Madoff Accountants

From the New York Times...

The district attorney for Rockland County, N.Y., Thomas P. Zugibe, has begun inquiries into Friehling & Horowitz, the three-person accounting firm that provided services to Mr. Madoff’s firm. Many have asked how a company as small as Friehling — a three-employee firm based in New City, N.Y., that occupies a 13-foot-by-18-foot storefront space in an office plaza — could have handled an operation as large as Bernard L. Madoff Investment Securities. Friehling & Horowitz is also the subject of a preliminary ethics investigation by the American Institute of Certified Public Accountants started after the scandal broke.

Another small accounting firm, Sosnik Bell, handled paperwork for investors in Mr. Madoff’s firm, according to Clusterstock, a financial news blog. Sosnik Bell, based in Fort Lee, N.J., processed forms for these investors, and then forwarded its work to the investors’ own accountants. Executives from Sosnik Bell could not be reached for comment.

Diversification

I have said it many times... the cornerstone of any intelligent investment program is diversification.

No tool is perfect, of course, under any and all circumstances, but this one is paramount.

It always amazes me when I see the so-called "smart money" people doing exceedingly dumb things, as the following news report will attest.

Diversify... be sure YOU understand exactly what you are investing in... and verify EVERYTHING you are being told.

If something appears to be "too good to be true", it probably is!

This is certainly not a 100% guarantee... but an intelligent way to avoid the following circumstances...

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NEW YORK – The list of investors who say they were duped in one of Wall Street's biggest Ponzi schemes is growing, snaring some of the world's biggest banking institutions and hedge funds, the super rich and the famous, pensioners and charities.

The alleged victims who sunk cash into veteran Wall Street money manager Bernard Madoff's investment pool include real estate magnate Mortimer Zuckerman, the foundation of Nobel laureate Elie Wiesel, and a charity of movie director Steven Spielberg, according to the Wall Street Journal.

All reported that they had fallen victim to Madoff's alleged $50 billion Ponzi scheme.

The 70-year-old Madoff (MAY-doff), well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested Thursday in what prosecutors say was a $50 billion scheme to defraud investors. Some investors claim they've been wiped out, while others are still likely to come forward.

"There were a lot of very sophisticated people who were duped, and that happens a great deal when you've had somebody decide to be unscrupulous," said Harvey Pitt, a former chairman of the Securities and Exchange Commission, a regulator in charge of monitoring investment funds like the one Madoff operated.

The extent of the potential damage prompted a leading fund manager in London to lash out at U.S. regulators for failing to detect the fraud earlier.

"I think now it is very difficult for people to invest in things that are meant to be regulated in America, because they haven fallen down in the job," Nicola Horlick, the manager of Bramdean Alternatives, which has 9 percent of its funds invested in Madoff's scheme, told the British Broadcasting Corp.

"All through the credit crunch this has been apparent," Horlick added. "This is the biggest financial scandal, probably, in the history of the markets."

New Jersey Sen. Frank Lautenberg, one of the wealthiest members of the Senate, entrusted his family's charitable foundation to Madoff. Lautenberg's attorney, Michael Griffinger, said they weren't yet sure the extent of the foundation's losses, but that the bulk of its investments had been handled by Madoff.

Reports from Florida to Minnesota included profiles of ordinary investors who gave Madoff their money. Some had been friends with him for decades, others were able to invest because they were a friend of a friend. They told stories of losing everything from $40,000 to an entire nest egg worth well over $1 million.

They join a list of more powerful investors that have come forward, all worried about the extent of their losses. The roster of names include former Philadelphia Eagles owner Norman Braman, New York Mets owner Fred Wilpon and J. Ezra Merkin, the chairman of GMAC Financial Services, among others.

The Wall Street Journal, citing a person familiar with the matter, said Mortimer Zuckerman, the chairman of real estate firm Boston Properties and owner of the New York Daily News and U.S. News & World Report, had significant exposure through a fund that invested substantially all of its assets with Madoff.

The Journal also said the Steven Spielberg charity, the Wunderkinder Foundation, in the past appears to have invested a significant portion of its assets with Madoff. It said the Elie Wiesel Foundation for Humanity, founded by the famed Holocaust survivor and writer, was hard hit by losses, citing two people familiar with the organization's investments.

Greed

Fifteen corporate chieftains of large home-building and financial-services firms each reaped more than $100 million in cash compensation and proceeds from stock sales during the past five years, according to a Wall Street Journal analysis.

How To Out-Buffett Warren Buffett

From the Wall Street Journal...

Here's the Buffett alternative available to any investor: You can't get the warrants he got, but you can get something quite similar for far less than $5 billion. When I last checked, Goldman call options with a strike price of $105 expiring in January 2010 were trading for about $10 each. (A call is an option to buy a security at a specific price.) That's the equivalent of the right to buy Goldman shares at $115, which is what Mr. Buffett got.

Instead of preferred stock, you can buy Goldman bonds. A week ago, I bought some at a yield close to 10%. When I last checked the Finra Web site, the best I saw was a little over 8%.

True, this strategy only makes sense if you believe in the future of Goldman. The firm may never return to the glory days when shares were $250 (circa Halloween 2007). But it still has the talent and the resources to be the world's pre-eminent investment bank. That should be worth far more than $60 a share, not to mention bonds trading at 80 cents on the dollar.

Economic World has Changed Radically

I just read a fascinating article by Robert V. Green that lays out the real problems of the US economy.

This is a sea change... and deserves your immediate, close attention.

Here's what he said, in part...

The Economic Drivers Are Gone

This means that all four of the major economic drivers of the past twenty-five years are now gone.

* The demographic driver is gone, as the baby boomer bulge has passed.
* The technology driver is gone, as new investment is curtailed and current technology has matured.
* Tax rates will not be used to provide stimulus.
* Credit is now restricted, in strict contrast to its ubiquitous presence.

This leads, then, to the major question.

What's Next?

What is the next major driver of the economy?

At the moment, the answer to that question is unclear.

Although there is a lot of optimism and well-being created as a result of Barack Obama's win, the truth is that a president cannot do much about creating major drivers.

No one, not even a president with Congressional support, can create demand. They can only encourage or discourage existing demand.

The only real impact presidents can have is through tax policy. The hope of lower tax rates vanished on Tuesday and the sharp decline of the market in the following days reflects the market's recognition of this. (See the Ahead of the Curve column of Monday, November 3, 2008, where we predicted this reaction.)

So what major new driver will spur growth in the U.S. in the coming years?

At the moment, we do not know the answer to this question. Neither does the market.

Mark Cuban : Insider Trader

The following from the New York Times...

The Securities and Exchange Commission said Monday that it had charged Mark Cuban, the billionaire Internet entrepreneur and owner of the Dallas Mavericks basketball team, with insider trading for selling 600,000 shares of an Internet search engine company.

The S.E.C. said Mr. Cuban sold the stock in the company, Mamma.com, based on nonpublic information about an impending stock offering. The commission asserted that Mr. Cuban avoided losses in excess of $750,000 by selling his stock prior to the public announcement of the offering.

The commission’s complaint, filed in the Federal District Court for the Northern District of Texas, asserted that Mamma.com invited Mr. Cuban to participate in the stock offering in June 2004 after he agreed to keep the information confidential. The complaint further asserted that Mr. Cuban knew that the offering would be conducted at a discount to the prevailing market price and that it would be dilutive to existing shareholders.

Within hours of receiving this information, the S.E.C. alleged in its complaint, Mr. Cuban called his broker and instructed him to sell his entire position in the company.

When the offering was publicly announced, the commission said, Mamma.com’s stock price opened at $11.89, down $1.215 or 9.3 percent from the prior day’s closing price of $13.105.

“As we allege in the complaint, Mamma.com entrusted Mr. Cuban with nonpublic information after he promised to keep the information confidential,” Scott W. Friestad, deputy director of the S.E.C.’s enforcement division, said in a statement. “Less than four hours later, Mr. Cuban betrayed that trust by placing an order to sell all of his shares. It is fundamentally unfair for someone to use access to nonpublic information to improperly gain an edge on the market.”

The S.E.C. accused Mr. Cuban of violating federal securities laws and said it was seeking to impose financial penalties and confiscate gains from the trades.

“Insider trading cases are a high priority for the commission,” Linda Chatman Thomsen, director of the commission’s enforcement division, said in the S.E.C. statement. “This case demonstrates yet again that the commission will aggressively pursue illegal insider trading whenever it occurs.”

All this proves, I suppose, that someone can have a lot of money but still lack basic ethics and even a cursory understanding of US securities laws.

Great Comments on Financial Crisis

Charlie Rose had another outstanding guest, Bill Ackman, major investor and hedge fund manager of Pershing Square Capital Management LP.

He makes some pertinent and useful comments about the current financial crisis.

This is another video which is not to be missed!

Maximizing Shareholder Value

In June 2007, a broad coalition of leading companies, investors, and other stakeholders released the Aspen Principles for Long-Term Value Creation as a call to action to reverse the capital market's bias toward short-term thinking. Among the key corporate actions it identified:

• Setting long-term metrics that de-emphasize earnings per share and quarterly profits as the metric of choice
• Incentive systems and compensation schemes that reward long-term focus and success.

More recently, Corporation 20/20 came out with its own set of policies for fostering corporate long-termism. Among the group's key principles is that the corporation shall accrue "fair returns for shareholders, but not at the expense of the legitimate interests of other stakeholders," such as employees, communities, the environment and future generations. One suggestion the group makes for achieving this is reducing the clout of short-term investors (hint: hedge funds) inclined to quick fixes to boost short-term profits. One lever the group suggests is requiring investors to hold shares for a year before before gaining voting rights or increasing capital gains taxes on short-term trades. Similarly, compensation incentives might be changed to modify or even outlaw stock options, or make bonuses contingent on achieving social and environmental performance targets.

It's All in Our Heads!

It's all in our heads!

New research shows that financial ups and downs are largely related to the way our brains are hard wired...

People make dismal financial decisions for a host of reasons including:

Too much focus on short-term gains and pleasures.

A strong tendency to imitate other people in one's decisions and actions.

Too much of a focus on specific outcomes rather than a consideration of the big picture.

Relatively quick forgetting of negative events experienced in the past.

Why are we buried in debt?

Social comparison: We get into debt because we need to look good. Related to this is entitlement — you need to have the house, the SUV, the lifestyle because you deserve it and other people like you have it. We 'one up' one another, creating a spiral of consumption and debt."

Unrealistic optimism: People in general believe they will be healthier, have fewer accidents and do better in life than the average person. Risks will turn out OK.

Self-delusion: Maybe it's not as bad as it seems. "They" will find a solution.

Interesting reading!

Vatican Bank

"We have no uncollectable losses."

I just saw an interesting post which itemizes the Vatican bank's financial situation.

While it is in no way comparable to financial disclosures common to Western, secular banking institutions, it is probably the most detailed Vatican financial disclosure that you are likely to see this side of St. Peter's pearly gates.

One comment stood out: the bank makes no loans and as a result "we have no uncollectable losses."

If only all those Wall Street titans could say the same thing!

How Does Banking Work?

From: Leon Johnson

From a good friend and worth sharing.

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This is a pretty dry but concise explanation of how our banking systems works if you are interested – otherwise, you can provide to kids so they can plagiarize on upcoming homework assignments.

A Short Banking History of the United States

Why our system is prone to panics.

By JOHN STEELE GORDON

We are now in the midst of a major financial panic. This is not a unique occurrence in American history. Indeed, we've had one roughly every 20 years: in 1819, 1836, 1857, 1873, 1893, 1907, 1929, 1987 and now 2008. Many of these marked the beginning of an extended period of economic depression.

How could the richest and most productive economy the world has ever known have a financial system so prone to periodic and catastrophic break down? One answer is the baleful influence of Thomas Jefferson.

Jefferson, to be sure, was a genius and fully deserves his place on Mt. Rushmore . But he was also a quintessential intellectual who was often insulated from the real world. He hated commerce, he hated speculators, he hated the grubby business of getting and spending (except his own spending, of course, which eventually bankrupted him). Most of all, he hated banks, the symbol for him of concentrated economic power. Because he was the founder of an enduring political movement, his influence has been strongly felt to the present day.

Consider central banking. A central bank's most important jobs are to guard the money supply -- regulating the economy thereby -- and to act as a lender of last resort to regular banks in times of financial distress. Central banks are, by their nature, very large and powerful institutions. They need to be to be effective.

Jefferson's chief political rival, Alexander Hamilton, had grown up almost literally in a counting house, in the West Indian island of St. Croix , managing the place by the time he was in his middle teens. He had a profound and practical understanding of markets and how they work, an understanding that Jefferson , born a landed aristocrat who lived off the labor of slaves, utterly lacked.

Hamilton wanted to establish a central bank modeled on the Bank of England. The government would own 20% of the stock, have two seats on the board, and the right to inspect the books at any time. But, like the Bank of England then, it would otherwise be owned by its stockholders.

To Jefferson, who may not have understood the concept of central banking, Hamilton 's idea was what today might be called "a giveaway to the rich." He fought it tooth and nail, but Hamilton won the battle and the Bank of the United States was established in 1792. It was a big success and its stockholders did very well. It also provided the country with a regular money supply with its own banknotes, and a coherent, disciplined banking system.

But as the Federalists lost power and the Jeffersonians became the dominant party, the bank's charter was not renewed in 1811. The near-disaster of the War of 1812 caused President James Madison to realize the virtues of a central bank and a second bank was established in 1816. But President Andrew Jackson, a Jeffersonian to his core, killed it and the country had no central bank for the next 73 years.

We paid a heavy price for the Jeffersonian aversion to central banking. Without a central bank there was no way to inject liquidity into the banking system to stem a panic. As a result, the panics of the 19th century were far worse here than in Europe and precipitated longer and deeper depressions. In 1907, J.P. Morgan, probably the most powerful private banker who ever lived, acted as the central bank to end the panic that year.

Even Jefferson 's political heirs realized after 1907 that what was now the largest economy in the world could not do without a central bank. The Federal Reserve was created in 1913. But, again, they fought to make it weaker rather than stronger. Instead of one central bank, they created 12 separate banks located across the country and only weakly coordinated.

No small part of the reason that an ordinary recession that began in the spring of 1929 turned into the calamity of the Great Depression was the inability of the Federal Reserve to do its job. It was completely reorganized in 1934 and the U.S. finally had a central bank with the powers it needed to function. That is a principal reason there was no panic for nearly 60 years after 1929 and the crash of 1987 had no lasting effect on the American economy.

While the Constitution gives the federal government control of the money supply, it is silent on the control of banks, which create money. In the early days they created money both through making loans and by issuing banknotes and today do so by extending credit. Had Hamilton 's Bank of the United States been allowed to survive, it might well have evolved the uniform regulatory regime a banking system needs to flourish.

Without it, banking regulation was left to the states. Some states provided firm regulation, others hardly any. Many states, influenced by Jeffersonian notions of the evils of powerful banks, made sure they remained small by forbidding branching. In banking, small means weak. There were about a thousand banks in the country by 1840, but that does not convey the whole story. Half the banks that opened between 1810 and 1820 had failed by 1825, as did half those founded in the 1830s by 1845.

Many "wildcat banks," so called because they were headquartered "out among the wildcats," were simple frauds, issuing as many banknotes as they could before disappearing. By the 1840s there were thousands of issues of banknotes in circulation and publishers did a brisk business in "banknote detectors" to help catch frauds.

The Civil War ended this monetary chaos when Congress passed the National Bank Act, offering federal charters to banks that had enough capital and would submit to strict regulation. Banknotes issued by national banks had to be uniform in design and backed by substantial reserves invested in federal bonds. Meanwhile Congress got the state banks out of the banknote business by putting a 10% tax on their issuance. But National banks could not branch if their state did not allow it and could not branch across state lines.

Unfortunately state banks did not disappear, but proliferated as never before. By 1920, there were almost 30,000 banks in the U.S. , more than the rest of the world put together. Overwhelmingly they were small, "unitary" banks with capital under $1 million. As each of these unitary banks was tied to a local economy, if that economy went south, the bank often failed. As depression began to spread through American agriculture in the 1920s, bank failures averaged over 550 a year. With the Great Depression, a tsunami of bank failures threatened the collapse of the system.

The reorganization of the Federal Reserve and the creation of the Federal Deposit Insurance Corporation hugely reduced the number of bank failures and mostly ended bank runs. But there remained thousands of banks, along with thousands of savings and loan associations, mutual savings banks, and trust companies. While these were all banks, taking deposits and making loans, they were regulated, often at cross purposes, by different authorities. The Comptroller of the Currency, the Federal Reserve, the FDIC, the FSLIC, the SEC, the banking regulators of the states, and numerous other agencies all had jurisdiction over aspects of the American banking system.

The system was stable in the prosperous postwar years, but when inflation took off in the late 1960s, it began to break down. S&Ls, small and local but with disproportionate political influence, should have been forced to merge or liquidate when they could not compete in the new financial environment. Instead Congress made a series of quick fixes that made disaster inevitable.

In the 1990s interstate banking was finally allowed, creating nationwide banks of unprecedented size. But Congress's attempt to force banks to make home loans to people who had limited creditworthiness, while encouraging Fannie Mae and Freddie Mac to take these dubious loans off their hands so that the banks could make still more of them, created another crisis in the banking system that is now playing out.

While it will be painful, the present crisis will at least provide another opportunity to give this country, finally, a unified banking system of large, diversified, well-capitalized banking institutions that are under the control of a unified and coherent regulatory system free of undue political influence.

Mr. Gordon is the author of "An Empire of Wealth: The Epic History of American Economic Power" (HarperCollins, 2004).

Why The Recession /Depression?

John Higgins of Capital Economics offers his analysis of why this is happening:

If policymakers think that adding extra liquidity is going to solve the credit crunch on its own, they are going to be sorely disappointed. This is because upward pressure on interbank rates is a consequence, not a cause, of the crisis.

It is a shortfall of bank capital that has made financial institutions reluctant to lend to one another. Boosting liquidity is therefore only a necessary, but not a sufficient, condition for stabilising the financial sector. In fact, until banks are adequately recapitalised, funding
pressures may even get worse.

This also explains why the markets’ reaction to the passage of the Emergency Economic Stabilization Act (EESA) has been so lukewarm. Bank capital will only get a lift from the $700 billion “troubled asset relief program” if the authorities overpay for the assets they buy.”

-----------

John Higgins is Capital Economics’ Senior Market Economist with 15 years of experience in financial markets as a trader, analyst and economist. John is tasked with identifying value in global asset markets based on our macroeconomic and policy projections. He contributes to and edits our Capital Daily and is responsible for producing regular updates and thematic pieces on key market developments.

John joined the company in 2008 from Stone & McCarthy Research Associates, where he was Senior Economist covering the euro area. Previously John worked at Nomura International plc in London, where he was Head of Economic and Credit Research within the fixed income division. John has considerable experience presenting at conferences and seminars, and speaking with the media. He holds a degree from Exeter University.

FDIC: On Both Sides?

According to a press report, the FDIC seems to be on both sides of the Wachovia dispute between CitiGroup and Wells Fargo.

It was clear from documents filed in federal court Sunday that Wachovia was in considerable trouble when it agreed to the deal. Wachovia disclosed that it agreed to the deal "with the understanding that a seizure of its banking assets later that day by the Federal Deposit Insurance Corp. would occur" unless it accepted Citigroup's proposal.

Four days later, San Francisco-based Wells Fargo & Co. stunned Citigroup by announcing that Wachovia's board had agreed to its $14.8 billion all-stock offer. Originally, the deal was valued at $15.1 billion, or $7 a share, but Wells Fargo stock declined after it was announced.

Wells Fargo also said it would need no FDIC assistance to complete the takeover, which would be aided by a new IRS rule designed to make it easier for banks to offset losses from loans and other bad debts held by other banks they acquire.

According to an affidavit filed by Robert Steel, Wachovia's president and chief executive in federal court Sunday, he was approached by FDIC Chairman Sheila Bair late Thursday; Bair told him that Wells Fargo was prepared to propose a merger transaction "and encouraged me to give serious consideration to that offer."

One of Wachovia's attorneys then advised Bair that unless Wachovia had a signed and board-approved merger agreement from Wells Fargo, it could not consider the proposal, the affidavit said.

The FDIC said Friday it "stands behind its previously announced agreement with Citigroup." It also said it would review all proposals and work with all three institutions to resolve the tug-of-war. An FDIC spokesman did not return calls for comment on Sunday.

NYSE Specialists

The following link isn't currently working properly, and I have reported it to CNN. But because of its importance to our study of finance and investments, I am posting the article here.

http://money.cnn.com/news/newsfeeds/articles/djf500/200809301638DOWJONESDJONLINE000624_FORTUNE5.htm

Specialists' Moves Monday May Have Staved Off Bigger Market Fall

Dow Jones
September 30, 2008: 04:38 PM EST

NEW YORK -(Dow Jones)- Black Monday could have been even darker. Proponents of open-outcry trading say that specialist market makers on the New York Stock Exchange, faced with a flood of selling orders late Monday, took the buy side or aggressively solicited for buyers on several large financial companies that were selling off.

By assuming the role of buyers or soliciting them, these specialists may have helped limit losses at the bell. In this solicitation, specialists that represent some financial
companies said they would take buy orders in a late crossing session - a move that helped create a floor to some of the selling and kept an even bigger decline from occurring.

"If this was purely electronic, it could have been down 1200 or 1300 on the Dow," said Bernie McSherry, a senior vice president with Cuttone & Co., the largest independent floor operator at the NYSE.

For the session, the Dow lost more than 777 points as the defeat of a proposed $700 billion bailout package in the U.S. House of Representatives sent traders scrambling. At many Wall Street companies, traders reacted to live footage of the vote count on the floor of Congress around 2 p.m. EDT with heavy selling.

Going into the 4 p.m. close, brokers on the NYSE floor say specialists published huge sell imbalances in many financial names, but were actively looking to find buyers. Specialists surveyed their books to find brokers that had purchased the financials on their books at certain levels in the past and went asking again. To solidify this negotiation, specialists made verbal commitments to settle up buy trades in a late crossing session, while continuing to execute sell orders. While this helped specialists pare some of the large positions they would have to keep on their books thanks to the
trade imbalance, it also served to help create a floor on some of the trading.

"[Specialists] created trades that otherwise would not have occurred...when someone alerts a broker and says look at this, you create an interest. That facilitates trading that doesn't happen in other markets," said Dave Humphreville, president of the Specialist Association, which represents market makers on the floor of the NYSE.

Still, a trader at one leading Wall Street algorithmic firm said the volume of stock handled by the specialists was small compared with the overall listed volume, and may not have had a broad impact.

Overall, specialists executed 141.5 million shares on Monday, more than double the 63.4 million shares they execute on an average day year-to-date. Overall volume was high, however, with about 7.3 billion shares trading on the NYSE Composite, meaning that the specialists handled about 1.9% of the volume.

"The New York Stock Exchange floor in general is shrinking as things go more electronic," the trader at the electronic-trading unit said. The dark pool, an electronic crossing network that is an alternative to stock exchanges, at this firm and others are seeing record volumes during the recent volatility. One such venue traded half a billion shares in a single session earlier in September.

As for who bought from specialists, representatives for two floor brokers say specialists disseminated information out to "anyone in the stock market community" that they would take these buy orders in an extended session. The "specialist helps in price discovery so, if they slow the market down, there would be better price discovery," said Tim Mahoney, chief executive of Bids Holdings, an electronic trading group that has partnered with the NYSE.

Among the names that changed hands in the crossing session were some of the large banks, including JPMorgan Chase & Co. (JPM), Bank of New York Mellon Corp. (BK), and Morgan Stanley (MS). "The specialists performed an important function by soliciting contra-side buy interest and that helped cushion some of the downward
move. It's happened on a stock by stock basis over the years, but I haven't really seen that happen on as broad a basis before," said McSherry.

Nonetheless, the "selling imbalance" at the close of the session, when sell orders flooded in, meant that prices slipped steadily during the extended trade. After being down fewer than 600 points at the closing bell, the Dow had taken a loss of 738 points by 4:12 p.m. EDT and at 4:15 p.m. EDT, when all orders were processed and closed, the loss was more than 777 points.

The Standard & Poor's 500 also took a long time to settle at its final close, ending down 8.8%. The Nasdaq Composite, which settled more quickly than the other two indices and had no specialist involvement, fell 9.1% - a comparable loss. "A lot of [specialists] went home way more long than they usually do. It's not what they like to do, but there was a buyers' strike towards the close," said Ray Pellecchia, a spokesman for the NYSE.

-By Geoffrey Rogow, Dow Jones Newswires; 201-938-5360; geoffrey.rogow@
dowjones.com

BOO YAH!!!!

I'm not a big fan of Jim Cramer on CNBC... is this supposed to be investment advice or just entertainment?

But I happened to catch his show last evening, after a 777 point drop on the Dow...

Cramer's the guy with the sound effects, and practically every stock last evening was greeted with SELL!, SELL!, SELL!

The most fascinating segment, however, was his comments on Wachovia Bank, which was just taken over by CitiGroup.

Two weeks ago, Cramer had a personal friend on the show, the CEO of Wachovia Bank, who told viewers that the company had strong controls in place, and that "problem loans" only amounted to about $10 billion dollars.

Whoops!!!!!!!!!!!!!!!!!

Two weeks later, those problem loans had somehow mushroomed to about $42 billion dollars, and the company then promptly joined the deadpool.

What went wrong? Did the CEO intentionally mislead the investing public? Or was he just unaware of what was actually going on in his company?

Who knows?

The company is now essentially worthless.and Cramer has installed CEO Robert Steel on his show's "Wall of Shame".

It is rare to see a TV host eat humble pie, which is why you should definitely take a look at this show segment!

-------------------------

Friday, October 3, 2008

Wachovia CEO Robert Steel is really getting a reputation on Wall Street!

Yesterday, according to a report on CNBC, Steel spent the day huddled with CitiGroup executives in New York... and somehow neglected to mention that Wells Fargo was thinking of opening up the auction and re-bidding for Wachovia.

Citigroup executives found out about this turn of events independently at around 2 AM this morning.

Makes you wonder if Robert Steel ever took a course on ethics, doesn't it?

Washington Spam

From: Henry Paulson
Date: 9/23/2008
Subject: Urgent transaction - need your help

Bright Greetings Dear American:

I need to ask you to support an urgent and important business relationship with a transfer of funds of great magnitude.

I am Ministry of Treasury of the Republic of America. My country has had a crisis that has caused the need for a large transfer of funds of 700 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

I am working with renowned Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.

This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren towallstreetbailout (at) treasury (dot) gov so that we transfer your commission for this transaction. After I receive you’re information, I will respond with detailed information about safeguards that will be used to protect the funds.

Wonderful salutations to you cherish friend from Republic of America.

Yours Faithfully,
Minister of Treasury Paulson

Bailout

"We've reached a fundamental agreement on a set of principles, one, for taxpayers, which is tremendously important," Senator Christopher Dodd said. "We're very
confident we can act expeditiously."

At least one prominent Republican says matters still aren't settled.

"House Republicans have not agreed to any plan at this point," said John Boehner, R-Ohio, minority leader.

Instead of receiving the entire sum at one time, Treasury will receive the money in installments, with $250 billion in bailout funds available immediately, the Wall Street Journal reported. Lawmakers also said the deal calls for the government to receive stock warrants of participating companies, the Journal said.

Bailout Alternative

A group of GOP lawmakers circulated an alternative designed to attract private capital back into the credit markets with less government intrusion.

Under the proposal, the government would provide insurance to companies that agree to buy frozen assets, rather than purchase them directly as envisioned under the administration's plan. The firms would have to pay insurance premiums to the Treasury Department for the coverage.

"The taxpayers haven't done anything wrong," said Rep Eric Cantor, R-Va., adding that rather than require them to bear the cost of the bailout, the alternative "pretty much puts the burden on Wall Street over time."

AIG: Greed ahead of responsibility...

AIG

"Once again the Fed has put the taxpayers on the hook for billions of
dollars to bail out an institution that put greed ahead of
responsibility and used their good name to take risky bets that did not
pay off," said Sen. Jim Bunning, R-Kentucky, a member of the Senate
Banking Committee.

http://www.cnn.com/2008/US/09/18/bush.economy/index.html

Constructing a Harvard Portfolio

How to construct a Harvard Portfolio

Given the expanding universe of publicly-traded securities that track industry sectors, geographies, and indices, average individual investors could have replicated the Harvard Endowment portfolio using a combination of stocks, index funds, and ETF’s for the respective asset classes.

Determining how much to allocate to each sector would require making estimates about return, volatility, and correlation among asset classes and plugging these numbers into an optimizer.

Source: http://www.portfoliomonkey.com/blog/?p=16

AIG

Here is a brochure from AIG...

Ironic advertising?

Big Accounting News!

The US is gradually moving away from GAAP towards international standards.

This actually represents a big move away imposing a book full of "rules" (remember, Enron followed the "rules", and look what happened!) toward more comprehensive international standards. This means that accountants will have to inform their clients that just following "rules" does NOT mean that reports comprehensively and fairly depict what has actually transpired in an organization, if such a treatment produces a misleading result.

Seems like common sense to me... but let's see how this is actually implemented in coming years.

VERY interesting!

Digital Gold Currency

Be careful... be VERY careful!

In a report originally intended as intelligence for a law enforcement agency, but made public this week by the Globe and Mail through Access to Information requests, Canada's financial regulator, the Financial Transactions and Reports Analysis Centre of Canada, FINTRAC, found Digital Precious Metals Operators "have achieved critical mass on the web."

‘As financial institutions and non-financial businesses increasingly deter money laundering and terrorism financing, adaptable and technology-savvy criminals and terrorist financiers will likely see other unregulated, exploitable avenues to further their nefarious purposes. Digital precious metals may become one of them," FINTRAC warned.

The system works thusly:

1. A user opens an online account with a Digital Precious Metals Operator (DPMO), which are Internet Payment Systems (IPS) providing the user with a digital currency that is allegedly backed by precious metals, which can be used for e-commerce, bill payments, person-to-person payments and other transactions.

2. Most DPMOs often require a username, password and e-mail address to set up a DPM account.

3. Once the account is set up, the user purchases digital currency units via a Digital Currency Exhanger (DCE) to find the user's Digital Precious Metals (DPM) account. DPM accounts are denominated by precious metals weight, rather than cash. The DPM account value fluctuates with the price movements of precious metals.

4. Precious metals e-currencies can be used to purchase goods and services if a merchant will accept them. They can be transferred to another DPM account holder. They can be converted back into national currencies, often paid through wire transfer. And they can be redeemed into physical gold.

"Exploitable weaknesses such as user anonymity and the existence of a network of exchange services-some accepting cash deposits to fund DPM accounts-may facility the placement phase," according to FINTRAC. The anonymity associated with opening the DPM account is maintained through the whole transaction process.

In the layering phase a launderer can ‘cash in' and ‘cash out' his DPM account but does not have to use the same exchange service. Therefore, FINTRAC fears a greater potential exists to "disguise the origin and the destination of funds than with other forms of Internet Payment Systems.

"Moreover, the recent introduction on the market of so called ‘digital gold ATM cards' offers the potential for launderers to re-integrate proceeds into the convention financial system." FINTRAC asserted. The agency fears that the digital gold cards may also allow launderers to "cash out" proceeds, "thereby reintegrating them into the conventional financial system."

Pump and Dump

Trading penny stocks is ALWAYS risky!

Pump and dump schemes involve stocks that have had their price artificially inflated. This can be done by manipulating the market but often it is done by sending out a spam run tricking small investors to cash in on a stock.

The fraudsters then quickly sell the overhyped shares collecting profits for themselves and causing investors and brokerages to lose money.

It has been estimated that 15% of all spam or junk e-mail is made up of messages that "pump" stocks that are later "dumped".

Now, VeriSign has developed anti-fraud software that works by keeping an eye on real-time trading activity.

Simply marvelous!!!!!

Investment Tips from Investor's Business Daily...

• Buy only when market indexes are trending up.
• Buy only high quality stocks selling for $15 a share or more.
• Look for stocks with accelerating sales and earnings.
• Look for stocks with increasing institutional ownership.
• Learn how to use charts to determine buy points.
• Don't buy stocks based on dividends or price-earnings ratios.
• Don't bottom fish or buy stock with a falling price.
• Sell a stock if it falls 8% below your cost. No exceptions.

What if your bank fails?

Analysts predict that more financial institutions will collapse

Things are going so great with the US economy these days that news stories are circulating about bank failures.

You need to understand what happens... and how the FDIC is currently operating with less reserves than desired at exactly the same time that failures are increasing.

Way to go Bush Administration!

This is one news story that you must read!

A Great One Passes...

From today's New York Times...

July 9, 2008

John Templeton, Investor, Dies at 95

By ROBERT D. MCFADDEN

John M. Templeton, a Tennessee-born investor and philanthropist who amassed a fortune as a pioneer in global mutual funds, then gave away hundreds of millions of dollars to foster understanding of what he called “spiritual realities,” died on Tuesday in Nassau, the Bahamas, where he had lived for decades. He was 95.

In a career that spanned seven decades, Mr. Templeton dazzled Wall Street, organized some of the most successful mutual funds of his time, led investors into foreign markets, established charities that now give away $70 million a year, wrote books on finance and spirituality and promoted a search for answers to what he called the “Big Questions” in the realms of science, faith, God and the purpose of humanity.

A Yale graduate, a Rhodes scholar, an audacious investor, a Presbyterian who preached open-mindedness and eschewed literal interpretations of Scripture, Mr. Templeton — who began annual meetings with prayers, he said, to clear the minds of shareholders — made billions as a pioneer in his globally diversified Templeton funds, often taking the old advice of “buy low, sell high” to extremes.

As a 26-year-old investor in 1939, when World War II began in Europe, he borrowed $10,000 and bought 100 shares each in 104 companies whose stocks were selling at $1 a share or less; 34 of the companies were in bankruptcy. A few years later, he made large profits on 100 of the companies; four turned out to be worthless.

In 1940, he bought a small investment firm that became Templeton, Dobbrow & Vance, the early foundation of his empire. Mr. Templeton embarked on mutual funds in 1954, establishing the Templeton Growth Fund in Canada to reduce the taxes of many shareholders — Canada then had no capital gains tax — and to emphasize the global reach of its investment strategy. It was one of the first mutual funds to invest globally.

As investor interest widened in the 1950s, he started funds specializing in nuclear energy, chemicals, electronics and technology. In 1959, his firm Templeton Damroth, with five funds and $66 million under management, joined a surge of others in going public.

The flagship Templeton Growth Fund, which was separate from the Templeton Damroth funds, also reported impressive growth, posting a 14.5 percent average annual return from 1954 to 1992; a $10,000 investment, with dividends reinvested, would have grown to $2 million.

Mr. Templeton sold the Templeton family of funds — scores of them, with billions in assets — in 1992, and turned to philanthropies that had engaged him for decades.

John Marks Templeton was born on Nov. 29, 1912, in Winchester, a small Tennessee town 60 miles from Dayton, the scene of the 1925 Scopes “monkey trial” pitting Clarence Darrow against William Jennings Bryan in a battle over the theory of evolution versus fundamentalist views of the Creation. Mr. Templeton was only 12 then, but issues in the case dominated his later life; he wrote at least eight books on spiritual matters.

He was raised in a devout Presbyterian household and was the first student in town to go to college. Supporting himself at Yale during the Depression, he graduated near the top of his class in 1934, won a Rhodes scholarship to Balliol College at Oxford and earned a master’s degree in law. He began his Wall Street career in 1937.

That year, he married the former Judith Folk. The couple had three children. His wife died in 1951. In 1958, he married Irene Reynolds Butler, who died in 1993. His daughter, Anne Templeton Zimmerman, died in 2004, and a stepson, Malcolm Butler, died in 1995.

Mr. Templeton is survived by two sons from his first marriage, John M. Jr., of Bryn Mawr, Pa., a retired surgeon and the chairman and president of the John Templeton Foundation, and Christopher, of Colfax, Iowa; a stepdaughter, Wendy Brooks, of Delray Beach, Fla.; three grandchildren; and three great-grandchildren.

Among his many gifts was the 1983 endowment of Templeton College, a business and management school at Oxford. In 1987, he was knighted by Queen Elizabeth for his philanthropy. After many years on Wall Street, he renounced his American citizenship in the 1960s, became a British subject and moved to the Bahamas, a Commonwealth nation that has long been a tax haven.

Mr. Templeton said his investment record improved after he distanced himself from Wall Street and no longer worried about the tax consequences of his decisions. He was an early investor in Japan in the 1960s and later in Russia, as well as in China and other Asian markets. He sold large holdings before the technology bubble burst in 2000, and warned several years ago that real estate prices were dangerously high.

In Nassau, his net worth swelled into the billions, but his lifestyle remained relatively modest. He drove his own car and spent his days reading, writing and managing his foundation. Visitors were given sandwiches, tea and courtly advice in the afternoon at his white-columned antebellum-style home on Lyford Cay, set on a hillside lush with citrus trees and bougainvillea, overlooking a golf course and the ocean.

Student Loans

June 10, 2008 - 11:30am

Attention recent college graduates: starting July 1st, you will have a once-in-a-lifetime opportunity to significantly reduce your federal student loan costs. We at Higher Ed Watch are telling you this, because if some in the student loan industry get their way, you may never hear about it.

For six months beginning July 1st, members of the Class of 2008 who have taken out variable interest rate federal student loans will have the opportunity to refinance those loans and lock in a low, fixed 3.61 percent interest rate. That's about 3 percentage points lower than the variable rate that was set last year. This is the biggest one year drop in student loan interest rates ever, and the 4th lowest interest rate in the 15 year history of the student loan consolidation program.

All borrowers with non-consolidation federal student loans that were issued before July 2006 [when the interest rate on new student loans changed to a fixed rate of 6.8 percent] can save big money by refinancing their debt after July 1st of this year. But it is the most recent graduates who can get the lowest rate by consolidating variable interest rate federal student loans during their post-graduation, six month grace period that takes place before student loan repayment begins.

A typical member of the Class of 2008, for example, with $17,000 in federal student loan debt can be expected to save approximately $2,100 in lifetime student loan repayment costs if they consolidate in the second half of this calendar year, assuming their loans' current variable interest rate of 7.2 percent is their approximate average interest rate over the next 20 years. Variable interest rates go up and down from year to year, whereas a new consolidation loan interest rate is fixed at 3.61 percent.

There's a catch. Because of subsidy cuts that Congress made last year and liquidity problems due to the credit crunch, most private lenders have stopped making consolidation student loans, which are necessary for the refinancing boon to borrowers. As a result, private lenders have little incentive to make students aware of the opportunity offered elsewhere (they don't want to lose your business), and given past behavior, are likely to try to actively dissuade students from refinancing.

In fact, this is particularly true this year since most borrowers who wish to consolidate their federal student loans are most likely to do so through the U.S. Department of Eduction's competing Direct Student Loan program. Can we really expect the student loan giant Sallie Mae to actively encourage its borrowers to seek Direct Consolidation Loans -- when such a move will require Sallie Mae to lose out on years of interest payments?

If you have any doubt, just listen to what Martha Holler, a Sallie Mae spokeswoman told TheStreet.com during a recent interview on the subject. "There is no immediate need to consolidate as the new rates will be in effect for the next year and many other options, such as extended and graduated plans, exist to help borrowers manage student loan repayment, " she stated. No matter that these other repayment programs don't reduce the cost of the loans for borrowers, and in fact, under the extended repayment program, actually increase a borrowers' lifetime costs by stretching out the loan repayment period over many, many years.

All of this is to say that the onus for alerting recent graduates of this great opportunity lies squarely with the U.S. Department of Education and other public officials. Unfortunately, the Department has a weak record of marketing and promoting the Direct Loan program. In addition, loan industry officials are likely to put the Department under tremendous pressure to play down this cost-saving option for borrowers. There's little doubt that lenders will play the "credit crunch card" with policymakers -- warning them that the potential loss of borrowers to direct lending, on top of the turmoil created by the credit crisis, could cripple them.

The Department must resist this pressure. It must also be prepared to penalize lenders that prevent borrowers from refinancing their loans. One way that lenders have done this has been by refusing to complete the loan verification certificates (LVC) that allow a loan to be shifted from one lender to another. While the Department has issued guidance to lenders to clarify the rules regarding LVCs, the agency's own Inspector General has faulted it for failing to take action against lenders who continually refuse to comply with the rules. "When a loan holder fails to return an LVC timely, or fails to provide all of the information requested on the LVC, the Department does not take effective action to ensure that the applicant's loan is consolidated," according to a 2005 Inspector General report.

The Department and other public officials need to move quickly to ensure that recent graduates are aware of this once-in-a-lifetime opportunity and to alert lenders that it won't allow them to block borrowers from refinancing their loans. Department officials must remember that the point of the federal student aid is not to protect lenders' profits, but to make college more accessible and affordable for the millions of students who benefit from these programs.

Note: Stephen Burd and Michael Dannenberg with Higher Ed Watch contributed to this post.

Personal Finance Tools

From USA Today...

Create a budget

The first step to taking control is to understand how you spend your money. Start by determining your basic living expenses such as housing, food and transportation.

Then, list other monthly expenses. This may take some work. So pull out your bills and credit card statements. Fortunately, free software can make light work of organizing it all.

SimpleD Budget (Windows) is a small program that helps you track expenses. You enter your monthly expenses and income. After allocating your money to certain categories, you enter payments as you make them.

You'll see when you're approaching the limit for a particular category. You'll also get an idea of how fast you're spending money.

Buddi (Mac/Windows) works much the same as SimpleD Budget. However, it can also help you generate various reports. For example, you can see how your net worth has changed over the months.

Another free finance manager is AceMoney Lite (Windows). It has more features than the other two. For example, it can download stock quotes from the Internet.

Review your credit report

Once you know where cutbacks can be made, you're ready to make changes. Maybe you want to downgrade your car to a cheaper model. Or perhaps you're looking for a car that uses less gas. And, of course, you may want to refinance your home.

Before you do this, you should review your credit report. A poor credit report can stifle your chances of locking in a lower rate on loans.

You'll want to check your report for accuracy and fraud. Then, you can contact the credit bureaus to correct errors.

You can get your credit report at AnnualCreditReport.com. You can request one copy from each of the three major nationwide consumer credit reporting institutions — Equifax, Experian and TransUnion — once a year. Those reports are free.

You must enter your Social Security number to get your report. If you're uncomfortable doing this online, you can mail your request.

AnnualCreditReport.com provides information on disputing items on your reports. However, it does not provide your credit score. For that, you'll need to pay the credit bureaus about $10 for each score. If you decide to buy just one score instead of all three, go with the FICO score, which Equifax offers. The FICO score is the most widely used by lenders.

Find your credit score for free

Your credit score can play a large role when you apply for credit. Quicken Loans has an interesting site —Quizzle.com. It will give you a free credit report and throws in a score. A Quizzle score, that is, which isn't used by lenders, but can tell you how well you're doing as a homeowner. Quizzle also will help you gauge your home's value. You'll also find out how to save on your mortgage. Additionally, there's a budget management tool.

Quizzle is interesting, even if you don't need a mortgage or can't qualify. You should come away with a better understanding of your finances.

For now, Quizzle is aimed at homeowners. It should provide service to renters soon.

CreditKarma.com also provides you with a free credit score. The score comes from one of the three major credit bureaus. The site will also help you monitor your score over time.

CreditKarma provides you with special offers based on your credit score. For example, you can get a lower interest rate on credit cards. You may also apply for offers from cable companies and other businesses.

Sandy Weill

Charlie Rose had an interesting conversation with Sandy Weill, Chairman Emeritus, Citigroup.

The most interesting tidbit to emerge from that conversation was this...

We keep buying oil and gas from all those other oil-producing countries. They take our money and put it into what they call "sovereign funds", which are owned by the various oil rich countries.

The problem is that these country-owned investment funds have to re-cycle these dollars and use them for something... which could either be good... such as creating educational opportunities, reducing poverty or improving health care... or they potentially could be used for not-so-good purposes, such as financing terrorism and helping to undermine the entire US economy.

The problem is not just the purposes these funds can be put to, but the very size of these funds, which are, even today, a very large part of overall global wealth.

According to Sandy Weill, "sovereign funds" today are about $2.3 TRILLION dollars in size. If you assume that oil will stay around $80 to $100 a barrel (not such a good assumption... have you visited a gas station lately?), then these "sovereign funds" will automatically grow to about $13 TRILLION dollars in size in just seven years (2015).

If you then assume that the oil price will much higher than it is today, the total value of all "sovereign funds" will be correspondingly much higher, and represent an even greater percentage of total global wealth, with enhanced capabilities to do either good or evil.

This is an important consideration for global finance going forward, and should be studied VERY seriously.

------------------------

And here is an article, Mortgaging America: Investment funds run by foreign governments are keeping the U.S. afloat, by Eric J. Weiner, from the Los Angeles Times on June 4 2008, that discusses this very topic!

Important points...

Sovereign wealth funds, or SWFs, basically are mutual funds that invest the excess capital generated by a region or country. The first one was established by Kuwait when it still was a British territory. After World War II, as Kuwait was negotiating independence, its leader, Sheik Abdullah al Salem al Sabah, asked the British to help him create a fund that would invest the nation's oil profits. The Kuwait Investment Board, which eventually became the Kuwait Investment Authority, today has about $250 billion in assets and is one of the largest sovereign wealth funds in the world.

As the British Empire crumbled, the government created similar funds for many of its territories and colonies (including the islands of Kiribati, which profitably exported guano for fertilizer). Meanwhile, other countries with growing wealth started setting up similar funds, such as the oil-rich nations of Saudi Arabia, the United Arab Emirates, Norway and Russia, as well as China, Singapore and South Korea, which had highly productive economies that also generated lots of excess capital.

In 1990, the funds held just $500 billion in assets combined. Today, that figure is about $3.5 trillion. For comparison purposes, that's more than all of the assets controlled by all of the hedge funds in the world. And by 2012, the figure will be at least $10 trillion, according to estimates by the International Monetary Fund.

The primary reason for this explosion is, in a word, oil. As its price has soared from less than $25 a barrel in 2002 to more than $125 a barrel today, the value of sovereign wealth funds held by oil-rich nations has skyrocketed. And this trend isn't expected to change any time soon.

The new power of SWFs has been on graphic display during our recent mortgage crisis. They've essentially rescued the international financial system by injecting tens of billions of dollars into troubled banks. Citigroup, for instance, raised about $20 billion from a consortium of SWFs from Abu Dhabi, Kuwait and Singapore. UBS secured nearly $10 billion from a Singapore fund that now controls 9% of the bank. Merrill Lynch took in about $11 billion from SWFs from Kuwait, Singapore and South Korea. And even august Morgan Stanley got $5 billion from China's SWF.

These investments are steadying global financial markets by ensuring that none of these key banks goes under. But there are important questions to ask about the increasing influence that sovereign wealth funds have over our economy. As SWFs grow in size, they will be in a position to control large swaths of the global business world. That means foreign governments, which control the funds, will increasingly own sizable stakes in companies in such important industries as computer technology, aerospace and biotechnology.

These kinds of investments raise "profound questions" of geopolitical power, as former Treasury Secretary Lawrence Summers pointed out a few months ago at the World Economic Forum in Davos, Switzerland. Summers' essential complaint is that there is no way of knowing if there is a political agenda behind a country's investment in these essential industries.

MSN MoneyCentral Stock Research Wizard

Many thanks to my daughter Dana for providing the following summary of the types of information to be found on the MSN MoneyCentral Stock Research Wizard about Apple Computer, as of February 9, 2008.

This summary is provided "for academic informational and illustrative purposes only" and should NOT be used under any circumstances for making actual investment decisions. Please use the free MSN MoneyCentral Stock Research Wizard yourself when making actual investment decisions.

This information is provided only to illustrate the types of information to be found on the MSN MoneyCentral Stock Research Wizard, and any actual information contained in this report may be inaccurate, incomplete and/or may have changed significantly since it was prepared.

------------------------------------------

Apple Computer, stock symbol: AAPL

5 key research questions:

Apple Fundamentals

Apple Inc. designs, manufactures, and markets personal computers, portable digital music players, and mobile communication devices and sells a variety of related software, services, peripherals, and networking solutions under such well known brand names as Mac, iPod and iPhone. The company is experiencing a resurgence under Founder Steve Jobs, after having slipped in recent years. The main company strength is high quality product design in both hardware and software, and the company is even clawing back market share in personal computer operating systems, after having been almost shut out of this market by the popular Microsoft Windows operating system.

Company sales of $26.5 billion are a bit under the industry average, but of course, this is a comparison with Microsoft, which skews the average significantly. However, one year income of $4.07 billion is actually a bit better than the industry average, which is a good sign. One year income and sales growth are both ahead of the industry average, indicating increasing success in competition with Microsoft. One year net profit margin of 15.4% is significantly ahead of its 5 year average profit margin, and the industry average, indicating a strengthening position. The company is operating with no debt.

Apple Stock Price History

Apple stock price change for both the past 3 and 6 months has been negative (-30.9% and -4.1% respectively), although the 12 month stock price change is positive (+40.7%). In each case, these averages compare favorably with industry averages, which are slightly worse. The stock is currently trading (as of the time of this writing) at $122.50 per share. The first resistance level on the upside, in comparison with the 200 day moving average stock price, is $146.61, and the second resistance level, in comparison with the 50 day moving average, is $170.75. On the down side, the support level for Apple stock is $83.00, which is the 52 week stock low.

Apple Stock Price Target

Based upon Apple’s current price/earnings multiple of 26.6, and the average earnings per share, as estimated by 21 professional analysts that follow this stock, Apple’s current fair valuation using the current Price Earning Ratio multiple, ranges from $132.48 to $152.90, with an Average Estimated Price of $140.76 in 2008. Next year’s valuation, using the same methodology, results in a fair valuation from $164.22 to $187.96, with an Average Estimated Price of $175.54 in 2009. Apple’s alternate target price, based upon industry multiples, results in a projected valuation of $140.76 in 2008, and $175.54 in 2009.

Apple Stock Price Catalysts

Representative recent catalysts for changing Apple stock price valuations include:

News – “Apple Ready to Shine Again 2/8/2008, from TheStreet.com

SEC Filings – Apple Quarterly Financials, the 10-Q Report, filed on 1/31/2008

Insider Purchases and Sales – A company director, Millard S. Dexter, sold 20,000 shares on 11/29/07

Advisor FYI Alerts (like changes in analyst projections or changes in the financial condition of the company) – Representative recent samples include:

· Price/Volume alerts - 01/23/08 AAPL opened significantly up

· Analyst alerts - 01/31/08 Current quarter earnings estimate increased.

· Financial alerts - 10/23/07 AAPL's profit margin up again

· News alerts - 02/06/08 AAPL appears to be bouncing off a 52-week low

StockScouter Rating - StockScouter rates U.S. stocks traded publicly for at least six months on a scale from 10 to 1, with 10 being best. Apple is currently rated “10”.

Apple Stock Comparison

Compared to Microsoft, Apple stacks up quite well. Categories in which Microsoft beats Apple include: Total Sales, Total Income, lower Price/Earnings Ratio, Net Profit Margin, Company 3 Month Price Performance, Industry 3 and 6 Month Price Performance, and 3 Month Relative Strength.

Categories in which Apple out performs Microsoft include: Share Price Percent Gain for this and next fiscal years, Sales Growth, Income Growth, 6 and 12 Month Price Change, Industry 12 Month Price Performance, and 6 and 12 Month Relative Strength.

In conclusion, the MSN MoneyCentral Stock Research Wizard provides an excellent and interesting method for quickly and easily summarizing and evaluating publicly traded securities.