets are in the $110-120 range right now. And Icahn is not exactly un-biased in his assertions. He holds 53 million shares of Apple, and I’m sure that he is well aware of the fact that if he comes out in support of a stock, investors will jump to buy it and boost the price. That’s exactly what happened this morning with Apple – the stock jumped 1% after his letter came out and he increased his holding’s value by $53 million (the stock came back down to rest unchanged this afternoon, but still). If the stock doubles like Icahn suggests, he will see an insane $5.4 billion increase over what his investment is worth today.

Apple apparently is getting a little sick and tired of Icahn’s constant interjections and basically shot him down. In response to the letter today, Apple said: “We always appreciate hearing from our shareholders. Since 2013 we’ve been aggressively executing the largest capital return program in corporate history. As we’ve said before, we will review the program annually and take into account the input from all of our shareholders.”

screen shot 2014-10-09 at 10.30.03 am.png

Thank you, Apple, for making all of us investors feel like we’re just as important as Icahn. It may not be true, but we appreciate the sentiment.

And if you’re not an investor yet, I recommend getting in on Apple. While you may not double your investment, and you definitely won’t make $5.4 billion, I think the company is poised for even more growth next year and you just can’t argue with its solid financials and strong cash position.

The Fed meeting minutes arrive just in time to boost stocks

It’s a bird, it’s a plane, it’s… Janet Yellen here to save the day! The Fed meeting minutes were released this afternoon, sending the market sharply up 2%.

Yellen SM

Right before this, I was about ready to lose it. All of my positions, which have already been trading lower in the notorious October dip (stocks tend to decrease in October), were tanking after the market’s nose dive yesterday. I am trying to become as non-emotional of an investor as possible, but today wasn’t really helping that goal.

But then, like a rainbow after a storm, the Fed minutes made everything better. Before I explain why, let’s chat about what these mystical Fed minutes are. The Fed is just short for the Federal Reserve, the central bank of the US. It sets monetary policy and interest rates. Did you buy a house this year and get a low mortgage rate? Thank the Fed. The Fed holds eight regularly scheduled meetings during the year and releases the minutes of the meetings three weeks after.

For those bored already, the Cliff notes version of the Fed minutes are:

  • Interest rates aren’t rising anytime soon
  • Quantitative easing (bond buying by the Fed) is ending this month
  • The dollar is appreciating thanks to Europe’s economy falling apart
  • Stock investors are happy

Now, back to the details…

So, why do Fed minutes matter? While the phrase monetary policy meeting notes doesn’t sound particularly exciting, the Fed’s decisions can have a big impact on the market. Although there are many reasons the Fed moves the market, including sharing its views on the economy, one key to remember is that interest rates and the stock market tend to be inversely related. If interest rates are high, bond investments become more valuable, so there is less money invested in stocks.

These particular Fed meeting minutes are important because the Fed has been keeping interest rates low the past few years as a way to help the economy recover from the recession. The Fed has been doing this in two main ways. They have been buying US Treasury bonds to keep long term interest rates low (a program called quantitative easing), and they have been keeping the federal funds rate (the rate at which banks lend funds to each other overnight) close to 0.

As the economy has been improving recently, investors have become concerned that the Fed would increase interest rates again. In the notes the Fed said it plans to end its quantitative easing program at the end of this month. While that’s not good, it was also expected so it didn’t shock anyone. The good news driving the market is that the Fed said it plans to keep the fed funds rate at its current rate of ~0 for a “considerable time” (translation: the Fed can’t commit to a date but it’s not anytime soon). This announcement put investors’ minds at ease.

Even though the economy has been improving, the Fed decided not to raise rates essentially because the rest of the world is falling apart. They’re concerned about slowing inflation and the economic problems going on in Europe and Asia driving up the dollar. While a higher dollar value is good if you’re Euro-tripping, it’s bad if you’re an American company trying to do business internationally (and therefore it’s bad for the American economy).

My investment recommendation: a plane ticket*. If you’ve been debating a trip to Europe you might as well book it now that you can get even more croissants per dollar.

*Assuming you’ve properly saved up for it.

Hewlett-Packard’s split tries to make 2+2=5

In the real world, break ups are a bad thing. They tend to involve extra time in bed, binge watching Friends, and way too much ice cream. In the business world however, break ups have seemingly become the new fad as companies split apart to try and increase their value.

This morning, Hewlett-Packard (HPQ) announced it is splitting up into two companies. One company will be made up of its PC and printer business, while the other will focus on corporate hardware, software and services. The stock is up about 5% today on the news. This announcement comes on the heels of eBay’s (EBAY) announcement last week that it is spinning off its payments system, Paypal, into its own company.


HPThe split is part of a 5 year turnaround plan for HP, which has been struggling recently. Total revenue was $112.3 billion last year, a decrease of 7% of the prior year.

Some parts of the business have been hurting more than others however. In its last earnings report, HP announced its PC and printer business saw a 3.1% growth year to date, but its enterprise hardware and services unit was a whopping 19% below year to date revenues a year prior. But even though the PC and printers business grew slightly this year, it lost its market leader position to Lenovo.

The supposed strategic reasoning behind the split is that streamlining the businesses will allow each one to better maneuver in the marketplace. Rather than focusing on one large behemoth, each company can have more dedicated and focused management to navigate the competitive needs of their marketplaces.

To be honest, I don’t really buy this strategic reasoning. I think the streamlining approach absolutely made sense in the eBay scenario, where eBay and Paypal are operating very different businesses and Paypal is hoping to sell to eBay’s competitors. However, HP’s two businesses are similar enough that they should still be able to generate efficiencies by keeping them together.

I doubt that either business will be significantly more efficient on its own. My doubt is further increased by the fact that Meg Whitman, HP’s CEO, shot down a split proposal three years ago. Now she has apparently changed her mind.

In reality, I think HP’s decision to split comes down to valuations and potential acquisitions, not strategy. Company valuations for the most part depend on “multiples.” A multiple is how much you multiply a company’s revenues or earnings by to get to a valuation for the company. For example, let’s say I wanted to buy Lisa’s pumpkin patch (going for seasonal appropriateness here). If similar pumpkin patches are being sold for 10 times their revenues, and Lisa’s pumpkin patch makes $1,000 in revenues for the year, I would pay Lisa $10,000 for her pumpkin patch.

Multiples are typically how analysts determine if stocks are trading for fair values and how other companies decide how much to pay for their acquisitions. The key about multiples though is that they change based on the industry. So a high growth industry like social media will have a higher multiple than a slower growth industry like retail.

This change in multiples is the key to HP’s split. Right now HP has a price to earnings ratio of 13.88, which means it is trading at almost 14 times its earnings. But if the enterprise business has a multiple of 10 times earnings and the computer business has a multiple of 20 times earnings (the average being 15 now), the sum of the two halves suddenly becomes greater than the original, whole business.

On top of this, splitting the two companies makes them easier to sell to or merge with another company. And if a company is being sold, you want its valuation as high as possible, which the split aids.

I’m not impressed by the HP split and will not be running to buy stock. To me this feels more like a numbers game than a strategic business move.