QUESTION: Do you have an opinion about whether Broadband over Power Lines (BPL) will supplant, and render obsolete, technologies such as DSL, cable Internet, or fiber to the home? — Ray (Plano, TX)
SCOTT BLEIER: Ray, BPL sounds like a good idea, but it has not caught on. BPL uses radio frequencies to transmit the Internet to your home. But BPL speeds are slow compared to cable or fiber. The other big problem is that it causes radio wave and electrical interference to multiple sources.
Utility companies have begun to use BPL to monitor home power usage, but as a consumer product, it has limited appeal. Utility companies are municipal concerns and would need local approvals to build a new network — even though the wires are already in existence.
BPL could be a way for users in rural areas to access the Internet if they are not served by regional cable or phone providers, but phone and cable companies have spent billions of dollars to build networks, and the power companies cannot compete with an inferior product.
QUESTION: I am a senior in high school and I will be graduating very soon. I think it is very important for young adults my age to start saving and investing their money. I am always inquiring on how to invest in stocks but I don't know the basics about this subject. Where can I find information on saving and investing in stocks and bonds? Thanks — Chinethia
SCOTT BLEIER: Educating yourself is the first step in your lifetime of saving and investing. Start here with the Internet! There are many free financial websites, including foxnews.com/business!
Read all you can about business and the markets. The Wall Street Journal and Investors Business Daily are great places to start. Forbes and Business Week are excellent periodicals. Go to your local bookstore and browse the business section. Once you read about the current state of business and news, you will have "feel” for the business angle of society.
Learning to invest is like learning anything else. Initially, there is a steep learning curve as you are exposed to the concepts involved. But as time goes on, it will seem natural to you. Stay motivated to read and learn, as there is always something new to assimilate.
Remember, there is no magic book that teaches you how to invest. It is a long-term process of being careful with your hard-earned money and investing it wisely.
QUESTION: How do you feel about Amylin (AMLN)? I believe the stock was recently upgraded, but it has fallen off a bit this week. Is it time to acquire more? Thanks — Chuck (Bowling Green, KY)
SCOTT BLEIER: Amylin Pharmaceuticals has been a biotech success story. Their stock is up over 160% in the last year, primarily on the strength of their diabetes drug Byetta. It has a collaboration agreement with drug giant Eli Lilly for further development and distribution of this and other diabetes drugs.
Considering the stock’s performance, I would not say that is has fallen off. On the contrary, they just raised over $440 million in a secondary offering of stock and it is currently trading higher than the offering price. That is a sign of strong demand for the stock.
Stay with your position and wait for general market weakness in which to add to your position. The fundamentals are strong, and so is demand for the stock — so you should wait for market weakness and hope the stock pulls back to the $45 range.
QUESTION: I've invested in Dow Chemical (DOW) and have seen the stock drop from high 40's to the high 30's over the last year. The stock is rated highly by S&P and has had very good earnings reports and projections. What gives? — Dan (San Diego)
SCOTT BLEIER: Dow Chemical is one of those companies that is a consistent money machine. It has a great 3.75% yield and sells at less than nine times earnings. The problem is that it does not grow fast enough for the growth fanatics of Wall Street.
Higher fuel prices have made their cost of goods higher, and that has taken a bite out of earnings. It is also considered a defensive stock that can outperform the market in times of a slowing economy. So far, that has not happened.
But don’t fret; the stock has finally come into an attractive buying range. It is fundamentally cheap, and appears to have significant technical support just under $40. This may be a good time to buy, but remember, you will need patience in order to make money.
QUESTION: Do you know of any mutual funds that "short" the bond market? — Ed
SCOTT BLEIER: Ed, there are several mutual funds that attempt to go “inverse” to interest rates. Rydex has the Juno Fund (RYJUX) and Profunds has Rising Rate Opportunity (RTPIX), which focuses on the 10-year bond, and a second fund (RRPIX) that focuses on the 30-year bond.
But this week the Federal Reserve stated that they are almost finished raising interest rates. If that is the case, then there will no longer be an upside opportunity with these funds — especially considering interest rates have risen quickly over the last few months.
QUESTION: I own stock in both Ford (F) and Merck (MRK). What should I do? Go for the long haul or sell and lick my wounds? — Jan
SCOTT BLEIER: Let me guess — you have owned these stocks for the “long-term,” right? That is the danger of buying and holding. If you want to own stocks for the long term, you must still monitor the fundamental situation of the company and act to limit your losses if bad news should strike.
Ford and General Motors are in the same boat in terms of high employee expenses because of soaring healthcare benefit costs. They are so high that there have been bankruptcy scares for both companies. I doubt that will happen right now for either, but it is a possibility in the future.
Ford is paying a 5% dividend now, and that could be cut at any time. But the stock seems to have found a bottom in the $7.50 range. Monitor it carefully, because if it approaches $5 to $6, chances are that there is something seriously wrong, and the stock should be sold.
Merck is another company that has fundamental problems because of Vioxx. They are open to a huge legal liability because the drug may have caused heart attacks in users. So far the company has defended itself, but the liability is potentially great.
When negative news happens, taking a loss quickly may be the best money that you could ever lose in your investing life, as the stock in question could go considerably lower. If you put a gun to my head, I would say it's time to move on from both stocks.