House of Representatives rejects $700B bailout

If you haven't heard already, the House of Representatives rejected the $700B bailout plan that was tentatively hashed out over the weekend. So hang on hard for this economic crisis to drag on a bit. Most the representatives voted against the plan (228 - 205) due to lack of confidence in it and that the presidential election is so close. Neither party wants to be faulted if the bailout fails (For the record, the majority of Democrats wanted the bailout while the majority of Republicans didn't).

What does this all mean for us? Well, for the taxpayers out there who were worried they'd have to shoulder the $700B bailout, they don't have to worry about that anymore. But with Washington Mutual failing last week and Wachovia pretty much pimping themselves to Citi, I'm gonna take a guess and say that a couple more banks will fail. The frozen credit market will get more frozen. People will find it harder and harder to get funding for houses, cars, etc. Companies will have a hard time getting funding to do business (including paying employees). Sure this is all a wild guess. But at the moment, anything is a wild guess.

Critics of the bailout plan stated the plan did not address job losses and other stuff. And I know the plan does not touch previous contracts that grant "golden parachutes" to executives of companies that seek bailout. But I still feel we should do something instead of waiting for things to turn around. I agree that the billionaire executives have to be held accountable for the companies that they drove to the ground, but to say no to a bailout plan because we don't want to be the ones to fix it is pretty silly. It's almost NIMBY-like, if you ask me.

Oh by they way, stocks plunged when it appeared the bailout would be rejected. The House held the vote open for an additional 40 minutes, even pointing out markets were going down to convince the nay-sayers to switch votes. But of course that didn't happen. Anyhoot. At the current moment, no bailout plan = shrinking 401ks, IRA's, investment portfolios, etc. If I were you, I wouldn't look at your retirement plan. Let's see what happens when the House votes again.

Market's not looking any better

After seeing my newly purchased shares of Freddie Mac (FRE) go as high as $2.95/share with the market on news that a bailout might pass yesterday, stocks fell as the day wore on with no announcement of a bailout. FYI, FRE closed at $1.85/share yesterday. Ouch. Then I went home and watched CNN before bed. What good news there huh? Talks among the President, Treasury, and party leaders left the bailout situation worse, with the Dems accusing Republican presidential candidate John McCain for messing up what was to be the bailout plan. And to add salt to the wound, Washington Mutual went down yesterday.

Markets are down on this new situation, but I'm thinking things will be better once another bailout plan is put together again. Some think it can be as early as this weekend. We'll see about that.

Bought some more FRE

I couldn't help it. I was checking on the market and noticed that Freddie Mac (FRE) has nearly doubled in price. Based on what I've read, I still think FRE has the potential to go up to at least $3.00/share. So I bought 100 more shares. Not a lot. It's about $253 worth. Again, I don't want to put too much money in. The market is trading higher today though. Investors are really betting on the government doing the $700B bailout for Wall St. So confidence is pretty high right now. Let's see what happens.

Following the market again

So with all this volatility in the stock market, I'm following it a bit closer again. It looks like people are selling off shares of AIG to recognize the gains from last week. Share prices are down to $4.30 (but still a pretty good return if you had bought it last week at $2.20). Last week, I kinda thought the peak would be around $5.00 anyway, so this drop made some sense. I also peeked at a headline mentioning that AIG has officially accepted the $85B loan from the Fed. I would think this would push the stock up as it means AIG has time to restructure and possibly sell off some of its business. But then again, I did hear that the $85B loan has a pretty high interest.

Yesterday, I sold off my measly shares of Verizon and threw the proceeds back into the market. I got 50 shares of Freddie Mac ($1.37/share). I have a feeling they'll do okay with the government holding them. It's not a big investment, but I didn't want to throw too much money in on a hunch I have, especially with this shaky market. It's not the same feeling I got with AIG. I also got 33 shares of Sirius radio. They finally merged with XM, so I think they'll do pretty well once they work out all the details and the dust settles. They were cheap too at $0.87/share. Again, no fresh money. Just some movement with my very small portfolio. I have more money in my Prosper loans than the stock market (not including my 401K, of course).

As of now, the biggest movers right now are Freddie Mac and Fannie Mae, so my call is right so far. Should I have put more money in it? Maybe, but I think I'm fine where I am.

Need to trust myself more

So I am really really annoyed right now. Last week, when the Fed announced they were going to bail out AIG, I peeked at the stock price and thought, "Hmm...it's a great deal right now, and the general public will most likely invest in AIG with news of this bailout." It was at $2.20/share. I wound up not putting any money down and instead just made a pick on the Motley Fool, an investing website. Well, last I checked today, AIG was at $4.81/share. W. T. F.

Why am I annoyed? Well, I thought about putting some money down and ride it for a bit. With $85B in the bailout loan from the Fed, AIG has 1-2 years of breathing room while they sort things out. With the market the way it is, 1-2 years of "stability" is pretty attractive. So, let's see what would've happened if I put in $1,000. That would've bought 450 shares of AIG (minus commisions). If I decide to sell today and manage to hit it at $4.81/share, that would've meant $2,154.50 in proceeds (minus commissions). That's $1,154.50 capital gain (yes, there will be taxes) from about a week of holding the stock.

What makes this more annoying was that when it hit $3.30, I thought about going in again. You know, $1,000. That would've been $433.00 capital gain. Oy. What can you do? AIG could still potentially go up, but I don't think it's worth it now. Besides, it takes a bit of time for me to transfer the $1,000 over to Sharebuilder, so I guess it really didn't matter. Still sucks though.

Bid update

So the loan I bid on a couple days ago at Prosper ended at 22.00%. That's my seventh loan at Prosper. In a month or so, I should be seeing some cash flow there. My portfolio at Prosper is looking pretty good. My previous six loans are still current. Two of them are actually paying at an accelerated rate, so I might have two paid off loans before the three-year mark. In fact, it's because of these two loans that I'm getting cash back as fast as I am. Granted, this does cut into the amount of interest I make on those loans, but it feels nice to have cash back to make extra loans.

I'm still thinking I should limit my investment in Prosper until I feel confident in their stability. I haven't been following the situation over at Lending Tree, and I haven't heard much news about Prosper doing bad. However, the initial reviews from when Prosper started does make some sense. The good news is that three years for Prosper is coming up next February. So we'll see how it all goes then. In the meantime, I'll keep reinvesting what I have back into Prosper. The high rate of return is still very appealing, especially with the state of our economy right now.

Another Prosper loan

After a couple months with no new loans at Prosper, I made a $50.00 transfer and bidded on a B-credit loan. It is currently at 32.00% with about a day and a half of bidding to go. I wanted to load up on a relatively risk-free loan, so I put a minimum rate of 19.99%. This way, I have a higher chance of getting it without diluting my average rate of return too much. If I don't get it, I'll just look for another lending opportunity.

Last I left off at Prosper I had $250.00 (now $300.00) invested with six active loans (one funded with money that was repaid). I currently have about $20.00 repaid again, so when it hits $50.00 again, I will reinvest and add another loan. I hope to continue to add more loans to increase the cash flow there. I'm still keeping a close eye on this Prosper situation. With Lending Club not accepting new lender applications, I'm wondering if Prosper can be sustainable. I've read an old article from when Prosper started that questioned whether the servicing fees are enough for Prosper to sustain themselves. Prosper started in February 13, 2006, so it's not even three years old yet. So none of the current lenders have had a loan mature yet.

I'm sure it'll be fine as it seems there is a continuous supply of loans and lenders that bid on them. As long as people continue to borrow and lend money, Prosper should be fine. And at the moment, I only have $300.00, so I'm not exactly losing my life savings if Prosper goes down.

Reviewing for Epinions

Having been on Epinions for a while and having made $25.00+ there (not a lot considering how long I've been there), I notice that you have to keep submitting reviews to keep the income rolling in. Eventually, old reviews get less productive as less consumers look up reviews to purchase an old item. So you can't exactly just write a bunch of reviews and sit back. I'm up to about 13 reviews since I've been a member.

There's also certain areas that tend to be more productive. It's actually quite obvious if you think about it. People tend to search for reviews on electronics and recreational items. So my reviews on hiking backpacks, bluetooth headsets, cellphones, cameras, etc. tend to produce more revenue. While my reviews on simpler items such as watches, starter guitars, and RAM tend to produce less. One other thing I noticed is that certain reviews are sold to other sites. When I Google my screen name, I find my Epinions review on other merchant sites. This must be Epinions trying to maximize their revenue on user-produced content. This is also good for reviewers as their reviews get more views.

Anyway, if you are on Epinions, you really need to keep reviewing items. I suggest using your item for a bit before writing. And write well and organized. That way fellow reviewers will rate your review higher and it'll appear higher on Epinions searches. Some veteran Epinions reviewers have hundreds, if not thousands, of reviews to their credit. Whoa...

Cash flow update - $168.80/year

Just did a quick check on my accounts. Average passive income cash flow is now at $168.80/year, up from $143.88/year. Monthly, this is $14.07/month versus $11.99/month. Most of this increase again is from my Prosper and ING accounts. Not much increase anywhere else. I haven't actually been doing much lately in terms of trying to increase cash flow. I just wrote a new review on Epinions for a knife I recently bought at REI, but that's about it. Anyhoot, that's it. I'll try to do a bit more and write about it.

$168.80/year or $14.07/month