Top 10 Savings Tips

1. Start Today

Time is the scarcest resource we have. We all know that the better we manage our time the more productive we become. This time management principle holds true in savings because time is the largest variable in growing your savings. In fact a person that starts saving a much smaller sum of money at twenty would still end up with more than someone who begins saving twice as much at thirty five. Garth Brooks says it best when he says, “Why put off till tomorrow what can be done today.”

2. Pay Yourself First

Pay yourself first is the key to saving money. Pay yourself first creates an environment where you live below your means. Every time you pay yourself first you create more security for you and your loved ones. If you haven’t been using pay yourself first as a payment strategy, try it the results you will see will astound you.

3. Pay down all your high interest debt

Carrying debt balances that charge a high interest rate make can be the largest obstacle to wealth creation. Examine all the debts you have especially focus on credit cards and automotive debt here, and if you pay more in interest than you earn in your savings earns then pay it off. Start by focusing on the smaller balances and paying the minimum payments on the other loans. After paying off the first balance you will have a sense of accomplishment. After the first balance begin to focus what you were paying on the previous debt towards the next biggest debt. This continues on making each debt easier to pay off than the last. Dave Ramsey coined the term, “Snowball Effect” to explain how this debt payment strategy works. Really the only debt that you should carry at the end of this is a home mortgage, and maybe student loans. I’m not saying don’t save before you are debt free, in fact I want you to start saving before you are debt free. So that when you are debt free you already have a savings system in place for yourself. Also keep in mind that not all debt is bad debt. Not all debt is bad debt, the mortgage helped you buy a home, and maybe fund your education.

4. Build An Emergency Fund

An emergency fund is your first line of defense against unexpected expenses. Often times unexpected expenses are the beginning of the debt cycle. Unfortunately most of us don’t have adequate savings for a rainy day. Forrest Gump may have said it best when he said, “It happens.”, and when it does you need to be prepared for it. To set up your emergency fund, first go to your budget and estimate what six to twelve months of expenses. This is what you should hold in your emergency fund.  A savings account works best here. If you need to use the fund replenish it with your pay yourself first money. Once you have six to twelve months expenses in your emergency fund you can leave it alone and focus on some different kinds of savings.

5. Get your Employee match for your 401k

This week at work go get information about your employer’s 401k plan, and do the paperwork. If you have your 401k set up be sure to contribute for the employer match, the same goes those of you just opening their 401k. The number one reason I am fond of the 401k is the employer match. The employer match great is because free money is given to you just for saving. In reality, it also boosts your returns by whatever the match is. For instance your employer offers to match 5%, well that gives you an automatic five percent return on your money, in fact is so easy it’s hard to give up. It doesn’t hurt either when your 401k contribution reduces your tax bill.
You can get the last five tips along with other savings and financial advice here.

Savings Advice for You

When most people think of savings they think of a savings account or a CD. This is a kind of savings, short term savings to be exact. This is not the only kind of savings available, there is medium term savings, long term savings, and retirement savings.

• In short term savings experts recommend that you have 6 to 12 months of savings. This is often called an emergency fund. As the name states it is there for emergencies like a unemployment sickness or disability. Emergency is is not a new pair of shoes to go with the rest of your collection.
•  Intermediate term savings can typically be placed in something more aggressive than with your short term savings. This allows you to look for better and interest rates and in turn better returns. Intermediate savings is a place to save for large purchase like a car for instance.
• Lastly, and probably the most important of all is retirement savings. Retirement savings plans that you may have heard of include 401Ks, IRAs, Roth IRAs, Pensions, SEPs, and Keoghs. Some of these plans like the 401k are tax deductible. If a plan is tax deductible that means that everything you contribute is deducted from your other sources of taxable income. There is a possible downside to these tax deductible plans.First there are rules about when withdrawals can be made or you will be penalized. Second, if tax rates go up in the future it will hurt you because withdrawals are considered ordinary income. The alternative is a non deductible plan like a Roth IRA. With a Roth you dont get to deduct your contributions. However in the future you get the money tax free at retirement. Typically its Ok to take on more market risk in long term savings accounts. The extra kick from higher returns associated with equities will give a boost to the future value of your money and retirement.

Keep this savings advice in mind when saving money its not best to have all your money in a savings accounts. There need to be different savings accounts with different goals and strategies. This coupled with the pay yourself first strategy will propel your savings and financial freedom to new heights.

Give Away!!

We are going to give away a $30 gift card. This is how much I believe in these financial success principles. We are going to reward you for participating in with the Blog. We will announce the winner after the beginning of June. We also want to show gratitude to our patrons.

There will be a random drawing to decide the winner.

1. To qualify you must follow the blog and your name and profile must show up in the "Followers" area on the right side of the blog.
2. You must comment on one of the existing blog posts.

Is it time for the market to pull back?

You may be watching the current market and wonder how much further the market can go up. I like to see the markets go up just like everyone else, but it can't go straight up. Recently I have been watching the market and it seems like this part of the bull run might be running out of steam. Its time for a moderate correction, there are three indicators that say it may be time to protect your portfolio.
The first indicator is the VIX. The VIX is referred to as the complacency indicator, it measures the cost of protecting your positions. When the market advances typically the VIX pulls back. Right now the VIX is sitting at 14.62 and the 52 week low is 14.27. Typically when the VIX reaches these levels it indicates a pullback is imminent. The second indicator is a saying. The saying is, "Sell in may and go away." Historically the summer time is the worst time to be in the market. Lastly, the current advances in the market have been on light volume. What this says to me is that there is not a lot of conviction in the advances the market is making. Also the market is sitting at technically significant levels so it seems that everyone is waiting to see whether the market will pull back or break out.
In closing I don't know where the market will move from here, but it may be a good idea to buy some puts or take some profits off the table and move into cash. I believe the bull market still has a long way to go, but a 10% could be close.

First Video Post!!

Peer to Peer Lending

Something I have added as a small portion of my personal investment portfolio is a P2P (peer to peer lending) portfolio. What is P2P? P2P is an alternative credit source. What you do is browse the prospective borrowers on the P2P site and decide to fund a portion of their loan. Often times the minimum amount to "bid" on the loan is $25, or you allow the P2P platform create you a portfolio according to your guidelines.
I personally use prosper.com. I started by investing $50, $25 went to two individual loans. My current note yield is around 19%. Now, to be fair I expect my returns to sink downwards as my portfolio grows. I am very pleased with the results that I have gotten using prosper. My to debtors have been on time in their payments every month so far, and I am in the process of funding another loan. To be fair though you should be prepared for some losses, Prosper projects losses for you and claim that the average investor is still receiving 10% returns. Also if you are looking at this as an investment for yourself it will be important to keep in mind that losses will occur. Banks have credit reserves in case you don't pay your mortgage or credit card, and the bank is actually required to do this due to accepted accounting principles. You should also predict some sort of potential losses and have a "reserve" estimate so that you aren't disappointed when one of your borrowers default.

If you have any specific questions about Peer to Peer Lending I would be happy to answer them.

Be your own banker

Have you ever considered being your own bank. You could have your own ATM and you don't have to go see the loan officer and attempt to convince them to give you a loan. Well you can, first I would like to say that I am not the first to develop this concept or use it. Actually the person that commercially published the idea was R. Nelson Nash, his book is called Becoming Your Own Banker: Unlock the Infinite Banking Concept. I recently read the book myself and now I am trying to improve upon it. Before we get started I want to advise you that I am licensed to sell basic insurance policies but not licensed for any variable or investment products. For professional purposes value my advice for what you payed for it.
The personal banking concept is build off of a permanent life insurance policy. Most of the time when you make a large purchase you have to decide between giving up interest that you earn, or paying interest on money that you financed. This happens because you either have to take money out of savings to pay for the item or pay the bank interest for the financing. What if you were able to continue earning interest after purchasing something and then pay interest back to your self. What ends up happening is that over time you develop a large pool of money that has multiple advantages that can be provided to you.

1. You can finance larger and larger purchases as your cash value accounts. While enjoying tax deferred growth inside the vehicle. If you were earning interest in just a plain old savings account you would be required to pay taxes on the interest.
2. Pass on wealth tax free to your decedents. I am pretty confident that if you can pass directly to your heirs that is a plus for anyone.
3. Provide retirement income, this retirement income often times far exceed your original cost of this policy and keep some sort of death benefit intact.

I would also like to point out that these policies take a little while to get started. Permanent life insurance products can be likened to an airplane. When a 70 ton airplane takes off it requires a lot of fuel, but as the plane reaches its cruising altitude and speed it becomes much more efficient. Actually the plane continues to become more and more efficient because it is consuming fuel and becoming lighter. A life insurance policy is the same way, the longer it is in force the more efficient it will become. An important thing to take away from this is to not let the policy lapse, if you do you will have been purchasing expensive term insurance. If you are truly interested in this idea I would start by reading Becoming Your Own Banker.

As I implement this infinite banking plan I will keep you updated on how it works for me.

Capture your large goals with patience

I had an epiphany this morning, my humanity came up and bit me in the rear. Yes, I am human just to clarify to my readers, not some martian coming to brainwash you. We all deal with the human condition everyday, life isn't easy, and sometimes we make life harder on ourselves than we should. We all face adversity in our lives and its how we deal with this adversity that makes or breaks us.
One of the hardest things to learn in life is patience. Sometimes we do not let the fruits of our labor come to fruition due to our impatience, we get frustrated and quit. The phrase "patience is a virtue" is so simple but carries so much truth. On our path to financial success if we could be more patient with ourselves, our investments, our positions in life, our businesses etc. we could be so much more successful. Our success could be measured in terms of exponential growth and success instead of multiplicative growth.
With every thing we take on in life its like planting a seed. In order for this seed to thrive we need to have some of the right resources fertile soil, water, light, air, and time. Often time we plant the seed in the ground and begin yelling "GROW". We often get caught up in the what we can see, and not the growth that is actually taking place. I have done this myself.
We end up giving up on the seed of our dreams because we get frustrated. The dream itself didn't die but since we didn't go out and pull the weeds, water, and fertilize, it couldn't reach its full potential. When we are young we have dreams that are as vast or vaster than the universe itself. It's not that we can't achieve those dreams we just don't let the root system develop to support the dream before we give up. We give up on to many of our dreams before they have a chance to sustain themselves. If you are reading this I want you to know that you can far exceed the expectations you set for yourself. I cannot tell you what your goals are but develop your goals and stay faithful to them.
To tie this back to financial success lets look at what it takes to build a large fortune. We can relate this back to the seed idea. The seed is your initial investment this initial investment can grow to the size of a blade of grass in a field or under the right conditions it can grow to be the tallest tree in the forest bigger than the great redwood trees. First you have to make the decision to plant the seed, and if you have planted the seed you have made it past one of the biggest barriers to being financial successful. The plant can fertilize itself through dividends and/or interest. The fertilizer is more money added, and proper use of other financial tools to protect and grow your financial tree. Some of these tools include insurance, diversity, and depending on the whether your sophistication you could use tools like options. The most important part of growing your money tree is patience as it grows its roots so that it can prosper. Time is one of the other variables that determines the size of any tree, and this is where your patience comes in. Instead of pulling fruit from your tree to early allow the tree to continue fertilizing itself. So that one day when you look out your window in the morning after waking up you can see your tree is there providing shade to you and your family, and will continue to provide shade and fruit to your decedents for years to come.
In closing I would like to remind you to not give up on your dreams or yourself, and leave you with the story of the bamboo tree told by Zig Ziglar.

The Chinese Bamboo Tree

It seems that this tree when planted, watered, and nurtured for an entire growing season doesn’t outwardly grow as much as an inch. Then, after the second growing season, a season in which the farmer takes extra care to water, fertilize and care for the bamboo tree, the tree still hasn’t sprouted. So it goes as the sun rises and sets for four solid years. The farmer and his wife have nothing tangible to show for all of their labor trying to grow the tree.
Then, along comes year five.
In the fifth year that Chinese bamboo tree seed finally sprouts and the bamboo tree grows up to eighty feet in just one growing season! Or so it seems….
Did the little tree lie dormant for four years only to grow exponentially in the fifth? Or, was the little tree growing underground, developing a root system strong enough to support its potential for outward growth in the fifth year and beyond? The answer is, of course, obvious. Had the tree not developed a strong unseen foundation it could not have sustained its life as it grew. The same principle is true for people. People, who patiently toil towards worthwhile dreams and goals, building strong character while overcoming adversity and challenge, grow the strong internal foundation to handle success, while get-rich- quickers and lottery winners usually are unable to sustain unearned sudden wealth.
Had the Chinese bamboo farmer dug up his little seed every year to see if it was growing, he would have stunted the tree’s growth.

Financial Success for starters appetizer recipe

So you have been reading the blog and listening to me talk about all this investment stuff and are ready for a step by step instructions on how to start investing. We will cover it like a recipe.

Ingredients

1. Money: $100 (Its a good starting point, and what I started with)
2. Routing Number 
1. Found on the bottom of your check or your banks website
3. Checking Account Number
1.  Also found on one of your checks or call your bank
4.  Social Security Number (for tax purposes)

Process

1. Go to Sharebuilder
2. Create an account
3. Link your checking account to your new brokerage account
4. Deposit your money
5. Set up your automatic investment plan with the symbol SPY (this is the S&P 500 that I have mentioned before)
6. Continue to add 10% of your paycheck to your account
7. Wait till retirement or whatever your goal is and enjoy the fruits of money working for you instead of you working for money.

An idea for your IRA

Recently I added AGNC to my Roth IRA. AGNC is a REIT (Real Estate Investment Trust). REITs don't have to pay income taxes to the IRS but they do have to pay out 90% of their taxable earnings to their shareholders. The shareholders then treat the dividends as ordinary income. That is why it is in my IRA, so I can grow it with out having to pay taxes on it. AGNC in particular yields around 18.5% annually in dividends. AGNC borrows with short term funds and buys government guaranteed MBS (mortgage backed securities). There are interest rate risks associated with AGNC but management can hedge these risks in case the yield curve flattens out. Check out some of the different REITs and see whether or not they match up with your investment strategy, there are REITs that invest in everything from malls to student housing to nursing homes.

Cash Flow Quadrant (Robert Kiyosaki)

findhttp://www.amway.com/BenFulcher/en/start-a-businessRobert Kiyosaki coined an important concept in financial Security, its called the Cash Flow Quadrant. He has written two profound books covering this idea, the Fist is Rich Dad Poor Dad, and the second isCashflow Quadrant. These books will forever change the way you look at money and income.

 This is what the quadrant looks like. On the left hand side is active income, and the right hand side is passive income. At some point everyone is going to be employed, and most people never leave this E quadrant. The employee quadrant is considered secure, but how secure is it during a bad economy? There is nothing wrong with being employed, but Kiyosaki recommends building up your right side of the quadrant. I have personally started developing a business system. You can info about the business system I use here. I am building this business system, and an investment portfolio that includes a credit card website.
These two books have changed the way I look at finances and financial security, look around at the links and see if any of these ideas could provide value in your life. In terms of financial security I would rather make $50 from 1,000 different sources than $50,000 from one source.

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.