Effective personal money management includes comparison shopping, ensuring you don’t pay more than you should for consumer purchases. Looking at goods and services offered by multiple producers and sellers gives you the tools needed to make informed decisions. Without contrasting available options, on the other hand, you are at the mercy of commercial markets, which doesn’t always work to your advantage.

Whether rendering everyday purchases or committing to a major buy, making the most of your resources relies on knowledge. Use research to compare and contrast alternatives, saving money in the following areas:

Insurance Premiums – For decades, insurance markets were built upon personal relationships, bringing together agents and customers in traditional coverage arrangements. The paradigm has shifted in recent years, giving insurance shoppers greater access to affordable coverage. For starters, online resources are now available outlining premiums among competing companies. With a few clicks, armchair shoppers can vet policies and compare the cost of each insurance vendor’s coverage portfolio. This access to information assists in two ways. Sharing knowledge online empowers prudent spending decisions, but the trend also leads to lower premiums, as providers compete in the public arena.

Cost of Credit – Various forms of financing serve consumer funding needs, ranging from short-term coverage to long-term mortgages, spanning decades. Like other consumer goods and services, pricing falls across a wide range, giving you a good reason to compare and contrast fees and financing charges associated with each credit opportunity. If you need a loan, for example, compare rates and terms online, before committing to a costly mistake. And when you need revolving credit, evaluate credit card alternatives with a close eye on annual membership fees, interest rates, and late payment penalties. For the best results managing credit costs, match the type of financing you select to each particular need, and borrow only what is required to cover the costs at hand.

Major Purchases – Cars and homes are among the most costly items purchased during your lifetime, so it is especially important to make your money count, when the stakes are high. Experienced real estate agents are well-prepared to assist your home search, but finding personal value is up to you. Is it a buyers’ market with ample inventory? Or will you pay a premium for a desirable home? Are you pre-approved for affordable financing? Or are interest rates comparatively high? Whenever possible, time your purchase according to prevailing conditions, enabling you to strike when it makes the most financial sense.

Automobiles depreciate drastically during the first year of ownership, so new car buyers lose a substantial share of their investment, within 12 months. To bring home better motoring value, consider used car alternatives, which come to market reasonably priced. For added quality assurance, compare certified pre-owned vehicles, which are refurbished and given a manufacturer’s stamp of approval.

Groceries and Consumer Goods – Substantial savings are on the table, buying food and other retail products. Coupon clippers are well-versed on this cost-conscious weekend ritual, cutting savings from local newspapers and advertising circulars. And modern communication facilitates an even more direct link to savings, enabling consumers to sign-up for alerts and promotional notifications from their favorite vendors. While day-to-day savings might not reflect the massive sums at stake buying homes and cars, incremental gains quickly add-up for those taking the time to compare and contrast retail pricing.

Knowledge empowers consumers to make informed financial decisions. As you contemplate purchases, compare and contrast various options, giving you the data required to effectively evaluate alternatives. Armed with a broad understanding about items in your consumer crosshairs, you’re sure to land the best prices on everything from milk to mortgages.

The post Comparison Shopping Supports Financial Health appeared first on Money Infant.

It is important to point out that over $30 billion of all the revenue coming from E-commerce came from social media platforms in 2015. Also, 46% of salespersons that used social selling were able to achieve their quotas compared to 38% of those who didn’t during 2015. It is clear that companies have already acknowledged that social media is the present and the future of business. Here is how they are using social media in 2016 in order to help them achieve their goals:

1.   More Focus on Instagram

While Facebook was and is still the “king” of social media business use, more and more companies have also started to focus their attention on Instagram. This is mostly due to the social commerce options this social media platform has to offer. With a total of four call-to-action buttons, Instagram users can land directly to a business’s website, app, or landing page. These buttons include “shop now”, and “learn more” among others. In March 2016, Instagram lengthened its videos to 60 seconds – originally being 30 seconds long. The purpose of this move is to optimize viewership metrics. Also, the number of active users in Instagram has skyrocketed from 300 million in 2015 to 400 million in 2016.

2.   Using More Videos

Companies have begun to use more videos for their marketing purposes. There is a clear explanation for this occurrence. Ever since Google announced that all of its videos would come with “shoppable” ads in late 2015, businesses worldwide have been more and more interested in this feature. These ads allow the viewer to purchase products that are promoted in pre-roll ads before a video is displayed. Additionally, YouTube is also featuring call-to-action interactive cards in which a company can give viewers information about a product so they can buy it right away.

Also, new social platforms that encourage the use of live videos are being launched. For instance, Your Brandlive allows companies to have live videos along with questions and comments from customers, thus, creating a personalized online shop brand experience.

3.   Reviews and Rating Social Media Integration

The power of public opinion can’t be underestimated. According to Ironpaper, peer recommendations are considered trustworthy by 90% of people. On the other hand, paid ads are only trusted by 14% of the general population on average. Businesses are being more and more aware of these facts and are using them to their advantage. As data such as the one listed above becomes more available on the web and business owners begin understanding the importance of being informed about these issues, social media integration – particularly, in regards to reviews and ratings – is now being used more than ever before. Ratings and reviews are a way to socially validate a purchasing decision. Currently, there isn’t a direct way to integrate reviews and ratings on Facebook and other similar platforms. What businesses are doing is posting their reviews (both the positive and negative ones) in their social media business pages to let potential customers know what others think of their products and/or services.

Diversifying your portfolio is very important. Having a business only may equate to having all of your eggs in one basket. Spread betting is an alternative way of investing your funds. CMC Markets is a company that provides its users with an innovative spread betting platform in which you can place bets on several different assets including currencies, and stocks among others. They also have a trading checklist available for investors who want to get into the exciting world of spread betting.

The post How Businesses are Using Social Media in 2016 appeared first on Money Infant.

Legal Fees

For starters, there are going to be legal fees involved with your divorce. How much you need to pay will depend on the specifics of your divorce, but there will most likely be at least some legal fees that you need to pay. For example, if you hire a lawyer, you will need to pay them along with fees if you go to court.

If you decide to not retain a lawyer and represent yourself instead, there are companies that are affordable for most families going through court proceedings. Places like National Family Solutions provide attorneys and legal document assistants to help you with all of the paperwork involved with a divorce. This way, you have the expertise of legal professionals with all the court documents, and since family law is mostly a written argument, that’s very important. You can relieve a lot of the financial burden of a divorce if you do some of the leg work yourself  but still have assistance from legal experts for the paperwork and other crucial steps in the process. After all, divorces can be an extremely emotionally painful time and it can’t hurt to not have to worry about the high cost of attorney fees as well.

Lastly, if you and your spouse use a mediator to split the assets, you will need to pay them as well. Going through a divorce can put a strain on your finances, thanks in no small part to all of the legal fees that can come with it.

Split Assets

If you and your spouse currently share assets, these are going to most likely be split amongst the two of you. Except in some cases, everything you own together will be split between the two of you, meaning that you will have less than you did before. Think about all of the assets that you and your spouse share – homes, cars, stocks, bonds, etc – and think about what your financial situation will be like if you lose a portion of them.

A divorce can also impact your business’s finances. If you and your spouse currently own or run a business together, this will have some complications. You will need to decide if you can continue working together, and if not, how you are going to handle the business going forward.

New Bills

Lastly, once you get a divorce, there will likely be some new bills in your life that you need to pay. For example, before your divorce you may have had two incomes that you could use to pay for things like rent, food, and utilities. Now, you are likely to have only one income, and you will have to pay for these things on your own. You will have to find a way to live your life on your new income level, and make some adjustments in order to get by.

Be Prepared Ahead Of Time

If your divorce is going to cause a large financial shift for you, it is best to know about it as soon as possible. By learning what impact this divorce may have on your money, you can take steps to adjust over time, rather than all at once. Going through a divorce is never easy, and more than likely you are just focused on getting by emotionally. However you should try to find some time to plan out your financial future, so that you can have one less thing to worry about.

The post How A Divorce Impacts Your Finances appeared first on Money Infant.

The Federal Reserve Is Raising Rates

If you’re not aware, the Federal Reserve is perhaps the most influential factor in the entire world when it comes to the economy. As the central bank of the United States, the Federal Reserve has an absolutely huge impact on domestic and foreign economies. Amongst other things, the bank decides how many dollars are in circulation and can set interest rates.

For the past few years, interest rates have been quite favorable. This was part of the Federal Reserve’s quantitative easing plan to help the country’s economy get back on its feet. Dropping interest rates made it easy to infuse the economy with fresh capital through loans.

However, the Federal Reserve has long since made it clear that 2016 would be the end of their quantitative easing strategy. There’s no set date, per se, but the low interest rates set by the bank definitely won’t make it to 2017.

As a result, you can expect that loans are going to be tougher to come by. Whether you need one for your small business or to buy a home, when the Fed finally pulls back on printing money, everyone is going to feel it with higher interest rates.

Beginning in December 2008, the Federal Reserve kept their official interest rate at practically zero until this past fall. That’s extremely low for an extended period of time. Now that the last days of “free money” are on the horizon, you can definitely expect loans to become much more expensive in the years to come.

Mortgage Rates Are Going Up

Given the above, it’s only natural that mortgage rates would go up as well. As we mentioned, as banks become less able to lend at low costs, they’re going to be more careful about who gets them. Charging higher interest rates will help them hedge their bets.

While refinancing in the future is always an option, in the short term, this will mean home buyers who take out mortgages are going to have much higher payments to make for the foreseeable future.

At the same time, mortgage rates going up will also keep a lot of current home buyers from deciding to refinance.

Now, how much they’ll go up will depend. The Federal Reserve has only slightly increased interest rates for the moment, but if the economy begins recovering, the flipside of that good news is that interest rates will continue to increase to keep pace.

Keep in mind, too, that other market factors can affect interest rates as well, especially those related to your mortgage. We saw this last year when turmoil in Europe and China shot Treasury prices up to a 10-year high. There’s no reason the same thing couldn’t happen to mortgage rates, on top of the interest the Fed has already tagged on.

Student Loan Rates Are Also Heading Up

One of the hot button topics right now for the upcoming election is student loan forgiveness. To put it simply, a lot of people are fed up with their student loan debt and a good number can’t possibly afford to keep paying it off.

Whether or not legislation will be introduced by either party to address it, student loan rates are most likely going to head up. This is especially bad news for those who took out loans between 2006 and the Student Loan Certainty Act of 2013. Loan rates were flat for them that unfortunately means they’re paying at a higher rate.

To make matters worse, even the Student Loan Certainty Act of 2013 can’t keep rates at a fixed, low price. They just ensure they’ll stay relatively the same for the life of the loan. Lenders can still tag on hefty interest rates.

As with any type of loan, the upshot of this is that you’re going to have a lot of students who need to take out a lot more money in order to attend college. Those without established credit histories or who don’t have co-signers will most likely take on especially hefty sums.

Variable vs. Fixed Rates

2016 will definitely be an interesting year as far as interest rates and loans go. By extension, the same can be said for our country’s economy.

Going into this year, one thing you should definitely understand is the difference between variable and fixed rate loans.

A loan with a variable interest rate is one that will have its rate change over the years. As market interest rates fluctuate, so too will the rate applied to the outstanding balance.

On the other hand, a fixed interest rate loan will remain that way for the entire term of the loan, regardless of what the market does. As a result, the interest you’re charged on the first payment will be the same as the amount you’re charged on, say, the 100^th.

Why is this important right now?

Well, as we covered above, interest rates will soon be going up. We’ve heard this directly from the Federal Reserve, but there are other reasons to believe this as well. Therefore, if you want to take out a loan, time is really of the essence. While you should never rush into this type of decision, you want to lock in the lowest rate possible at a fixed percentage before you don’t really have the option.

Once interest rates jump up, the opening will be closed and will likely stay that way for upwards of a decade.

Again, don’t make rash financial decisions, but if you’re planning to make a big purchase that will require a loan—like buying a house—now is the time to do it.

2016 should be an interesting year, economically. While we’re hopefully seeing the early days of a full-on recovery, interest rates are definitely going up, which could produce quite the challenge for many.

The post How Rising Interest Rates Will Hurt You in 2016 appeared first on Money Infant.

Unfortunately the move higher in crude is not really based on any solid data indicating higher growth. Economic data in Europe and Japan remains tepid, showing both areas remain in a flat and potentially deflationary environment. U.S. data has been better, but is actually showing signs of slowing growth, with the fourth quarter of 2015 coming in at just 1% annualized GDP growth, versus the second quarter of 2015 which had a growth rate of 3.9%. And the world’s second largest economy, China, has just downgraded their growth forecast from “around” 7% to a range of 6.5% to 7% for the coming year.

So what is driving crude prices higher recently?

Like the hope of equity investors, crude prices are also moving higher based on nothing more than hope. In this case it is the hope of crude traders who are looking for OPEC and Russia to cut crude production in 2016. But there have been no firm commitments from either to even freeze production, let alone begin to cut production. Sure they have agreed to meet and talk, but it could be months before we get an agreement to any production cuts in crude, if such ever occurs.

Meanwhile, traders are also pointing to the falling production in the U.S. and falling active rig counts as positive signs for crude.

But this could just be history repeating itself, and if that’s the case the crude oil bulls could be in for a rude awakening.

Back in March and April of last year crude rallied strongly on the same combination it sees now – that is falling U.S. production and falling rig counts. And just like last year markets are getting signs of weakness from the U.S. that has led to a sharply weaker U.S. dollar.

All signs certainly look positive for crude over the past week though. Last week saw crude move 9.6% higher, and yesterday’s 5.5% rally has put crude up by 2.5% for 2016 following the drastic 31% drop in 2015.

Some analysts are suggesting though that the rally in crude is based entirely on false premises. They say that the production declines in the U.S. are seasonal in nature and that a rebound is likely in the coming months. They also point to the fact that despite falling production levels, U.S. inventory levels continue to rise, remaining at historically high levels.

Regarding OPEC and Russia, the analysts remain skeptical of any production cuts from either quarter as both have remained stubbornly set on holding and even increasing production levels going forward. Even if there was an agreement to cut production made in March, which remains highly unlikely, it could be several months before such cuts actually take effect and are seen in global supply levels.

The post Is the Rally in Crude History Repeating Itself? appeared first on Money Infant.

Forex along with CFDs are some of the hottest financial vehicles which can be utilized by a forex trader. Neither forex nor CFDs are an easy market to trade, however, if a trader is able to understand and master these markets they can earn a very good living. The trading hours for Forex as well as CFDs very based on each product.

Today, over five billion dollars of transactions are placed within the forex markets. The forex market is very dynamic and the forex trader can reap huge trading returns if they are able to master the markets. A forex trader should utilize as many financial trading tools as possible and leverage these tools to create consistent winning trades.

The forex markets are not very different than those of the equities markets. Securities traders will pursue and purchase a stock if they believe the price of the stock will increase in value in the near future.   In addition, the same trader will sell the security if they think that the price of the stock will fall in the near future. Like the securities trader, the forex trader will purchase a currency pair if/when they think that the exchange rate will increase in the near future and sell a currency pair if they think that the exchange rate will fall in the near future.

Forex traders should utilize every financial tool they have at their disposal to optimize trading opportunities. Some financial tools utilized by forex traders are pricing charts and statistical indicators which are tools that will help the forex trader make better decisions about which direction a currency pair price action is going in. The most popular indictors used by forex traders are moving averages along with relative strength index. A forex trader should be consistently reviewing their forex trading strategies and utilize the strategies they feel most comfortable with. Along with technical indicators the forex trader should leverage fundamental analysis to follow and track the markets.

In addition to forex trading, the forex trader has the option to utilize and trade contracts for difference (CFDs). The hours for CFD trading varies based on the CFDs which are being bought and sold.

Contracts for difference or CFDs are considered leveraged derivative financial products. CFDs are defined as derivative products because their benefit is derived from the value of another resource. CFDs can be a very complex market to trade and the forex trader should be well aware of their complexity prior to trading this market. Typically, when a forex trader trades in CFDs they are wagering on the change in price of the underlying asset over a set period of time. Again, the forex trader when trading CFDs is betting on whether the price of the underlying asset is heading upward or downward in the future.

In closing, there are numerous financial vehicles which a forex trader can leverage off of when building their trading portfolio. Forex and contracts for difference (CFDs) are great financial vehicles to trade and the trader can earn a great deal of money when trading these vehicles properly.

The post Financial Vehicles a Forex Trader can Utilize (CFDs) appeared first on Money Infant.

Your Claims Are Covered

Insurance exists to protect you from the financial impact of accidents and unexpected expenses. The savings are negated, however, if you come to find out that your claim is not covered by your policy. This is the greatest risk you face if you are shopping by price only. Car insurance providers, for example, can deny a claim even if you satisfy the requirements of your policy and furnish evidence to support your claim.

If you are in this situation, you are almost no better off than if you’d been uninsured. A competent insurance agent will help you find affordable and appropriate coverage for your needs. They will guide you through the claims process and provide you with the support you need to receive the benefits of your coverage.

Communication is Easy

Insurance agents are busy people. They juggle claims, quotes, and clients constantly throughout the day. All of these obligations, however, should never be enough to make your insurance agent difficult to get in touch with. If you need to talk to your insurance agent, you should be able to have a conversation with them within a few hours of reaching out. If you call before the office closes, you should hear back the next morning.

Communication should always be a top priority for an agent, but if your agent struggles to call back to answer a quick question, they probably won’t be much better when you are filing a claim. An agent who keeps up with calls is a keeper.

Trust Their Expertise

Trust is a big part of maintaining a great relationship with your provider. As you might with any other service provider, you should take some time to look up the reputation of insurance agents in your area. You can do this by verifying the license and credentials of an agent as well as looking up reviews posted online by clients. You should find an agent who is trusted and experienced. You will be the most likely to get great coverage and a great deal from somebody who is highly reviewed.

Working with an agent requires that you believe in their abilities completely. With a great agent on your side, you can save money, protect yourself and your property, and smoothly navigate a claim if you someday need to file one. You’ve found the right agent once you’ve found somebody who listens to and advocates for you. These qualities, as well as a commitment to saving you money and providing great coverage, are what make a great insurance agent.

The post Three Signs You Have a Great Agent appeared first on Money Infant.

There are several reasons for the extreme drop in share price which wiped out $10 billion in market capitalization for the company. We’ll look more closely at these reasons to try and determine if the sharp fall was warranted, or if it was overdone and makes shares of LinkedIn a good candidate for a rebound in the coming weeks and months.

As you probably already know as an experienced investor, moves in markets can often go beyond what the fundamentals dictate, setting up some spectacular recoveries. On the other hand, these extreme moves can also go further and last longer than anyone would predict. Whenever we see volatility like this extreme caution is needed, but those who have the nerve to step in and trade their conviction can often make excellent profits.

So, putting the solid fourth quarter profits and revenues aside, what is it that caused shares of LinkedIn to tank so spectacularly on Friday?

LinkedIn Future Guidance

LinkedIn has been one of the darlings of the tech industry, with solid management, a stable and diversified business, and strong growth. At least that’s the way it looked until Friday.

After reporting a 34% increase in revenue from $643.4 million in the fourth quarter of 2014 to $862 million in the fourth quarter of 2015, which beat analyst’s expectations, LinkedIn dropped a bombshell for their 2016 forecast. They surprised markets and analysts by projecting lower growth, lower revenues and lower earnings that previously anticipated.

Markets are always fixated on the future, as binary option traders well know, and even though results are strong right now, investors focused instead on the company’s own projections for lowered growth, dumping the stock enmasse and nearly cutting the stock in half.

The company projected first quarter revenues of $820 million versus expectations for revenues of $867 million. They also cut their full year guidance for 2016, projecting revenues of $3.6 to $3.65 billion versus expectations of $3.91 billion in revenues expected by analysts. In addition, LinkedIn said that first quarter profits would be just $0.55 a share versus analyst expectations of $0.74 a share in profits.
(https://www.forbes.com/sites/kathleenchaykowski/2016/02/04/linkedin-shares-plummet-on-weak-first-quarter-forecast/#5c8112dd2928)

Investors were understandably cautious following the lowered 2016 projections and showed their disappointment by dumping shares. But did they go too far? Growth is still expected to be strong, even if it isn’t as strong as hoped for by investors prior to the Thursday conference call.

Multiple Analysts Cut Forecasts for LinkedIn

After the conference call and reduced guidance from LinkedIn many analysts changed their guidance on the stock, creating a cascading effect.

Eight different research groups downgraded the stock from buy or outperform to market neutral, while also cutting their price targets. Both JP Morgan and Monness, Crespi & Hardt downgraded the stock and referred to headwinds to the business as a reason for the downgrade. JP Morgan also cut their price forecast from $300 a share to $180 a share, which was substantial, but the new price target is still significantly above the current price.

On a more positive note, there were six firms that maintained a buy rating on the stock, though all of them cut their price targets significantly. Even so, most price targets remain in the $200 a share range or higher, giving the stock a forecast of a 100% increase in the coming year. Pacific Crest even stated that they believe the fall in the stock price was “overdone”, indicating they at least are looking for a bounce in the shares in the near future.

After the smoke cleared there are still 29 analysts calling the stock a buy versus 36 prior to the conference call. Hold recommendations jumped from 7 to 16 and there are still no analysts recommending to sell the stock. In addition, the average price target for the stock is $205.40 a share versus the current price of $107.13, leaving room for the stock to nearly double in the coming months.

The future for the stock may not look as bright as it once did, but it still looks pretty rosy. In fact, the current price targets leave more potential upside for the stock now versus prior to the Friday sell-off.

Macroeconomic Headwinds for LinkedIn

One of the largest concerns highlighted by the company are the macroeconomic headwinds it is experience due to a slowdown in global growth. The company cited economic weakness in Europe, Asia, Africa and the Middle East as a reason for slowing sales growth in those regions that will weigh on LinkedIn revenues in 2016.

Revenue growth last year from those areas was 30%, but the company expects revenue growth to slow to the mid-20% region in 2016.

Also cited was the impact of a stronger USD, which is expected to cut company profits by 2% in the coming year, though that is uncertain considering the recent weakness seen in the USD and the increasing probability of the Federal Reserve delaying interest rate hikes in the U.S.

LinkedIn Lead Accelerator Shutting Down

Several analysts pointed to the decision to shut down the Lead Accelerator program at LinkedIn as a bad choice. Lead Accelerator is a business-to-business marketing service that was formed after the acquisition of marketing firm Bizo. The company admits it will likely lose $50 million in revenues due to shutting down the service, but points to costs savings as offsetting the revenue losses, and commented that they had not expected the resources necessary to scale the service successfully to be so great.

The company also reminded investors that they will be rolling out the new Recruiter and Referrals enterprise products in 2016, and neither of these have been included in the 2016 forecast. Either one, or both, could significantly impact revenues to the upside, and lead to a revenue and earnings beat versus the company’s current forecast.

Technical Analysis for LinkedIn

LinkedIn shares had already been falling since November, coming off highs near $250 a share and hitting levels of $200 as the stock became oversold and turned sideways in the week leading up to the earnings report and conference call.

On a five year chart we can see that the 200 period moving average had been supporting the stock, but Friday’s drop sent price sharply through the level. The 200 moving average should now act as resistance, and is currently sitting at $186.50, which indicates the stock could make a solid recovery even while remaining bearish based on moving average analysis.

Friday’s move also sent the Relative Strength Index heavily into oversold territory and it now sits at 16.15, which is extremely low. While the RSI could remain quite low for a short period of time it is unlikely it will remain so depressed for more than a week. Keep in mind though that this by itself doesn’t indicate a coming rally as the stock could turn sideways and see the RSI level rise.

It is also notable that the $100 level acted as support for the stock throughout much of 2012 and is likely to do so again.

The Bottom Line for LinkedIn

Whenever we get such extreme moves in stocks it can be tempting to jump in and trade in the opposite direction in the hope that the move may be overdone. While this could be the case with LinkedIn, there are many examples where an extreme move in an asset remained extreme for far longer than anyone thought it could. This by itself argues that caution should be maintained.

That said, keeping shares of LinkedIn on your trading radar could prove to be a smart move, as the potential for a rebound exists when looking at both fundamental and technical factors. Plus the support at the $100 level and current heavily oversold indicators should serve to limit further downside for the stock.

The post LinkedIn Loses Appeal, but was it Overdone appeared first on Money Infant.

The company has been fighting back by cutting aluminum production, and the shuttering of plants in the U.S. this year has caused U.S. aluminum production to drop to a 65 year low. Even so, investors sold shares after yesterday’s earnings results, with Alcoa shares falling to $7.94 in after-hours trading.

The past year has also seen the share price of the aluminum, nickel, titanium and lightweight allow producer tumbling, but we wonder if the sell-off has been overdone and there is good value in Alcoa shares now. Shares are very close to the 2013 low as well as the 2009 low. Prior to 2009 we have to go back to 1990 to find price below $8 a share. Below we take a closer look at the business to help decide if now is a good time to start buying back into Alcoa.

Splitting Alcoa in Two

One looming event in the Alcoa business is the announced split of the company. One half will comprise the less profitable aluminum commodity and smelting operations and will keep the Alcoa name. The other will be made up of the Engineered Products and Solutions (EPS), Global Rolled Products (GRP) and Transportation and Construction Solutions (TCS) units with the name yet to be determined. The split is expected to be completed in mid-2016.

As of 2014 reporting, the new Alcoa had annual revenues of $13.2 billion, while the yet to be named company had yearly revenues of $14.5 billion. The new Alcoa is expected to improve profitability as the company continues to shutter mining, smelting and refining operations, as well as focusing more on recycling. The second company is comprised of the value added side of the business, which has seen a much greater emphasis since 2010 as Alcoa shifted strategy to move away from the raw commodity business.

Following the announcement of the split in the company on September 28, 2015 shares of Alcoa rocketed 20% higher. They have been unable to hold on to the gains though amidst the disappointing third quarter earnings results, a slowdown in the Chinese economy, and the global rout in aluminum and other commodity prices.

Plummeting Aluminum Prices

As the third largest producer of aluminum in the world the fortunes of Alcoa are necessarily tied to the price of aluminum. This has been a definite drag on the company over the past 7 years as aluminum price dropped from over $3,000 a ton in March 2008 to the recent price of just under $1,500 a ton.

The drag on aluminum prices has come due to oversupply as Chinese miners and smelters have dramatically increased capacity in recent years to keep up with Chinese demand.

While Chinese demand is now slumping, overall the demand for aluminum actually increased by 6.5% in 2015, even as prices headed lower. Alcoa maintains that global demand for aluminum will double between 2010 and 2020, which should help support price. Unfortunately Chinese production is expected to continue to climb, though Alcoa has also projected that 2016 will see a supply deficit as producers around the world curtail production.

A Silver Lining for Aluminum Producer Alcoa

All is not negative for Alcoa. While it is the third largest aluminum producer in the world, since 2010 the company has been shifting its focus from base commodity production to value added products. This has put an emphasis on titanium and alloys for aerospace and automotive industries, while the company sells or closes mining and smelting operations.

The remaining aluminum capacity and production has gone to flat rolled aluminum, which still commands a premium price. Alcoa has also been developing advanced 3D printing capabilities meant to replace traditional forging and casting.

Additionally, the company split will separate the value added business units from the raw commodity units, and should positively impact on earnings for both units. Current shareholders will receive stock in both companies, though pricing is uncertain at this point.

What Will the Future Hold for Alcoa?

While some have pointed to the split up of Alcoa and said the company is simply trying to jettison the raw commodity business, I think this is a short sighted analysis. Global demand for aluminum continues to climb and while the supply glut is currently depressing prices, that will turn around at some point in the future. It may seem easy to think prices will remain low, but the truth is we will likely see a rebound within the next 12-18 months as global production is curtailed and supply returns to more normal levels.

The new value added business that will focus on aerospace, automotive, and 3D printing will almost certainly see its share price increasing immediately following the split. The raw commodity portion of the business that will keep the Alcoa name is more of a mystery at this point though. If aluminum price remains depressed when the company splits there could be a large sell-off in the shares immediately following the split.

If Alcoa has timed the split properly and aluminum price is back on the rise when the split is made however we could see strong gains for both sides. The split is not projected to occur until the second half of 2016 and it is imaginable that aluminum could be on the mend by that time.

Buy, Sell, or Hold Alcoa?

So we finally come to the big question…should you be buying Alcoa in 2016, selling Alcoa in 2016, or simply holding or sitting on the sidelines?

Personally I think Alcoa under $8 a share represents great value. Sure we may see price decline some from here, but I think the stock is near a floor. Additionally I firmly believe that the recovery in aluminum price, which will come in 2016, will send shares of Alcoa sharply higher. A move back above $1,800 a ton in aluminum could potentially double the share price for Alcoa and make it one of the best performing stocks of 2016.

And what do the experts say? They are not quite as bullish as I am, but they are decidedly bullish. Alcoa is covered by 17 analysts and of those only 1 is calling the stock a sell. A further 7 are saying to hold the stock, and 8 analysts or nearly half are calling the stock a buy. The average price target from the professional analysts is more conservative than mine, with an average target of $11.21 a share from analysts. Still, this is a 40% increase from the current stock price, which would be a very nice return.

Ultimately you need to make your own decision, but I think I’ve shown that putting the price of aluminum aside, Alcoa is being run very well. Aluminum price will recover in time, and when that happens shares of Alcoa are primed to rocket higher.

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You don’t have to pick up and move half way ‘round the world as my wife and I did to embrace the frugal life. There are plenty of ways for you to add a dose of frugal living right in your home town. If you are ready to add some frugal living to your lifestyle here are 10 ways that you can get started.

1. Rediscover Your Local Library – No doubt you remember the library from your childhood. Well, the library has become even better these days. In addition to books and magazines, many libraries now carry movies as well. With the cost of all these entertainments rising so fast, there’s nothing like getting your entertainment for free. And did you know that you can even borrow books for your Kindle from the websites of libraries that participate in the Amazon Overdrive program? There’s really little reason to buy books ever again. As far as movies are concerned, if you simply have to have a certain title tonight, give Redbox a try. Their super low $1 per night rentals certainly beat the high cost of purchasing dvd’s and bluerays.

1. Make Use of Coupons – The average consumer saves 12% per year on groceries by using coupons. You don’t have to be average though. Taking as little as an hour per week can save you 25% off your grocery bills easily. You can save even more by finding a grocery store that doubles coupons and by searching for sales and discounts before buying pretty much any product or service. And don’t forget online sources for coupons.
2. Cook More, Eat Out Less – While I agree that eating out is fun, it is also way more expensive than making it yourself at home. If you eat out every week, challenge yourself to cut back on the restaurant excursions. By simply dropping a few trips per month to the restaurant you can save literally hundreds of dollars, especially if you have a family. One other good idea for families is to look for restaurants that offer free meals or discounts to children. Or you can join me in Bangkok where our average cost of eating out is about $10 for the three of us.
3. Pay Your Bills Online – This may not make a huge difference, but you can save yourself the cost of several stamps each month and avoid the possibility of late fees by setting up all your eligible accounts for online bill pay. Just be careful to monitor your account balance if you set up automatic bill payments.
4. Minimize Your Auto Expenses – Whenever possible, save money on gas by walking. Not only will your checking account feel better, you will as well and so will the planet. If you have to take the car, try to plan your errands in a logical fashion so you aren’t driving to similar places several times a week.
5. Use Homemade Cleaning Products – You might be surprised at how many things you can clean using simple cleaning agents like bleach, vinegar, and baking soda. Commercial detergents are often harsh, bad for the environment, and downright expensive. Why pay for dyes, perfumes, and marketing costs when you can get the same results for a fraction of the cost?

1. Look for Freebies – At the extreme, you can head to Costco or Ikea for a free lunch or dinner, but there are loads of other freebies out there if you know where to look. This can be a particularly good way to save money if you don’t mind trying new products.
2. Use Cold Water – According to Trent Hamm of The Simple Dollar, “running mostly cold washes with all cold rinses saves us $214 per year.” That’s a pretty compelling argument for washing in cold water. He also mentions that unless your laundry is stained or heavily soiled, there is really no need for hot water. And, hot water damages clothes more, causing shrinking, fading and wrinkling. So, you are likely to keep your clothes in good shape longer by using cold water, which means you will save money on your clothing budget as well.
3. Turn Off the Electricity – I don’t mean for you to go back to using oil lamps and candles, that is too extreme. You can however make a habit of turning off lights and electronics when they aren’t in use. This simple frugal habit can add up to several hundred dollars in yearly savings. Moreover, you can save on electricity by doing some simple diy updates on your home’s insulation. According to the pros at Jayhawk Exteriors, “Energy loss can account for 10 to 25 percent of the heating bill.” By replacing the caulking and weather stripping around your doors and windows, you can easily cut down on the amount of heating and cooling your house requires.
4. Do It Yourself – There are many maintenance type tasks that you can easily learn to do for yourself rather than paying others. One example that quickly comes to mind is oil changes. I know the quick lube places seem inexpensive, but they are not nearly as inexpensive as changing your own oil and filter. And if you have two or more cars you multiply your savings. Here are 10 more ways to save money on car maintenance.

So there you have it, 10 quick easy ways to begin a new frugal life. None of these ideas will make you rich, but taken together they can save you thousands of dollars a year.

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