Your Questions Answered

Gary Kaltbaum
This week Gary Kaltbaum, president of money management firm Kaltbaum & Associates, answers YOUR money questions. Keep e-mailing us — we're making this a weekly feature. So, tap into the power of the #1 business team on cable at and be sure to tune in to "The Cost of Freedom," Saturday starting at 10am ET.

I was able to purchase (BIDU) at $100.00 per share...My questions is the next Google? If so, should I just hold onto the stock, or keep it for the long-term? Regards, Olga

There is no way in knowing whether Baidu is going to be another Google. But here are some thoughts you can ponder:

The action right now in Baidu is something that cannot be measured. It is just a bunch of investors buying in hopes that someone is going to come around and buy at higher prices.

When Google came public, the market threw it aside for a bit because of the way it was taken public. Baidu has made a loud noise. On the first day of trading, investors were willing to pay six times the offering price.

In the three months ending in March, Baidu had revenue of just $5.2 million and net income of only $303,000. When Google went public, its most recent quarterly revenue and net income were $700 million and $79 million respectively.

At the offering price, Baidu was trading 64 times sales — not earnings, sales!

There is no doubt! Baidu will have trmendous growth going forward, but how much are you willing to pay for that growth. Your best bet is to put in trailing stops (you pick a number underneath the current price...and if it hits, you are taken out) just in case this IPO marks another top in the Internet space.

Could you give me your thoughts on SIRI (Sirius Satellite Radio Inc.) from both a short term (two - three months) to longer term? — Don

If you are asking about Sirius Satellite the company, I will tell you that it is exciting. I will tell you it is aggressive. I will tell you they have a visionary as their new CEO, Mel Karmazin.

If you are asking about Sirius Satellite the stock, you may want to consider the following thoughts:

Currently, Sirius has trailing yearly revenues of approximately $140 million. The market cap for Sirius sits at just under a whopping $9 billion. But I have seen market caps grow and grow for companies that grow their earnings in an explosive manner. That's if they have earnings. Sirius does not. In fact, in the past year, Sirius lost over $800 million. That number is not a typo. Sirius lost 63 cents per share on over 1.3 billion shares. So the question is at what cost are they growing?

Between Howard Stern, the NFL, and other contracts, Sirius is on the hook for a couple hundred million dollars a year. How are they going to finance such contracts? I will tell you. They are going to tap the public markets again, just like they did on August 4 when they announced they filed to sell securities up to $500 million including common stock. This only dilutes shareholder wealth.

Sirius says they will be "breakeven" in 2007. I have only one question — How do they know? How do they know whether subscribers will show up for Howard Stern? How do they know a new technology won't come out that trumps satellite radio? How do they know what the competetion will look like?

At $9 billion market cap and losses into the future, this is not my cup of tea. It gets the speculative juices flowing but that's about it. Great company, great CEO, but at what cost?

How high do you think Alan Greenspan will raise the interest rate in the next year? How do you think his decision will affect the average working person? — Rich, Houston, TX

My personal opinion is that the FED has four more raises to 4.5%. On the positive front, savers will make a lot more money on their money markets and CDs. On the negative front, credit card rates, home equity loans and other types of borrowings will cost more to the consumers.

I am 54 and, thanks to an ex-wife, my first retirement is gone. Do you have suggestions for me to start and build a second retirement? — Skip, Holland, MI

There is only one answer and it is simplistic. You must spend less than you make. The rest should be put in a retirement account by dollar cost averaging over time in quality growth and income funds. Wealth will not be built in a day. You must think for the long term and stay disciplined.

Hi, I've managed to save about $10,000 and currently have the money in my savings account. I would like to start investing, but still have access to some of my money if I need it. Do you have any ideas for a first time investor? — Jeanne, Hartford, CT

You must first decide how much risk you want to take. I would then investigate the top mutual funds of the past 10 years and find one that fits your needs. I would not put it in all at once but would average it in over time. With that amount of money, I would be hesitant to buy individual stocks. Lastly, do your homework. You can never have enough knowledge.

Gary Kaltbaum is president of money management firm Kaltbaum & Associates. He can be heard nightly on his nationally syndicated radio show "Investors Edge" on over 50 radio stations. He is a regular on FNC's Business Block. Visit Kaltbaum's Corner on for more.