It’s a new year and it’s time for our new picks of ETF funds and stocks for 2008. Our last year portfolio yielded returns 0.81% above S&P 500 market average (based on C Fund performance during the same period of time – i.e. from 20-Feb-2007 till 18-Jan-2008). We will continue to do a good work and pick stocks and ETF funds that will help you to supplement your TSP investments.

 

Disclaimer: all Stocks and ETFs were screened by our staff but we do not guarantee any returns. The only thing that we do guarantee is our unbiased opinion. We put our money where our mouth is and invest into the same stocks/ETFs.

 

XLK (Jan 18^th price $23.25)

Technology Select Sector SPDR

 

Our take: Technology sector stocks are trading at a very attractive P/E ratio levels. Yes – we know 40% premium over S&P 500’s average P/E is high but tech stocks historically were traded at 70%-75% premium. At the same time technology is a driving force behind the world’s economical development. It changes the way we communicate, live and consume energy.

 

 

VHT (Jan 18^th price $59.50)

Vanguard Healthcare Index

 

Our take: Health Care is the second most undervalued sector after Tech. We also noticed that almost every strong Presidential candidate has a plan on how we can improve health care system in the United States. One way or another it smells like profits for us.

 

 

ODP (Jan 18^th price $11.54)

Office Depot

 

Our take: Recently I’ve looked at my office and realized that almost 80% of supplies and equipment I purchased were from Office Depot. It might be a bias opinion but I believe that Office Depot found some secret formula on how to retain customers and slim down their operational costs. It also looks like the recent stock market turmoil unreasonably punished Office Depot – now it trades at P/E ratio of 6.38 (!!!!) which is way below the S&P 500 average.

 

 

C (Jan 18^th price $24.45)

Citigroup, Inc

 

Our take: it does not look like Citigroup’s stock price can go any lower. They just announced $10 billion write-off, which was cause by sub-prime mortgage mess, and reduced their dividends. Market already priced-in those events and it is now time to BUY! This company is starting with a clean slate leaving all problems back in 2007.

 

 

BAC (Jan 18^th price $35.97)

Bank of America

 

Our take: Bank of America is yet another victim of sub-prime mortgage mess. R&D spending is the main reason why we love BAC. Most of financial agencies (and accountants in general) tend to be very conservative. Yet Bank of America keeps funding its’ R&D efforts and they have a lot of things to show for the money that they’ve spent. For example - did you see automatic pay-roll accounting module that they offer for free to their clients??? That thing is amazing! If you own a small-business and have several employees that module will completely eliminate the need for you to hire an accountant. All your pay stabs, W-2s and other forms/reports will be generated automatically.

 

 

HMC (Jan 18^th price $29.59)

Honda Motors Co., Inc

 

Our take: The whole world is going green and Honda Motors seems to be a leader when it comes to eco-friendly cars (hybrids, natural gas, hydrogen and etc.). At the same time nobody can beat Honda’s cars quality and dependability. The only thing that I still do not understand is why nobody designed diesel-electric car yet? That car can be easily manufactured based on gas-electric model and at the same time would have much better gas mileage…

 

 

VGK (Jan 18^th price $67.49)

Vanguard Euro Stock

 

Our take: Economies in China and India seem to start running out of steam. Yet Europe and Japan still look very attractive.

 

 

EWJ (Jan 18^th price $12.50)

iShares: Japan

 

Our take: same as above.

 

We are launching formal testing of Prosper.com. We always looking for new way to diversify investments and would like to test Point-To-Point lending through Prosper.com.

 

During our test we will make 20 lending bids $50 each ($1,000 total). Our potential customers’ selection guidelines:

 

-         High APR (20% - 29.9%)

-         Debt to Income ratio below 40%

-         Total amount of requested credit less then $10k

-         Priorities will be given to Active Duty personnel and people that are trying to consolidate “Pay Day” loans.

 

We will keep you updated on results.

 

=== UPDATE 17-Jun-2007 ===

 

So far we are very pleased with Prosper.com results. Over the course of last two months we issued 288 loans and all over in current status (borrowers were not late on payments). Our average interest rate is 19.54% and majority of loans were issued to borrowers with C and D credit rating. All earnings we are planning to reinvest in loans with APR above 20%.

 

=== UPDATE 23-Jul-2007 ===

 

So far we've got 355 loans issued with 19.64% average APR. We've got first few borrowers running late on their payments - 1.6% of accounts in late status.

 

=== UPDATE 24-Nov-2007 ===

 

As of today we have 999 active loans with 20.17% average interest rate (i.e. 24.238% real APR since we reinvest all payments back into new loans). Out of all active loans 52 (5.2%) are in collection for being late more then 30 days. Even if all of those 52 loans will not be collected we still will be looking at about 19% or real return. We are in good shape so far...

 

TSP/401k

Maximum annual contribution: $15,500 (or $20,500 if 50 or older)

Note: can be tapped at 55 y.o. (must be started after 70 ½ y.o.)

 

Traditional/Roth* IRA

            Maximum annual contribution: $4,000 (or $5,000 if 50 or older)

            Note: can be tapped at 59 ½ y.o. (Traditional IRA must be tapped at 70 ½ y.o. / Roth - Never)

            * - You can always withdraw your Roth contributions without tax or penalty.

 

Health Saving Accounts

            Maximum annual contribution: $2,850 for an individual and $5,650 for a family

            Note: after 59 ½ y.o. unused HSA balance can be withdrawn without penalties (will be treated similar to Traditional IRA).

 

Drop in prices generally positively affects growth of following sectors:

• Retail sector because people have higher expendable income, are willing to drive more and shop (example: Wall-Mart)
• Chemical producers that use oil to produce chemicals (example: DuPont)
• Oil refineries (example: ExxonMobil and etc)