Strategy for Student Credit Card Users

Credit cards are a reality in today's world. At some point in your life you will need to develop a credit score. There are strategies you can use to use credit properly and to your advantage. As a student in college it is a good time to learn discipline, and build a good credit history.
The first thing we need to talk about is what is a credit score and how is it calculated? A credit score or FICO score is a weighted score based on certain variables in your credit past. Your credit score is calculated by three different companies. They are weighted in the following ways.
35%- Payment history

• Payment history on individual accounts
• Adverse public records like (bankruptcies etc)

30%- Amounts Owed

• Amounts owed on different accounts
• What proportion of credit line are you using out of your total credit line

15%- Length of credit history

• Here the longer you keep a card open and current the better

10%- New Credit

• This includes credit inquiries
• What proportion to your esablished credit is new

10%- Types of Credit Used

• This looks into the diversity of accounts used (credit card, mortgages etc.)

So basically when you have a credit card you need to make a habit of paying for it. It is not beneficial to keep a balance on a student credit card. We as students are charged very high interest rates. Plus if you make a habit of paying it off every month it will help with the largest contributor in your credit score.

So lets say you feel like you are ready to open a credit card lets talk about how to go ahead and get one. Use a credit card comparison site. I reccommend the Discover Card, they have lower interst rates, great customer service, and cashback for things you paay for anyway. I have a discover card and it has been a dream. This website here has a selection of different designs for your discover card.

In review, I want to remind you of some important things with credit. It will follow you so be mature. Only use credit in emergencies or for specific purposes like purchasing gas, and pay it off everymonth. Treat it like the money being used is coming straight from your bank account.

Financial Planning at your own pace

I was having a discussion recently with one of my friends about the power of them starting to prepare for their future sooner rather than later. Now, you have to remember that I am in college, and you may be in college now or were in the past, most of my peers are concerned about where their next twelve pack of bud light is going to come from. I understand that train of thought because I am a college student and I do enjoy a beer after I am done working or going to class. I developed the habit of paying myself first which is what many professionals say to do. On the other hand I have friends whose income is not as steady as mine. For instance I have a friend who uses cash frequently and he received a Digital Coin Counting Money Jar for Christmas. So what he is doing is saving up his change to start his retirement account. It may not be much but at least he took that baby step to get him self started. I would rather all of my readers to be moving forward with some sort of financial plan than moving backwards with no plan at all. So if you don't have the money to open an IRA or investment account at the very least get your self a coin counter that is set aside for this task and place your extra change in it.

Is Apple a good investment?

Since the market bottom in March of 2009 Apple (AAPL) has been a great performer. My question is, will their stock continue to out perform the market? Apple has a great business and is fundamentally sound, with billions of dollars in liquidity they could weather a storm. There are some issues that Apple needs to address, the first being Steve Jobs. As a going concern they will have to be able to continue without him. They need to show the investment community that there is more than one creative mind at Apple outside of Steve that is developing these new products. They need to take a leaf out of Warren Buffets book, yes he has been the investment mastermind but if something were to happen Berkshire already has the next captain of the ship waiting in the wings. Who is this person at Apple? And if this person does exist, he needs to be placed in the public eye so that shareholders know them in case Jobs continues to have health problems shareholders can sleep peacefully at night.

Also how is Apple going to continue to create shareholder value. When the share price appreciation stops how are they going to properly compensate shareholders. When you have a war chest the size of Apple at some point in time inflation is going to eat away at the returns since such a large amount of assets are in cash. So they are going to have to put the cash to work in the business or institute a dividend, because that is what mature businesses do.

Life Insurance Lisence

I am proud to announce that today I passed my life insurance lisencing exam. This is a major hurdle I have now overcome in my financial planning career. As well as preparing myself to better serve you and provide more valuable information.

ATP Oil & Gas Analysis

By: Devon Shire
valueinvestorcanada.blogspot.com




I just saw the most recent short interest on ATP Oil and Gas which now amounts to over 16.49 million shares. With just over 50 million shares outstanding and 13% of those tied up by management we are looking at an incredibly high short interest.




Now usually seeing such a high short interest would give me pause. But I have been following this company extraordinarily closely for over 3 years, and to be honest, if there is an information edge here it is on my side.



Prior to BP messing up their well in April ATP shares were touching $24, and the short interest that has doubled since then. Those shorts are going to be in for a tough decision as there is going to be a flood of good news coming that may set off a classic short squeeze. Here are the reasons that I think those short this stock are going to be wishing they weren’t in the coming weeks:







1) ATP is going to monetize the ATP Titan. They are going to do it in the very near term. And it is going to provide them with more liquidity than they need. The amount of cash that is going to be freed up from this monetization is $350 million. This single transaction alone should be enough bring in interest from investors who have been concerned about ATP’s liquidity.

Completed





2) A increase in cash flow of more than 40% is coming within the next few weeks when ATP brings on the second Telemark well. It is expected to be about 7,000 BOE per day vs the existing production of 22,000 per day. So this is a 30% plus increase in production, but an even larger increase in cash flow as this well is almost 100% oil vs production that is more evenly split between oil and gas.


Completed




3) So stop and think about that for a minute. Within the next month ATP is going to bring in enough cash to fund an entire year worth of capex AND add a well which will increase cash flow by 40%. That is a massive improvement to both liquidity and cash flow within the next few weeks.







4) The big spending is done. It is done. Over the past two years ATP has struggled to come up with the $900 million to complete the ATP Titan and the Telemark pipelines. That is what created the highly leveraged balance sheet. Now the spending goes into drilling wells that immediately add production and cash flow. Over the last two years there has been little spending on drilling, the spending was all on the infrastructure. To put it in perspective the first half capex was almost $500 million. The second half will be $140 million.







5) And ATP wells that are drilled make a big difference to production and cash flow quickly. Consider that in Q4 2009 ATP was producing 13,000 BOE per day. Current production as a result of being able to drill just a couple of wells is already up to 22,000 BOE per day. What is that a 40% increase already this year ? Next is the 7,000 BOE per day MC941 #3 well at Telemark which brings the company to almost 30,000 BOE per day. Then in Q4 the 5,000 BOE per day well at Gomez (already drilled just being connected by pipeline). So in just 2010 ATP is going to enter the year at 13,000 BOE per day and leave it at 35,000 BOE per day. But there is more coming because the infrastructure is now in place and the spending is going into drilling. In 2011 comes the third Telemark well at Mirage which will be another 7,000 BOE per day, and the fourth Telemark well at Morgus which will be yet another 7,000 BOE per day. And also in 2011 will be two additional development wells at Gomez which will both come in at around 5,000 BOE per day.







6) Just to get my point across in #5. The cash over the past two years was being spent on infrastructure that provided no immediate cash flow reward. That spending is done. Now the cash goes into drilling and cash flow increases immediately. This company is crossing the bridge from huge infrastructure spending to drilling spending.







7) This brings me to another point that I want to make. ATP is horribly overleveraged using the REARVIEW mirror. Their balance sheet is the result of all of that spending on infrastructure at Telemark. While their income statement and cash flows have yet to show any benefit from all of that spending as the production is just starting. Perhaps the multitude of short sellers are using some sort of REARVIEW mirror approach where leverage to cash flow ratios look horrible. When you look FORWARD and see what production is going to be after just two more wells you start to see very manageable leverage ratios. When you consider the next 3 Telemark wells and the next 3 Gomez wells which are coming on in the next year or so you should fully get the picture.







8) Now if you know ATP at all you should be asking “but what about all of the infrastructure spending at the next big project Cheviot” ? The answer there is that there just isn’t going to be much. The bulk of cost of Cheviot relates to the production unit called the Octabouy that is already 70% complete in China. Under an agreement with the Chinese company building the Octabouy the entire cost (topsides and hull) will be constructed on a payment deferred basis. When it is complete in early 2012 it will be financed under a similar SPV structure that the Titan will be going into in the upcoming weeks. In other words no cash required from ATP. And for the rest of Cheviot I believe that you will see ATP bring in a partner on the project. ATP has said as much several times and I believe they are already well into discussions.







9) Are you aware of the reserve increases coming to ATP in the next 18 months ? ATP has 212 million BOE of 2P reserves. This could will increase materially in the next 18 months. First will be the addition of Entrada which was picked up this year. The prior operator had over 30 million BOE booked. Second and even more exciting is MC710 which is right beside Gomez. ATP picked it up early this year and believes that it is a mirror image to MC711 which is Gomez and has 50 million BOE. Keep in mind that ATP already has all of the infrastructure in place at Gomez and if this turns out as they expect will result in a huge amount of cash flow with no additional infrastructure spending.







10) What about the government regulations coming ? The answer is that we have seen what Congress has proposed and it is manageable for companies like ATP. The Senate still has to pass something and it appears that their legislation will be even less harmful. The bottom line is that the Certificate of Financial Responsibility requirement WILL allow for pooling of interests by smaller operators and that works well for the GOM independents.







11) And the drilling moratorium ? Well, it is scheduled to end in November and it seems likely that it will end earlier. And the fact is that the ATP Titan is the premier production and drilling unit in the entire GOM with respect to safety redundancies and will be the first to get back to work. And even more importantly ATP already has drilling permits in hand for all 3 remaining Telemark wells.







12) And perhaps even most importantly any legislative changes will apply to FUTURE leases not existing leases. Existing leases were acquired under binding legal contracts that can’t be broken without breach of contract. All of ATP’s value comes from existing leases.







There was a pretty significant short interest back in April. These people got very lucky that BP made the mess they did or ATP would already have the MC941#3 well on production and have the Titan monetized. But what we have learned is that government legislation is going to have minimal impact on ATP and other independent operators. And at this point with 50% of the float sold short I think there is going to be a scramble to cover ahead. ATP has ample liquidity, access to more liquidity, and no debt covenants to worry about. All that is ahead is a series of six large DEVELOPMENT wells to drill and complete (2 of which are already drilled, 2 are partially drilled and 2 to be drilled completely). As a short how long can you sit around and watch as ATP adds well after well each of which add at least 5,000 BOE of production (to put that in perspective 5,000 BOE per day x 365 days x $60 oil = $100mil of revenue per year per well). Get your eyes off the rearview mirror and actually do some math on the size of the cash flow increase that is coming.







Here is a pain for shorts checklist of what I think is coming:







- Monetize the ATP Titan $350million of cash (could be any day)



- MC941#3 well 7,000 BOE per day of oil production (before the end of September)



- Formal announcement on deferral of Octabouy topsides construction cost (any day)



- Moratorium is lifted



- MC754 (Gomez) well 5,000 BOE per day (in fourth quarter)



- Formal announcement on a partner on Cheviot



- Add reserves from Entrada on year end reserve report (this opens $300mil of additional funding on first lien loan)



- Third Telemark well at Mirage Q1 2011 7,000 BOE per day



- Fourth Telemark well at Morgus Q2 2011 7,000 BOE per day



- Two Gomez wells in 2011 5,000 BOE per day each



- Result from drilling MC710 at Gomez which could result in a large increase to reserves with no additional infrastructure cost







With these “Big Six” wells coming on over the next while ATP is going to be a company with annual EBITAX in the $800mil to $1bil range. I’ve seen various valuations suggesting that the company would be worth $50 to $70 with this sort of production. If you are short here you are looking at a potential loss of 5x to 7x from here. And what are you really hoping will drive the stock down much further ? ATP has plenty of liquidity, a huge step change in cash flow coming in a couple of weeks, and more increases coming every quarter almost indefinitely and no financial covenants.



I’m obviously long ATP. I don’t love the company, but a love the increase in production from 13,000 BOE per day to 22,000 BOE per day that has already happened and the increase of another 30,000 BOE per day that is in the drilling pipeline with no further infrastructure spending required.



This is a photo of the ATP Titan



Guest Authors

In order to change up the blog a little bit I have been looking for a guest author or authors to write some articles. I just recently got consent from another Blog author to use one of his articles here. If any readers are interested in writing article please feel free to contact me.

First Day at the Internship

As I had previously stated I have been studying for my life insurance license. On January 10th I completed my prelicensing course for the Life and Health License for Georgia. I finished a little earlier than expected due to the winter weather delayed the start of our college semester. Since the 10th I have been taking practice tests in preparation to take the actual licensing exam. Yesterday I reported for my first day on the Job. Currently we are doing a lot of regulatory paperwork, and trying to roll over the clients into the new business. On next Tuesday I have a reservation to take my licensing exam. You will be one of the first people on the list that I will tell aside from my parents and employer.

The Effects of Interest Rates on Money

This article goes together with one written a while ago titled The Effects of Time On Money. We are going to use the same scenario used in that article except we are going to change the interest rate variable instead of the time variable. So lets assume you save $1 a day for ten years. To make things more simple we will make a $30 investment at the end of the first month and another $30 every month there after for ten years. Under our first scenario our savings account will pay us 4%. At the end of ten years this will be our results

Principal:$3630.00
Interest:$846.94
Total:$4476.94

In our second scenario we will find a savings vehicle that pays 8% with all other facts the same. At the end of the ten years here are our results

Principal:$3630.00
Interest:$1961.56
Total:$5591.56

This scenario presents almost a 25% better performance than the alternate scenario if we gave a longer time horizon the higher interest rate would outperform by a much larger margin. Just to illustrate this fact this we'll extend the time period to twenty years

4% Account      
Principal:$7230.00
Interest:$3876.59
Total:$11106.59

8% Account
Principal:$7230.00
Interest:$10706.22
Total:$17936.22

As you can see over a longer time horizon the higher interest rate is now almost doubling the performance of the lower interest rate. Now you can see the importance of finding a good interest rate for your investments and savings.

My Personal Investments

I have two different investment accounts, the original account I opened was a taxable account, and about nine months ago I started a Roth IRA. I hold five different companies in the taxable account and one ETF (exchange traded fund) tracking an index in my IRA. I typically look for value investments that trade at a discount to their intrinsic value
In my taxable account my oldest holding is ATP Oil & Gas ticker symbol ATPG. The company is an oil E&P (exploration & production) company. The company focuses on the production of oil instead of  exploration. They do this by focusing on wells that have proven reserves. They have a 98% success rate of getting oil out of the ground. They have racked up a lot of debt in the last few years, but this has been spent on capital expenditures for two different projects. They were well on their way to producing the first of these projects called Telemark until the BP oil spill. Over the next two years their production will increase as Telemark and Cheviot are brought on line.
The second holding is The Blackstone Group ticker symbol BX. Blackstone is a private equity company. They manage funds for large investors where they take public companies private. They manage close to $100 Billion dollars. They make money through management and profit fees. For instance they will charge 2% for assets under management, and 20% of profits as they exit investments. This company is one of the best in the business, with good long term fundamentals.
The third business in my portfolio is Capital Source Bank ticker symbol CSE. This company used to be a REIT and has since acquired a bank right before the financial crisis. They are well capitalized and have handled most of their credit losses. They are redeploying their assets at good yield spreads, as well as generating $1 billion dollars of new loans annually. Currently they are trading at only 1.2 x BV where most banks trade at 2 x BV.
The fourth holding is Eagle bulk shipping ticker symbol EGLE. The company has a modern fleet of ships and operates in a niche market. they have long term charters giving them a guaranteed revenue for multiple years. They trade a significant discount to BV. The only problem I see with the company is the leverage caused by their new build program but I see the shipping sector improving with the world economy.
The final holding In my taxable account is Vantage Drilling Company ticker symbol VTG. They are a young oil drilling company with four new jackup rigs and a deep water drill ship along with other management contracts. The company has done a great job managing their own fleet with about a 99% utilization rate and trading at a discount to book value.
In my IRA I hold the Russel 3000 Growth Index ETF ticker symbol IWZ. It holds many different companies from Google to Apple, along with many other companies. and basically allows me to follow the market but I may shortly change my asset allocation inside the IRA to follow a different strategy.