My Personal Finance Blog

The success of eBooks has been an on and off thing for the last decade. Different readers and formats come and go, with Amazon’s Kindle system looking like it might have some staying power with over 225 thousand titles listed as of May 2009.

Now you can add the iPhone and its buddy the iPod Touch as viable competitors to the Kindle for publishing eBooks. The iPhone has many eBooks available free and for purchase from the iTunes App Store but in addition there is the new Kindle app for the iPhone and iPod Touch which gives readers access to the whole Kindle library without needing to have the Kindle reader.

For aspiring writers and authors who are already published, getting your eBooks listed for sale with Amazon and Kindle is a great way to start. Your eBook can be uploaded and listed without much time and cost, and Amazon will pay you a royalty of 35% on each eBook sold for Kindle. The drawback? There are only about 500 thousand Kindle units on the market so far.

Let’s contrast that with publishing your eBook for the iPhone and iPod Touch using your own iPhone app. You will first have to find a qualified iPhone developer to create your eBook app. There will be an upfront cost to develop your application and the time to get your eBook listed in the iTunes App Store can be several weeks. On the plus side, Apple takes only 30% of the sale price, leaving you with 70% vs. the 35% you get with Amazon/Kindle. And, remember that the iPhone and iPod Touch have a combined 40 million users vs. just 500 thousand for the Kindle.

There are also strong rumors of an upcoming super-iPod Touch, tentatively called the iPod MediaPad, that will be just under the size of the Kindle yet will have a larger screen with HD Video capability and full touchscreen keyboard – perfect for reading eBooks in addition to everything else the iPod Touch already does.

There are definite advantages for publishing your eBook with Amazon for the Kindle and there are also advantages for publishing your eBook for the iPhone and iPod Touch using a custom iPhone app. Authors who are looking to monetize their publications should seriously consider making use of both the Kindle and iPhone publishing platforms.

The rise of CFDs (contracts for difference) and spreadbetting over the last decade has naturally impacted on the amount of trading in physical shares using a traditional stockbroker. There is no doubt that the internet has altered the share trading process to the benefit of private clients in terms of cost and access to information and markets, and with broadband and efficient streaming this really is a boost for those looking to capture real time movements using online trading. The first part of this paper discusses why CFDs and spreadbets are now so popular, and then the subtle differences between the two will be explained.

CFDs and Spreadbetting – the best way to trade the stockmarket

In the old days, what now looks a very cumbersome system involved phone based dealing with the client having to wait for a dealing report from the broker, and this would be followed up with a paper based settlement and certification system. The introduction of nominee accounts and the crest settlement system was a great step forward, and in terms of deals carried out for investment, rather than trading, the system works well.

But for traders, this reduction in certification has gone hand in hand with the biggest change in the industry, the explosive growth of CFDs and spreadbetting, which have principally three main benefits over traditional share dealing:

First, there is no stamp duty to pay under current tax laws, so there is an immediate pick up of 0.5% on all UK based trades. The reason is simply that with a CFD, the client is contracting to pay the difference between the opening and closing prices of the position taken – essentially the profit or loss. Delivery never takes place and there is no time limit on the CFD, therefore there is no stamp duty. Spreadbets are treated as bets and are not currently subject to duty likewise.

Second, clients have the ability to take long or short positions on the underlying share, commodity or index. This is an option that many traditional stockbrokers still prohibit, and is useful both as a speculation and for hedging purposes. CFDs offer a simple and effective way to protect against a potential fall in the stockmarket or for that matter any instrument, without having to sell shares in a portfolio and then buy them back.

Third, traders can utilise generous margin rates, which by using leverage, enable large position sizes to be opened using a relatively small amount of deposit. It goes without saying that there is an associated risk which mirrors the amount of leverage, but for experienced traders this to some extent bears some similarity to traditional physical trading for extended settlement. For CFD traders, margin rates of as low as 1% are available, which again is very attractive for hedging purposes.

For share trading it is usual for clients to place funds on margin, but positions have to be closed within the trading settlement period, or the full cost of the purchase has to be made. The client usually pays a premium for not having to settle for up to 25 working days. Again this option is not allowed universally by brokers, and CFDs solve this problem, as they have no time limit, which makes them far more flexible. Spreadbets can be taken out with a wide range of expiry dates, so again it increases the choice for clients.

With these benefits, and the undoubted cost advantages, the natural question is why clients would wish to use a traditional stockbroker. The answer of course lies in the added value services offered by a broker, which include portfolio analysis and management, advice on collective investments, taxation and other financial products. For clients seeking perhaps a longer term perspective on investments, and for buying and selling shares on a longer term view, stockbrokers have an important role to play.

Buying shares outright also gives clients the benefit of shareholder voting rights, which is not the case for CFDs and spreadbet positions, although holders of long CFD positions do receive corporate dividends, and short CFD positions are debited with dividend payments on the ex-dividend date.

It is for shorter term trading and longer term hedging that CFDs and spreadbets have a clear edge, and they are both beneficial for those who wish to ‘go it alone’ in terms of costs. This benefit can be quantified in terms of the length of time each trade is open.

With CFDs, the additional cost of holding a long CFD position over a traditional purchase is only the interest cost. The interest charged on a long CFD is usually at a premium to LIBOR (London InterBank Offered Rate), typically LIBOR plus 2%, but it should be noted that if a client takes a short position, then interest is actually credited to the CFD position at a comparative discount to LIBOR. The amount the client lodges by way of margin is held to secure the performance of the contract and is not available to be set off against the Contract Value.

Conversely, a traditional share purchase incurs stamp duty at 0.5%. The crossover will occur at the time that the interest charged on the long CFD matches the saving made against stamp duty, and this point is usually reached on or around 28 days after the position is opened. Consequently, for trades outstanding for less than this period it is economically more viable to trade the CFD rather than the underlying stock, working on current interest rates. For those going short of a stock or index, there are clear benefits as interest is received each day while the position is open, so time is not a factor.

CFDs against spreadbetting

The terminology is slightly different for CFDs and spreadbets, but both offer the same degree of leverage and potential risk/reward for online trading. If a client wishes to open a CFD position, this is quoted in the same way as if a normal share purchase/sale was being made i.e. ‘buy 1000 Lloyds TSB CFDs’. With spreadbetting one is technically betting on the price movement of a share, index, commodity or whatever measured in pounds per point of movement. So the equivalent trade here would be ‘buy Lloyds TSB at £10 a point’, but the exposure is essentially the same. In both cases, you simply ‘buy’ if you think that the price is set to rise, or vice versa.

In spreadbets, all profits are free from UK capital gains and income tax, which is not currently the case for CFDs. (Tax law can change or may differ if you pay tax in a jurisdiction other than the UK). The other main difference is that for spreadbet long positions there is no daily funding but as each bet has a defined expiry date the interest cost to the broker is built into the spread in the same way as a futures price might be constructed.

In terms of use, CFDs have the edge for stockmarket trading, accounting for 40% of LSE volumes, and many investment banks tend to use CFDs simply because they tend to track the underlying price more than spreadbets.

There is no question that CFDs and spreadbets have revolutionised short term and online trading if one does not aim to hold any long position for more than a month, and they are valuable for longer term hedging.

Perhaps this is an unnecessary statement of the obvious, but the point of insurance is to give people a financial safety net. Should an emergency or disaster strike, money you would struggle to find is paid out by your insurance company. But the squeeze has been on for the last decade as medical costs and the prices of essential drugs have been rising fast. In fact, so fast that the insurers cannot pass on all the increases to their policyholders. It was hard to raise premium rates while the economy was doing well. It became impossible to raise premiums when the recession hit without there being investigations by each state’s Commissioners for Insurance and complaints from everyone else. There comes a point when the insurer cannot get any more blood from the stone and has to sacrifice profits. This has left the medical profession, the hospitals and clinics in a winning position, while the pharmaceutical industry’s profits have continued to rise despite the recession. At the other end of the spectrum, the patients are the losers. There are some who discover the small print in their policies denies cover for the very illnesses they have. There are others whose savings are not enough to pay the deductibles and co-payments. And then there are those whose policies are cancelled when they make a claim for a chronic disease or disorder.

There is a new piece of research from the Commonwealth Fund, an independent, non-profit body. In 2007, it carried out a detailed survey among 2,600 people aged between 19 and 64. When their coverage was analysed, 20% were found significantly underinsured. Why was this happening? Because they were already spending more than 10% of their income on health coverage, whether as premiums, deductibles or both. When the underinsured were added to the uninsured, this represented 42% of adult Americans. Like the uninsured, this forces the underinsured to think twice before they have treatment with more than half either refusing treatment or struggling with debt because of treatment.

In the push for healthcare reform, the focus has been on the uninsured. But this fails to recognize the injustice suffered by the underinsured. No one should be forced to choose between refusing needed treatment and potential bankruptcy. It is therefore going to be an interesting year in prospect as the reform slowly comes into force. Both the poor and the middle class need access to cheap health insurance with reasonably comprehensive coverage. This will further squeeze the insurance industry because it will be denied the right to refuse coverage to those with pre-existing conditions and will be forced to establish group health insurance for those who have struggled to find affordable plans. In all of this, the key to success will be the ability of government and the insurers to impose more control over costs. President Obama has negotiated with the pharmaceutical industry and there is some agreement to hold down prices for those in Medicare and Medicaid. The for-profit healthcare industry also sees some self-interest in moderating its price increases and has given undertakings to the Administration. If some of the pressure is removed from the insurance industry, premium rates will stabilize and the reforms should offer a more fair system to all with a health plan. We can only hope for the best while we wait and see what happens.

Ladies and gentleman, it’s 2010 and also the 3D Tv revolution has arrived. We spent the much from the last decade talking about Plasma Television, LCD Television, and HDTVs but those talks are fast getting close to their expiry date. The 2nd decade in the second millennium is going to be all about the 3-D Television set. If you’ve been living under a rock for that past few months, and haven’t been following the out-of-this-world-buzz that 3-D TVs are generating, then let me catch you up on the whole affair. In 1844 a man by the name of David Brewster devised stereoscope – that was the birth of 3D imagery as we be aware of it. However today\’s world have all but removed involvement in the format as content was scarce as well as the colored glasses needed to appreciate the 3-D experience became more of a burden than a useful tool. That is until today, as well as the recent technological breakthroughs made by the top Tv set manufacturers to bring true 3-D Television set viewing experience in the centre of the lounge room.

To comprehend how 3D Television set technology works, one must know how our eyes work. Our eyes are several centimeters apart from each additional and so obtain the input picture from different perspectives. Our brain uses that information and it is smart enough to mesh the two into one single view, making depth, and making what we see 3 dimensional. Tricking the brain in this manner is not any straightforward process, and for years the simple and cheap technology was making use of colored glasses that had the large problem with limiting the number of colors that you could enjoy a movie in. Panasonic is one from the manufactures that has created a auto stereoscope method that has the capacity to make 3D watching doable with no need of glasses whatsoever. One big hurdle with obtaining people to upgrade their televisions to 3D is that there’s not a lot of viewable content at the moment.

A second large hurdle is that everyone wanting to watch the 3DTV content will need a pair of special 3D glasses. The glasses have to view the 3D effect, although 3DTV’s will function perfectly well as standard 2D screens for the time you’re watching 2D content. For that upcoming 3DTV’s we’re not talking cheap, disposable red/blue glasses, either.

The 3D glasses required for the new 3-D TV’s are what’s known as “active shutter” which means they synchronise with the Telly showing images alternatively towards the left eye then the right eye. While one eye sees an picture, the other eye sees nothing as that side of the glasses is darkened. Your brain stitches the switching images into a coherent 3D image.

Of course, you’ll need more than one pair of glasses if there’s more than one person inside your household.

The graphic card manufacturer, nVidia, is already offering glasses and software which changes almost any computer game into a 3D version, as long as you have a graphics card with enough power and a screen which can refresh at 120Hz, enough to provide each eye a flicker-free view in the action. Most people’s computers and monitors won’t be adequate, but avid gamers is going to be quick to upgrade once they see the impressive 3D effects and the added immersion 3D gives game play.