Finance

Geithner's subtle dig at China

2011-02-07T09:57:00.000-08:00

Geithner's subtle dig at China: "The push to get China to allow its currency to appreciate continued Monday, with Treasury Secretary Tim Geithner raising the issue in Brazil."

Interesting Investment Book

2009-05-12T12:43:00.000-07:00

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A great friend, Eric Zimmer, just suggested a fine investment book to get you thinking...

The Ultimate Depression Survival Guide: Protect Your Savings, Boost Your Income, and Grow Wealthy Even in the Worst of Times

by Martin D. Weiss

This book comes highly recommended, so you just might want to have a look at it!

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Madoff Accountants

2008-12-22T08:28:00.000-08:00

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

2008-12-15T08:21:00.000-08:00

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

2008-11-21T06:57:00.000-08:00

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

2008-11-20T09:10:00.000-08:00

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

2008-11-18T13:05:00.000-08:00

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

2008-11-17T09:29:00.000-08:00

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

2008-11-14T12:29:00.000-08:00

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

2008-10-14T14:02:00.000-07:00

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!

2008-10-14T13:02:00.000-07:00

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

2008-10-14T12:35:00.000-07:00

"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?

2008-10-10T11:03:00.000-07:00

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?

2008-10-06T11:17:00.000-07:00

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.”
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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?

2008-10-06T05:25:00.001-07:00

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

2008-10-01T08:35:00.000-07:00

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!!!!

2008-09-30T07:18:00.000-07:00

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!

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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

2008-09-27T15:52:00.000-07:00

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

2008-09-25T12:00:00.000-07:00

"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

2008-09-25T11:43:00.000-07:00

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...

2008-09-18T09:31:00.000-07:00

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

2008-09-17T12:12:00.000-07:00

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

2008-09-17T10:50:00.000-07:00

AIG

Here is a brochure from AIG...

Ironic advertising?

2008-08-28T09:34:00.000-07:00

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!

2008-08-14T11:23:00.000-07:00

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."

2008-08-11T19:50:00.000-07:00

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!!!!!

2008-07-16T11:20:00.000-07:00

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.

2008-07-15T10:21:00.000-07:00

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!

2008-07-09T04:56:00.000-07:00

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.

2008-06-11T10:32:00.000-07:00

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.

2008-05-22T21:32:00.000-07:00

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.

2008-05-22T13:15:00.000-07:00

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.

2008-05-21T17:12:00.000-07:00

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.

2008-05-14T11:57:00.000-07:00

Example of a Prospectus for an IPO

Check this out!

Grand Canyon Education, Inc.

2008-05-11T10:01:00.000-07:00

Newspaper? What's a "Newspaper"?

It's the end of an era...

I teach finance courses, and my very favorite is MBA 540, a graduate course entitled "Maximizing Shareholder Wealth".

Traditionally, I offer a fun optional assignment in the first session: What's the highest priced, single share of stock available on the New York Stock Exchange?

I'll tell the students to look over the stock tables in the daily newspaper, perhaps over a cup of coffee in the morning, and one obvious candidate will pop out (Hint: it's Warren Buffett's company).

And an occasional student will say, "I could do that on the Internet, couldn't I?" Sure, I say, but the newspaper lists all the companies on the New York Stock Exchange in one compact list.

As a matter of fact, I started a new course just last week, and gave out this very assignment to my current students.

But, unknown to me, that will be the very last time.

You see, our local paper, the St Petersburg Times, just announced today that they are re-organizing the newspaper, and will stop publishing daily stock listings for most companies as of Monday, May 19 (coincidentally, the anniversary of the day that I graduated from college myself).

The paper now directs readers to look up stock prices online.

Which is a shame... and obviously, the end of an era.

Newspapers have always been a daily part of my life. One of my first memories is reading the comics spread out on the floor on Sunday morning after church.

Although neither of my parents graduated from high school (one not even from the eighth grade), there were always newspapers around our home. We had the morning paper (the New York Daily News... New York's Picture Newspaper!), and two afternoon papers, the Staten Island Advance, with neighborhood news and the New York Journal American, primarily to get the closing day's stock prices. Sometimes, my parents subscribed to the Wall Street Journal, and always we had the 'bigger than life' New York Times, with its multitudinous array of separate news sections, including a glossy magazine and book review, on Sundays. In the summer, I used to take the Sunday Times along when I went fishing. Friends and family used to get a kick out of that!

To me, getting a stock price always meant looking it up in the newspaper. I even continued to show students, right up to the present day, a graphic about "How to Read Stock Tables in the Newspaper".

All that will, of course, end on Monday, May 19, 2008.

Of course, I expect that I will make a mental slip now and then in the future directing students to look up a stock price in the newspaper.

"What's a newspaper?" they may ask.

For that matter, as I've cover before in this blog, they also may well ask "What's the New York Stock Exchange?"

Progress? I'm really not sure about that.

2008-04-24T13:28:00.000-07:00

Wendy's... Going... Going...

When you're a public company, you loose control.

What would Dave Thomas say about this?

Arby's owner buying Wendy's for $2.34 billion stock deal

After at least two rejections, billionaire Nelson Peltz has finally succeeded in landing Wendy's in a $2.3 billion deal that would add the chain known for its square burger and chocolate Frosty dessert to his ownership of Arby's and its roast beef sandwiches.

Now, the investor known for agitating corporations to boost their stock price has to figure out how to make both profitable while the economy slumps and more Americans are saving money on food and fuel by staying home to eat.

Atlanta-based Triarc Companies Inc., owned by Peltz, said Thursday it will pay about $2.34 billion in an all-stock deal for the nation's third-largest hamburger chain started in 1969 by Dave Thomas. Wendy's had rejected at least two buyout offers from Triarc.

Thomas' daughter Pam Thomas Farber said the family was devastated by the news.

"It's a very sad day for Wendy's, and our family. We just didn't think this would be the outcome," said Farber, 53.

If her father were alive to hear news of the buyout, "he would not be amused," she said.

Peltz has pushed for change at Wendy's — including the spinoff of the Tim Hortons coffee-and-doughnut chain and cutting corporate expenses — since 2005 to increase the company's stock price. His Trian Fund and his allies own 9.8 percent of Wendy's stock.

It's a similar tactic Peltz has used at other companies where Trian has become a significant investor, such as Cadbury Schweppes PLC and H.J. Heinz Co. Trian also owns shares of Tiffany & Co. and the Cheesecake Factory Inc., according to regulatory filings.

Sales at company-owned stores opened at least a year, considered a key indicator of a retailer's strength, fell 1.6 percent in the quarter and 0.1 percent at U.S. franchise restaurants.

Wendy's also has failed to connect with consumers in several advertising campaigns that have been tried since Thomas' death in 2002 and it has limited success in adding new products and with its breakfast menu. Thomas, always wearing a white short-sleeved shirt and red tie, became a household face when he began pitching his burgers and fries in television commercials in 1989.

"It's a company that's sort of lost its way," said Bob Goldin, executive vice president of Technomic Inc. in Chicago.

Triarc said it will also change its name to include the Wendy's name.

Wendy's deferred comment to Triac, which had nothing further to say right away.

Several lunchtime customers at a Wendy's in Columbus wondered how Thomas would have reacted to the news, were he still alive.

"I think he's probably rolling over in his grave right now," said John Knape, 36. "But it's business, and that's what you need to do to survive, right?"

The deal caps two chaotic years for Wendy's in which it has sold or spun off operations, slashed its corporate staff and had its wholesome image tarnished by a woman who falsely claimed she found part of a finger in her chili.

Farber said the family didn't think much of Peltz' and Triarc's tactics.

"They came after them (Wendy's) and came after them and came after them. They spun Tim Hortons off, they did this, they did that. They did everything they asked but it wasn't enough."

Thomas opened his first restaurant in a former steakhouse on a cold, snowy Saturday in downtown Columbus on Nov. 15, 1969. He named the chain after his 8-year-old daughter Melinda Lou — nicknamed Wendy by her siblings.

Wendy's, based in suburban Dublin, operates about 6,600 restaurants in the United States and abroad. It trails McDonald's and Burger King Holdings Inc. in the burger business.

2008-04-15T12:37:00.000-07:00

The Icahn Lift

60 Minutes recently had an interesting segment about Carl Icahn... and about how you can profit when he decides to buy a company's stock.

It's called "The Icahn Lift"...

See how he does it... and why it works...

Check it out!

2008-04-14T15:10:00.000-07:00

Secrets Behind Return on Investment

Evaluating a project based on Return on Investment alone?

Thanks to Kim Kerr for forwarding the following link... for YOUR consideration!

The ROI Users Survival Guide

or read the new book The Business Case Guide.

2008-04-13T07:41:00.000-07:00

Are Auditors Worth It?

Auditing is an expensive proposition for public companies.

Sure, it's a task that must be done, but are auditors really worth the fees they charge?

The New York Times has an interesting article about this.

Draw your own conclusions after reading these excerpts...

ALTHOUGH he had been with the mortgage lender New Century Financial for only two months, Tajvinder S. Bindra had spent a good part of late 2006 and early 2007 pelting the company’s controller and a member of its auditing firm, KPMG, with questions about the company’s accounting.

Frustrated by their responses and staring down a deadline to close New Century’s year-end books, Mr. Bindra, the company’s chief financial officer, told both men that he needed written assurances from KPMG that New Century’s bookkeeping was proper, according to accounts of the discussions.

But KPMG balked. A few weeks later, on Jan. 31, 2007, KPMG and New Century’s own accountants stunned the company’s board by revealing that the lender had incorrectly calculated its reserves for troubled home loans. That mistake was likely to cost New Century $300 million, wiping out all of its profits from the second half of 2006.

Two months later, New Century, one of the largest subprime mortgage lenders in the country, would be bankrupt.

In March, Xerox and KPMG settled a securities lawsuit relating to decade-old accusations of accounting manipulations. And KPMG has been criticized for its audit of the Federal National Mortgage Association, after it was revealed that the company, known as Fannie Mae, had overstated its earnings by billions of dollars over several years.

And, finally, nearly three years ago, federal prosecutors came within an eyelash of filing criminal charges against KPMG over dubious tax shelters it set up for clients, leading to a deferred prosecution agreement and a wrenching internal investigation.

“For KPMG, this comes on the heels of all of the tax-shelter stuff, and they just got rid of having a court-appointed examiner, so this is difficult for them,” said Jack Ciesielski, editor of The Analyst’s Accounting Observer, a trade publication.

AMONG the “Big Four” auditing firms, KPMG is the smallest. Yet it is the go-to auditor for banking and financial services firms and real-estate investment trusts like New Century, according to Audit Analytics, an independent research firm. Deloitte & Touche and Ernst & Young also have many financial services clients.

KPMG is the auditor for such prominent mortgage players as Wells Fargo, Citigroup, HSBC Finance, Countrywide Financial and Thornburg Mortgage, according to an examination of annual reports.

Those relationships put KPMG in a potentially vulnerable spot as authorities increased their scrutiny of the subprime business. The Federal Bureau of Investigation has said it has 17 continuing investigations of possible corporate and accounting fraud related to subprime lending. That number, the F.B.I has said, is likely to increase.

“The Justice Department learned from its prosecution of Arthur Andersen that threatening entire firms jeopardizes our system of private auditing,” said Lawrence A. Cunningham, a professor at the George Washington University Law School. “What’s vital is that individuals be held responsible for wrongdoing.”

A MORE likely threat to auditing firms and mortgage companies could be civil, rather than criminal, lawsuits. Shareholders have already filed a raft of lawsuits against lenders that failed or whose stocks have dropped sharply. In some cases, shareholders are trying to add the auditors as defendants.

In January, New York City and New York State pension funds that are leading a class-action lawsuit against Countrywide added its auditors, KPMG and Grant Thornton, as defendants. KPMG declined to comment on the suit. A spokesman for Grant Thornton said the firm was confident it would be dropped from the suit because it had not audited Countrywide for four years.

Last week, liquidators of two hedge funds run by Bear Stearns sued the bank and its auditor, Deloitte & Touche. They contend that the firms hid the true financial risks and health of the funds, which invested in mortgage-linked securities. Bear Stearns declined to comment, and, in a statement, Deloitte said that the suit was without merit and that the firm intended to defend itself.

It is unclear whether the creditors in the New Century bankruptcy will try to recoup losses from KPMG. Even the court examiner, Mr. Missal, notes in his report that creditors of New Century could pursue negligence claims against KPMG but that such a case could be hard to win.

Even if KPMG is safe from large damages and a criminal prosecution, Lynn E. Turner, a former chief accountant at the S.E.C., said the findings were still troubling.

“The examiner cites different pieces of evidence that do raise concerns about whether or not you had an honest-to-goodness independent audit going on,” Mr. Turner said.

For its part, KPMG says that it faithfully carried out its professional duties.

“It is very easy — and totally unreasonable — to look at decisions made in 2005 or 2006 through a 2008 lens,” said Ms. Fitzgerald, the KPMG spokeswoman. “The full record shows that KPMG acted in accordance with professional standards. We will vigorously defend our audit work in the appropriate forum, which will allow for a complete hearing of the facts.”

2008-03-28T14:38:00.000-07:00

Today's Debt, Tomorrow's Burden

College student Yoni Gruskin heads organization that advocates for fiscal responsibility in the government.

College freshman Yoni Gruskin sometimes walks around Penn’s campus wearing a sign that bears a thirteen-digit number. If you ask him about it, he will be happy to explain that it’s the U.S. national debt – more than nine trillion dollars and counting.

The sign is one of many tactics Gruskin and fellow members of the organization Concerned Youth of America (CYA) use to educate their peers about the national debt. He founded the organization with a group of friends as a senior in Phillips Academy in Andover, Mass., and started a Penn chapter during his first semester here. Gruskin, who is executive director of CYA, believes that the issue is one of the most important for people his age to understand.

“This is the issue that will affect our generation more than any other issue that’s being debated in this election or any other election,” Gruskin says. “This has to do with the kind of country we’ll be raising our children in and whether we’ll inherit a prosperous America and a government that’s still functioning.”

Although there are many national organizations grappling with the issue of fiscal responsibility, Gruskin feels that few of them are youth oriented. “People are used to hearing about this issue from older men and women, and their discussions are thick with policy details and large numbers,” Gruskin explains. “We’re not going to pretend that this is the sexiest issue going around campus, but we think our strength is that we speak the same language as kids our age.”

This language includes experimenting with what Gruskin calls “PR stunts” – one of which made it all the way to the Sundance Film Festival. Last November, CYA members dressed in prison jumpsuits (symbolizing that America’s youth were “prisoners of national debt”) stood on the campus’ Locust Walk and distributed literature about the issue. The demonstration and a CYA-hosted forum on the topic were filmed as part of a Sundance documentary called I.O.U.S.A., which will also be shown at the Philadelphia Film Festival this April. Gruskin hopes the film will turn this “wonkish, policy-oriented issue into one that gets people really fired up.”

With the support of both Penn faculty and of business, political and civic leaders around the country, the group is planning future awareness-raising events. CYA is currently working with the Concord Coalition, a grassroots organization focused on fiscal responsibility, and Penn’s Fels Institute of Government to bring former U.S. comptroller general David Walker to speak on the issue at Penn. The group also plans to co-host a forum at the Philadelphia Convention Center that will include other schools from the region.

Gruskin’s future goals for CYA go beyond education to affecting actual policy change. “Once we feel that we have a strong base of support,” Gruskin says, “we’re going to try to tackle specific pieces of legislation and specific congressional habits with a bottom-up campaign that includes letters to the editor, letters to congressmen and other standard grassroots tactics. We want to show people that our generation is alert to this issue, cares about this issue, and isn’t going to sit by while our future is pulled out from under us.”

2008-03-27T06:49:00.000-07:00

US National Debt

How bad is it?

Some statistics, please! (courtesy of Glenn Beck)

$200 billion is the approximate total amount of write-downs announced so far as a result of the current credit crisis.

$14.1 trillion is the size of the entire U.S. economy

And $53 trillion is (drum roll please) the approximate size of this country's bill for the Social Security and Medicare promises we've made.

A million seconds is 12 days. A billion seconds is 32 years. A trillion seconds is 32,000 years. And 53 trillion seconds? 1.7 million years.

The problem will first make impact in the year 2019 when the Medicaid trust fund becomes insolvent.

Only an immediate 122 percent increase in Medicaid taxes and a 26 percent increase in Social Security taxes can prevent (or more likely, delay) its impact (not very likely!).

US Treasury Secretary:

"Rising costs will ... consume nearly all projected federal revenues ..."

Translation: Every single tax dollar that is sent to Washington will be used to pay for just these two programs.

That means no money is left for anything else. Nothing. No Department of Defense or Homeland Security, no Department of Energy, no Department of Justice, no Environmental Protection Agency.

Former Comptroller General of the United States David Walker tries a different tactic. He writes that our unfunded promises translate into "an IOU of around $455,000 per American household."

PS Check out the current Cost for the War in Iraq.

PPS On Wednesday, April 2, 2008, we find the following (emphasis in the original):

Yes, your tax dollars will be used to bail out BEAR STEARNS

from digg

Today CNBC and other news outlets reported that Treasury Secretary Hank Paulson confirmed what we have suspected. Since this loan was backed by Bear Stearns' worst collateral, worthless assets consisting of subprime mortages, YOUR TAX DOLLARS, $100 PER CITIZEN, WILL BE USED TO BAIL OUT RECKLESS INVESTMENT BANK BEAR STEARNS.

2008-03-19T08:39:00.000-07:00

Financial Rot

Robert Samuelson offers us an interesting op-ed piece in the Washington Post about the current financial crisis.

Highlights for your consideration...

What distinguishes this crisis -- which brought down Bear Sterns over the weekend -- is that it involves the entire financial system, not just depository institutions, and it's more mystifying than any of its predecessors.

Recent estimates of subprime losses range from $285 billion to $400 billion. They might go higher. Ignorance breeds caution and fear.

The stunning fall of Bear Stearns reflects these realities. It was not a traditional commercial bank that took deposits from the public but America's fifth-largest investment bank, which funded most of its operations with borrowed money ("leverage"). On average, the ratio of borrowed money to underlying capital for investment banks and hedge funds is about 32 to 1, according to a recent study. Many of these loans -- commercial paper, "repurchase agreements," bank credits -- are backed by the securities owned by the borrowing financial institutions.

What this means is that if lenders became worried about the worth of these securities, they might ask for more collateral or pull their loans. In effect, that's what happened to Bear Stearns. Deprived of its credit lifeblood, Bear Stearns either had to collapse or be purchased by someone with credit. J.P. Morgan Chase bought Bear for almost nothing: $236 million for a firm valued at $20 billion in January 2007.

Financial institutions (banks, investment banks, hedge funds and others) are interconnected through networks of buying, selling, borrowing and lending. These require confidence that commitments made will be commitments honored. If confidence collapses, the processes of extending credit for the economy and of trading -- for stocks, bonds, foreign exchange -- may also collapse.

But in trying to calm financial markets, the Fed has spewed out enormous amounts of money and credit that have depressed the dollar's exchange rate and could aggravate inflation. The effort to fix one problem may lead to others.

2008-03-19T08:10:00.000-07:00

You CAN Get a Free Lunch!

Want to cut your taxes... legally?

Just hire some powerful lobbyists!

That's the message of a new book...

Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill) by David Cay Johnston.

“If you’re concerned about congressional earmarks, stock options (especially backdated options), hedge fund tax breaks, abuse of eminent domain, subsidies to sports teams, K Street lobbyists, the state of our health-care system, to say nothing of the cavernous gap between rich and poor, you’ll read this fine book—as I did—with a growing sense of outrage. Free Lunch makes it clear that it’s high time for ‘We the People’ to stand up and be counted.”
—John C. Bogle, founder and former chairman, The Vanguard Group

Can't afford a lobbyist? Then be prepared to cough up a higher percentage of your personal income.

That's the way the system works...

Lobbyists wouldn't have it any other way!

2008-03-17T10:54:00.000-07:00

And the Dollar Goes down the Drain...

Dollar dives to near 13-year low vs. yen

Greenback plunges after Federal Reserve slashes discount rate at emergency meeting.

March 17, 2008: 12:08 PM EDT

TOKYO The dollar nose-dived to its lowest levels in 12 1/2 years Monday in Asia, falling below 96 yen as the Federal Reserve's rate cut failed to calm market fears about more U.S. bank writedowns.

The Fed on Sunday cut its discount rate, or its lending rate to financial institutions, by a quarter point to 3.25%.

The move only managed to give a temporary lift to the U.S. currency before it began its steep decline.

"The Fed's action is needed but it leaves the current main market problems unresolved, and there seems to be nothing that can stop this [dollar-selling] flow for now," said Masafumi Yamamoto, head of foreign exchange strategy at Royal Bank of Scotland.

The dollar fell to 95.72 yen, its lowest point since August 1995, in morning trade in Tokyo before recovering to 96.84 in the afternoon. Late Friday in New York the dollar was trading at 99.17 yen. It broke below 100 yen just last Thursday.

The euro also rose to a record against the dollar, climbing as high as $1.5851 from $1.5676 Friday.

News that JPMorgan Chase (JPM, Fortune 500) had bought rival investment bank Bear Stearns (BSC, Fortune 500) - a move aimed at averting a bankruptcy - also sparked renewed market worries about the extent of the credit crisis, sending Asian stocks tumbling.

Japan's benchmark Nikkei 225 stock index fell 3.71%, or 454.09 points, to close at 11,787.51.

The Bear Stearns news "increased players' fears about credit markets and liquidity conditions, making it increasingly difficult to build dollar-long positions," said Keiichi Iguchi, a dealer at Resona Bank.

It was hard to predict how much further the dollar may fall, as "there are no concrete policy measures from either the Japanese or U.S. governments," said Masanobu Ishikawa, manager of foreign exchange at Tokyo Forex and Ueda Harlow.

And this...

April 11, 2008

The official Xinhua News Agency reported that the yuan was trading at 6.9920 to US$1 -- the first time it has ventured below the 7 yuan mark since the government loosened the unit's peg to the dollar in 2005. The yuan has gained about 18 percent in value since then.

2008-03-15T19:19:00.000-07:00

Where DOES All That Money Go?

Want a readable guide to the US Federal Budget?

Try“Where Does the Money Go?: Your Guided Tour to the Federal Budget Crisis ” by Scott Bittle and Jean Johnson (Collins, $16.95 in paperback). This is a book that manages to be entertaining and irreverent while serving as an informative primer on a subject that is crucial to the future of all Americans.

Highlights from the New York Times...

In 31 of the last 35 years, the federal government has spent more money than it has taken in. (The exceptions were the budget surplus years 1998 to 2001.) Along the way, the government has amassed a debt that now exceeds $9 trillion. Over $2 trillion of that is owed to foreign banks and other international investors, with China holding $420 billion and the oil-exporting countries $113 billion, using figures from the 2006 budget.

Mr. Bittle and Ms. Johnson predict that even with continued foreign investment and financial forbearance, the nation may soon find it impossible to fulfill its existing and future commitments to its own citizens in the form of Social Security and Medicare payments. In 2006, Social Security, Medicare and Medicaid consumed 39.7 percent of the federal budget of $2.6 trillion, compared with 19.7 percent for defense.

In the future, the cost of entitlement programs will balloon as 78 million baby boomers age. In 2006, there were fewer than 50 million Social Security recipients; 12 years from now, there will be nearly 70 million. With health care costs rising faster than inflation, the part of Medicare that covers hospital costs for the elderly is already paying out more than it takes in from payroll taxes.

“Unless something changes, we could see a time (around 2040, if nothing is done) when nearly every tax dollar collected will be needed to pay for retirement and health care for the elderly and interest on the debt,” the authors warn. “There will be almost no money for anything else, except maybe a basic national defense.”

Their proposed solutions include raising to 70 the age at which people receive retirement benefits; making people pay more in Social Security taxes, as well as privatizing Social Security (“but very slowly”); rethinking the prescription drug program, is expected to add $518 billion in costs by 2013; redesigning Medicare so that people can shop around for the most effective coverage; and passing a national value-added tax to help pay for Social Security and Medicare.

For the time being, the globally respected “faith and credit” of our federal government are keeping the United States afloat financially. But if we are unwilling to swallow the kind of bitter medicine that Mr. Bittle and Ms. Johnson prescribe, our country may one day be unable to make even the interest payments on our $9 trillion debt, payments that are now $226.6 billion a year — and we would be forced to declare ourselves a bankrupt nation.

2008-03-15T12:09:00.000-07:00

Problems? What Problems?

Did you notice the Bear Stearns saga that played out this week?

Bear Stearns has problems?

Anybody notice any problems?

Bear Stearns stock lost nearly half of its market value, about $5.7-billion, in a matter of minutes and pulled the broader market down with it. The Dow Jones industrial average fell nearly 200 points.

If Bear Stearns were to go under, "it has the potential of bringing down the whole market," said Richard Bove, a Punk, Ziegel & Co. analyst. "This is the crescendo of the crisis."

Bear Stearns is one of the world’s biggest custodian banks, effectively a clearing and warehouse of international financial instruments, and its collapse would wreak havoc in capital markets.

James Cayne, known for his aloof management style, stepped down as chief executive of Bear Stearns at the beginning of the year.

Mr Cayne, who had been chief executive since 1993, was forced to resign after the sub-prime mortgage crisis led to the company suffering record losses.

A world-class bridge player, Mr Cayne, 74, was heavily criticised for the time he spent playing bridge and golf last year while the bank was engulfed in sub-prime turmoil. He also found himself embroiled in controversy after The Wall Street Journal alleged that he had smoked marijuana at a 2004 bridge tournament. This was a claim that he strenuously denied in an e-mail to the group’s 15,000 employees.

The cigar-smoking former scrap metal salesman, who still holds a stake of about 5 per cent in Bear Stearns, remains as chairman of the board. He has served as a director since 1985.

The New York Times had an interesting article about how the past week played out for the Wall Street firm.

You can always trust what corporate executives tell you, right?

Here's how it actually played out, day by day...

The rumors began in earnest on Monday, as whispers circulated that Bear faced a liquidity crisis linked to the still-dropping value of mortgage-backed securities an affiliate had issued. Though most of its bigger rivals have also taken write-downs related to those investments, Bear had long ago become the embodiment of the mistakes of the subprime mortgage era. Despite repeated assertions that it had enough capital, Bear-issued securities remained subject to credit rating downgrades.

The swell of rumors prompted Bear’s chief executive, Alan D. Schwartz, to issue a terse statement late that day: “Bear Stearns’ balance sheet, liquidity and capital remain strong.” But shares in the firm closed down 11 percent at $62.30.

To back up Mr. Schwartz’s statement, the Securities and Exchange Commission stepped in. The agency’s chairman, Christopher Cox, told reporters on Tuesday that the regulator was reviewing capital levels at the five big investment banks on a constant basis. “We have a good deal of comfort about the capital cushions that these firms have been on,” he said. That seemed enough to stanch the speculation: Bear’s stock rose slightly to close at $62.97.

By Wednesday, the firm took a more decisive step. Mr. Schwartz spoke with CNBC’s David Faber that morning, saying that Bear’s holding company ended last year with a $17 billion liquidity cushion, which is “virtually unchanged” so far this year. Bear’s stock dipped 2 percent to $61.58.

The situation changed by Thursday. Inchoate speculation gained tangibility as reports from the likes of the Wall Street Journal outlined potential blows to Bear’s stability. The Journal reported that several firms regarded Bear as a potentially risky counterparty, with some clients going to far as to request that Goldman Sachs, Morgan Stanley and others serve as counterparties to Bear on several transactions. And hedge funds that use Bear as a primer broker — a provider of services like clearing trades — had shifted some of their business to other shops, the Journal said.

By that point, it seemed less clear whether these investors and clients had seen proof that Bear was suffering a liquidity crisis, or were simply reacting to a growing wave of pessimism and fear. Bear’s stock closed down 7.4 percent at $57.

Whether the rumors were true had become almost irrelevant by Friday. In his statement announcing the emergency financing, Mr. Schwartz said that while his statements over the past week had been truthful, “our liquidity position in the last 24 hours had significantly deteriorated.”

Bear’s stock was down about 39 percent by noon on Friday, trading at $34.75.

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

Bear Stearns, facing collapse because of the mortgage crisis, 
agreed Sunday evening to be bought by JPMorgan Chase 
for a bargain-basement price of less than $250 million, 
the two companies announced.

The all-stock deal values Bear Stearns at about $2 a share, 
based on JPMorgan's closing stock price on Friday, the 
companies said. 

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

And what can you really say about this?

Bear Stearns Chairman Played Cards Amid Crisis

Mon Mar 17, 2008 8:01am EDT

NEW YORK (Reuters) - Bear Stearns Cos Inc Chairman Jimmy Cayne was playing cards in a tournament late last week while his company's future appeared to be at risk, according a published report.

As the bank hammered out an emergency funding deal on Thursday with the Federal Reserve and JPMorgan Chase (JPM.N: Quote, Profile, Research), which resulted in Bear's shares falling by as much as half, Cayne was playing in the North American Bridge Championship in Detroit, The Wall Street Journal reported on its Web site on Friday.

Cayne, who in January stepped down as Bear Stearns' long-time chief executive, is no stranger to controversy about his hobbies. Last year he was criticized for spending too much time playing bridge and golf while Bear stumbled on wrong-way bets on subprime mortgages.

Cayne played cards last week during a period in which Bear Stearns CEO Alan Schwartz held conference calls with directors about the pending cash pledge, the newspaper said, although Cayne participated in at least some of the dialogue.

The Wall Street Journal said Cayne did not respond to a request for comment that it left at his New York office.

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

April 25, 2008 CEO James Cayne has sold all of his holdings in Bear Stearns stock for $61 million

2008-03-13T12:11:00.000-07:00

Sad State of the US Dollar...

Dollar sinks worldwide

Antique store owners in lower Manhattan, ticket vendors at India's Taj Mahal and Brazilian business executives heading to China all have one thing in common these days: They don't want U.S. dollars.

Hit by a free fall with no end in sight, the once mighty U.S. dollar is no longer just crashing on currency markets and making life more expensive for American tourists and business people abroad; its clout is evaporating worldwide as foreign businesses and individuals turn to other currencies.

Experts say the bleak U.S. economic forecast means it will take years for the greenback to recover its value and prestige.

Negative dollar sentiment is growing in nations where the dollar was historically accepted as equal or better than local currency — and dollar aversion is even extending to some quarters in the United States.

At the Taj Mahal, dollars were always legal tender, alongside rupees, for entry into the palace. But because of the falling value of the dollar, the government implemented a rupees-only policy a month ago. Indian merchants catering to tourists have also turned bearish on the dollar.

"Gone are the days when we used to run after dollars, holding onto them for rainy days," said Vijay Narain, a tour operator in the city of Agra where the Taj Mahal is located. "Now we prefer the euro. It gives us more riches."

In Bolivia, billboards feature George Washington's image on a $1 bill alongside a bright pink 500 euro note, encouraging savers to turn to the euro to tuck away money earned abroad or sent home in remittances.

"If the dollar's going down ... save it in Euros!!!" say the signs popping up around La Paz for Bolivia's Banco Bisa.

And in neighboring Brazil, the Confidence Cambio money-changing service was the first to start offering yuan so travelers to China no longer have to change the money into dollars first. The service is already a hit because Brazil does big business with China, and lots of Brazilians are heading to the Olympics this summer.

"Now we tell people not to take dollars when they go abroad, it's better to change it directly to the local currency," said Fabio Agostinho, one of the firm's managing partners. "If people leave here with dollars and go abroad, they lose when they exchange them. It's the same thing whether they're heading to China, Europe or even Argentina."

In Manhattan's Bowery district, Billy LeRoy, the owner of Billy's Antiques & Props, prefers payment in euros so he can stockpile the currency for his annual antique buying trip to Paris.

"Whip out dollars at the French flea market now, and they'll shoo you away," he said at his store near apartment buildings where Europeans are snapping up units because they've become dirt cheap. "Before it was like the second coming of Christ, but now they don't want it or if they do take dollars, they're going to take their pound of flesh."

The dollar has steadily eroded in value against the euro and other currencies since 2002 as U.S. budget and trade deficits ballooned, but fears of an American recession and credit crisis have sent the dollar to stunning lows amid predictions the slump will continue for a long time.

The euro traded for a record $1.5625 before declining to $1.5586 Thursday while the dollar dropped below 100 Japanese yen for the first time since November 1995. It traded as low as 99.75 yen before recovering some ground to 101.68 yen. The dollar also recently hit a 10-year low against the Chilean peso, and fell to its lowest level against Brazil's real since the nation floated its currency in 1999.

While low dollar cycles have come and gone for decades, experts caution that it's now much more difficult to predict when this one will end because the euro didn't exist as competition for the dollar before.

During previous U.S. economic downturns, big foreign funds typically snapped up U.S. treasuries, helping to shore up the dollar to a certain degree. But the euro and currencies from other nations are now seen as legitimate options, and interest rates are higher outside the United States — meaning the funds can get better returns on investments elsewhere.

"You have the U.S. still holding this trade deficit, but now you have the possibility of a U.S. led recession, and you have a weakening currency. So it's a very dark outlook for the dollar," said Gareth Sylvester, senior currency strategist with the British firm HIFX Inc., which executed $40 billion in currency trades last year.

Nations that were once seen as incredibly risky for investments — such as Brazil — are now seen as good long-term bets. And countries such as China and Russia, with burgeoning coffers of money to invest abroad, are thought to be shifting some of their reserves or diversifying fresh income to destinations and currencies outside the United States.

It used to be important for most countries "to accumulate dollars as a precautionary element against rainy days, but the accumulation of reserves has become so large in most emerging market countries that the balance is way beyond what's needed for precautionary reasons," said Eliot Kalter, a fellow at Tufts University's Fletcher School of Law and Diplomacy and a former International Monetary Fund official.

While most experts believe the dollar will eventually regain strength, no one is willing to predict when that will happen.

"I think the factors that are affecting the weakness of the dollar will be reversed, but no time soon," Kalter said.

The problem right now, is that "people just don't want to be holding U.S dollars and U.S.-based equities," Sylvester added. "If you are an investor with a million dollars to invest, you look for the highest yield — you're looking at South Africa, Australia, New Zealand."

And it's not only the big time investors that are looking for other options.

In Peru, where savings in U.S. dollars were long a popular hedge against inflation, many citizens are closing dollar accounts in favor of Peruvian soles.

At the same time, businesses like supermarkets, movie theaters and cable TV companies that used to accept dollars are now demanding soles.

Edwin Figueroa, a 29-year-old systems engineer, switched his checking account from dollars to soles seven months ago as the dollar's decline started worrying him. He doesn't think he'll be going back anytime soon.

The Peruvian sol "is stable now," he said. "And maybe in a year, the dollar will even go lower."

2008-03-10T08:03:00.000-07:00

The True Costs of War

According to a recent article in the St. Petersburg Times, the average household in the United States is currently paying around $100 to $140 a month for the war in Iraq.

In 2008, its sixth year, the war will cost approximately $12 billion a month, triple the "burn" rate of its earliest years, Nobel Prize-winning economist Joseph E. Stiglitz and co-author Linda J. Bilmes report in a new book.

Beyond 2008, working with "best-case" and "realistic-moderate" scenarios, they project the Iraq and Afghan wars, including long-term U.S. military occupations of those countries, will cost the U.S. budget between $1.7 trillion and $2.7 trillion -- or more -- by 2017.

Interest on money borrowed to pay those costs could alone add $816 billion to that bottom line, they say.

The nonpartisan Congressional Budget Office (CBO) has done its own projections and comes in lower, forecasting a cumulative cost by 2017 of $1.2 trillion to $1.7 trillion for the two wars, with Iraq generally accounting for three-quarters of the costs.

Variations in such estimates stem from the sliding scales of assumptions, scenarios and budget items that are counted. But whatever the estimate, the cost will be huge, the auditors of the Government Accountability Office say.

In a January 30 report to Congress, the GAO observed that the U.S. will be committing "significant" future resources to the wars, "requiring decision makers to consider difficult trade-offs as the nation faces an increasing long-range fiscal challenge."

In their book, "The Three Trillion Dollar War," Stiglitz, of Columbia University, and Bilmes, of Harvard, report the two wars will have cost the U.S. budget $845 billion in 2007 dollars by September 30, end of fiscal year 2008, assuming Congress fully funds Bush administration requests. That counts not just military operations, but embassy costs, reconstruction and other war-related expenses.

That total far surpasses the $670 billion in 2007 dollars the Congressional Research Service says was the U.S. price tag for the 12-year Vietnam War.

Looking ahead, both the CBO and Stiglitz-Bilmes construct two scenarios, one in which U.S. troop levels in Iraq and Afghanistan drop sharply and early -- to 30,000 by late 2009 for the CBO, and to 55,000 by 2012 for Stiglitz-Bilmes -- and a second in which the drawdown is more gradual.

Significantly, the two studies view different time frames, the CBO calculating possible costs met in the next 10 years, while Stiglitz and Bilmes also include costs incurred during that period but paid for later, such as equipment replaced in post-2017 budgets.

This factor figures most in the category of veterans' medical care and disability payments, where the CBO foresees $9 billion to $13 billion in costs by 2017. Stiglitz and Bilmes, meanwhile, project $422 billion to $717 billion in costs over the lifetime of soldiers who by 2017 are wounded or otherwise mentally or physically disabled by the wars.

"The CBO is only looking 10 years out on everything," Bilmes noted in an interview.

For its part, a CBO critique suggested that Bilmes and Stiglitz might be overstating the expense of treating veterans' brain injuries, a costly category.

The two economists say their calculations are conservative, because they don't encompass many "hidden" items in the U.S. budget. Their basic projections also exclude the potentially huge debt-service cost -- on which CBO approximately agrees -- and the cost to the U.S. economy of global oil prices that have quadrupled since 2003, an increase analysts blame partly on the Iraq upheaval.

Estimating all economic and social costs might push the U.S. war bill up toward $5 trillion by 2017, they say.

2008-02-17T18:28:00.000-08:00

Index Funds

Should you invest in Index Funds instead of other types of investments?

A great question!

Read this article... and draw your own conclusions!!!!

2008-02-09T18:03:00.000-08:00

Prime Rate vs. LIBOR

The Prime Rate is the interest rate or discount rate, calculated differently by each lender, announced by North American commercial banks for their most credit worthy, largest and most preferred commercial customers having the highest credit ratings, high enough that there is little risk to the lender in making a loan, for short term unsecured loans, as determined by market forces affecting a bank's cost of funds and the rates the borrowers will accept.

Most lenders are careful to disclose that the "prime rate" is a standard benchmark and not necessarily the best rate offered by the lender. In actual practice, the most credit worthy corporate customers get a rate lower than this. The Prime Rate is a yardstick for trends in interest rates in general, and it is often a baseline for establishing interest rates on high risk loans. The prime rate is known to change, but not on a regular basis.

LIBOR, the British Banking Association's London Interbank Offered Rate, is an average of the interest rates that major international banks charge each other to borrow US dollars in the London money market. The reason that extra loan points are typically charged for LIBOR based loans as compared to Prime Rate denominated loans is that LIBOR is a wholesale rate charged between banks themselves, while Prime Rate loans are retail loans posted for corporate customer transactions.

2007-12-20T08:15:00.000-08:00

Too Much Data?

Yes, I'm guilty of it!

I often point students to mountains of online investment data in places like Yahoo Finance, when I'm really a long term investor at heart myself.

Now comes a report about academic research showing that we can be swamped by too much data... for investments and for making any other decision.

I think you'll enjoy reading this!

Does more data yield better investment decisions?

By Michael R. Sesit
Bloomberg News

Monday, December 17, 2007

2007-12-07T10:07:00.000-08:00

1929 Repeating Itself?

Just the other day I was sharing with a house guest that everything on the economic horizon looks swell... but... I have this gut feeling that all is not well with our national economy. Of course, I added, no one seems to agree with me... maybe I'm crazy or completely out of touch with reality... but...

Here comes another Steven Pearlstein column from the Washington Post!

This guy is starting to make me a believer! So much so that I've added his column to my Google Reader RSS feed file so that I can follow what he has to say on a regular basis in the future.

His December 5 column is definitely worth a look!

He could be wrong, of course... and I could be wrong as well... but SOMETHING just seems out of wack to the both of us.

He lays out a bunch of economic problems that don't seem to have been fully resolved, such as the credit bubble... the mortgage & housing crisis... and financial shenanigans at major Wall Street financial firms, such as Merrill Lynch. He asks the question: If all this is so bad with what we KNOW about about financial company management, why would we then believe that these same senior managers performed any better in situations about which we DON'T KNOW? Good question!

His conclusion? If all this sounds like a financial house of cards, that's because it is. And it is about to come crashing down... this may not be 1929, but it is way more serious than any other financial crisis in recent decades.

Worth reading... thinking about... and perhaps acting upon.

2007-11-30T11:33:00.000-08:00

The Art of Managing Risk...

Washington Post Business Columnist Steven Pearlstein recently had two excellent articles concerning business financial risk.

The first was an interview with Dr.Vince Kaminski, who has seen firsthand how sophisticated companies systematically underestimate and ignore the financial risks they take on until it's too late.

He was at Salomon Brothers when a rogue trader used false bids at Treasury auctions to corner the market in some government bonds, a scandal from which the venerable investment bank never really recovered.

At Enron he was one of the few who tried to warn top management of the financial house of cards created by Andy Fastow's off-book partnerships and the inadequate capital the energy company had to support its extensive trading operations.

Kaminski hardly fits the mold of the corporate gadfly. He is a careful man with a Ph.D. in economics, an MBA and a nearly completed degree in mathematics. His expertise is in the relatively new field of risk management, in which sophisticated quantitative techniques are used to measure and model a business's risks and what would happen under various unpleasant scenarios. It is this "science" of risk management that supposedly gives management the ability to foresee and prevent the kind of things that brought down Enron and that now befall Citi, Merrill, HSBC and the rest. And it is this "science" that regulators rely on to protect the health of the banking system.

So why doesn't it work?

He answers that question in a second article, an online chat with Dr. Kaminski and various members of the general public who joined the online chat.

One key comment...

"First, it requires a top management that won't let itself get pushed around by Wall Street and short-term investors. and that requires compensation packages that are less tied to medium and short-term movements in the stock price.

Second, you have to change the culture and incentives within the firm (monetary and career incentives). You can celebrate the guys who bring in the big money, but you also have to celebrate the people who save you from disaster.

I think the directors are somewhat to blame as well. They are supposed to be the wise outsiders. And when they see a particular line of business is suddenly delivering outsized profit margins for what looks to be modest risk and involves no great skill or originality, a light should go off. And they should engage someone from the outside to take a look at the business and decide if there are inbedded and unacknowledged risks in the line of business that need to be addressed.

Maybe I'm naive in thinking directors can do this. But they are the best candidates I can think of who might have enough distance that, when a company is raking in the money, doesn't think that the only reason is because of the brillance of management."

Interesting reading!!

2007-11-28T10:22:00.000-08:00

Currency Trading.... eToro!!!

Ever wonder what it would be like to trade foreign currencies?

How big is the foreign currencies market? Forex trading experiences an estimated $3.2 trillion in daily turnover—that’s ~35 times the average turnover of the NYSE!

Wish you had a safe place to play... that is, practice trading... for fun, without any money actually changing hands... and without any risk?

Looking for something cool?

Take a look at eToro!

It's a new web site that allows you to open a free practice trading account (or place real trades if you wish).

The web site requires a small download, but offers graphical ways to see your trades perform, in real time.

This is where it gets fun… There are four games to choose from:

* Forex Marathon – You pick the currency you think will go up and have it compete in a foot race against the currencies you think will go down.

* Dollar Trend – Race the US Dollar against other currencies, choosing whether it will rise or fall.

* Globe Trader – Manage your Forex trading portfolio by forging relations with other currencies on the map of the world.

* Forex Match – Choose the currency you think will go up and have it go one-on-one in a tug of rope against a currency you think will go down.

One unique aspect of foreign currency trading is that the market is almost always open (excluding some weekend hours), so you will see what is happening in real time with real data, no matter what day or time you log on.

Forex trading is definitely NOT for everyone... it is EXTREMELY highly leveraged (up to 400:1)...you certainly need to study the market very, very carefully... and place trades, even practice trades, with great care and skill... but eToro just might be a fun way to learn more about the ups and downs of this fascinating international marketplace!

2007-11-09T12:18:00.000-08:00

Reverse Split - Example

Sun Investors OK 1-For-4 Reverse Split

ASSOCIATED PRESS/AP ONLINE

SAN FRANCISCO - Sun Microsystems Inc. shareholders approved a 1-for-4 reverse stock split Thursday, an essentially cosmetic maneuver by the server and software maker that is intended to remove the stigma of its slumping stock price. Approved at Sun's annual shareholder meeting, the move is not expected to affect its total market value, which stood at $18 billion Thursday. Sun hopes the split will help it overcome negative perceptions among potential customers about its stock price, which has been stuck under $10 since 2002.

2007-11-09T11:07:00.000-08:00

Rational Investing and Tricks the Mind Plays

By Jane Bryant Quinn

Nov. 7 (Bloomberg) -- How good an investor are you? If you're like the average Joe or Jane, you think -- for sure -- you're better than most. You remember every one of your winners, in detail. You bury your losers. You never average the two together, which means you have no idea whether you're beating the market or not. If asked how you're doing, however, you'll probably say that you're ahead.

This confident approach to investing does wonders for your self-esteem. Where it leaves your portfolio is another story. We all know we're not supposed to trust our emotions when we buy a stock. What we didn't know is that our investing brain is a traitor, too.

We're hard-wired to kid ourselves. If you doubt it, take a look at ``Your Money and Your Brain,'' a new book by Money magazine writer Jason Zweig. He visited the scientists who study the neural circuits that switch on and off when we invest. It turns out that our brains amount to a hostile environment. To be better investors, we have to work against what our minds want most to do.

2007-11-05T06:25:00.000-08:00

Sign of the Times...

PetroChina 1st Firm Worth $1 Trillion
Monday November 5, 6:20 am ET
By Elaine Kurtenbach, AP Business Writer

PetroChina Becomes World's 1st Company Worth $1 Trillion After Shanghai Stock Debut

SHANGHAI, China (AP) -- PetroChina, a unit of state-owned China National Petroleum Corp., the country's biggest oil and gas producer, became the world's first company worth more than $1 trillion on Monday, surging past Exxon Mobil as the Chinese oil producer's shares nearly tripled in their first day of trading in China.

2007-10-16T04:54:00.000-07:00

Ben Stein's Best Thoughts

Sunday's New York Times carried an interesting article which offered Ben Stein's "best thoughts".

I thought I'd share his classic investment advice...

INVEST FOR THE LONG HAUL If you are a smart long-term investor, do not pay any attention to short-term developments. They are often reported by people whose motivation may be to scare you (screaming about the subprime “crisis”) or to make you giddily greedy (screaming about that one certain stock you should buy to retire rich).

Some articles may scare you into selling, or not buying, at the wrong time, because the worse things are, and the worse the mood of speculators, the better the time to buy. Or some may motivate you to buy in excess — sort of like drinking in excess — at exactly the wrong, “irrationally exuberant” time. The people who write some of these articles often know very little about markets, are way too young to have learned much, have no money to invest anyway or just like to act like big shots with your money.

In the very long run, stock prices plus dividends (in the postwar period) have rewarded patient, long-term, careful accumulation of broad indexes, mutual funds, exchange-traded funds and variable annuities (with a careful eye on fees). They have not rewarded short-term trading. Such trading based on tips seen on television shows — even shows whose hosts are true comic geniuses with bald heads — or read in magazines can be potentially disastrous. The short term is no place for the ordinary investor to trade.

AVOID INDIVIDUAL STOCKS The data on this is as clear as a bell, and has been compiled by high-end thinkers ranging from Nobel laureates to the best friend the ordinary investor has ever had, John C. Bogle of Vanguard. Basically, you and I cannot pick stocks, except for Berkshire Hathaway. I was recently on a panel with the stock guru Ray Lucia, who offered overwhelming data about how impossible it was to pick stocks, trade in and out of them and fare as well as the market. His data was terrifying.

The people on Wall Street do many questionable things. They reward themselves extremely well. But they have, in the last couple of decades, made it possible for almost anyone to get good results in stocks: buying very broad-based mutual funds, index funds, exchange-traded funds and (with an eye on fees) variable annuities and holding them for a long time. The evidence that this form of investment does better over long periods than trying to pick stocks is simply staggering.

Yes, maybe some gurus at a hedge fund can do it for a while. Maybe your cousin claims that he has done it. Don’t try to do it yourself.

Wall Street, and especially Morgan Stanley, with its fine exchange-traded funds, and Fidelity and Vanguard, with their super-low-cost index funds, have made it possible to be a really good investor. So have many other companies with broad-based mutual funds. You can buy domestic funds, foreign funds, foreign developed markets funds, foreign developing market funds — all at amazingly low transaction costs.

Just for my own bad self, I suggest the Fidelity Spartan Total Market Index fund (FSTVX), a very broad index fund of domestic stocks; the iShares MSCI Emerging Markets Index fund (EEM), an exchange-traded fund that invests mostly in developing countries’ markets, and the iShares MSCI EAFE Index fund, for Europe, Australasia and the Far East (EFA),which invests mostly in highly developed in Europe, Japan and Australia. This has allowed the rank amateur to take advantage of the long fall of the dollar because the stocks are priced in foreign currencies that have appreciated against the dollar.

If you feel like throwing around money speculating on individual stocks, go for it — but only after you have several millions in index and other mutual funds and exchange-traded funds and variable annuities. Just as you might stop to gamble $300 as you pass by the craps table at the Mirage on your way back from the meeting to your room, feel free to take a flier on a few stocks just for laughs. But keep it limited.

KNOW THY LIMITATIONS Be aware that there are almost no investment geniuses. The only ones I know of are Warren E. Buffett and John C. Bogle and Jim Rogers. If you want to buy Mr. Buffett’s individual stock, be my guest.

Investments

2007-10-11T10:58:00.000-07:00

MBA Finance Class Investment Information

Will Rogers once said, “Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.”

Here are some web sites that may be helpful when seeking academic investment information...

Remember, your personal situation is unique, and you might want to get professional investment, tax, accounting and legal advice before you act on any potential investment opportunity. The following list is merely a list of some web sites that you might find helpful in doing preliminary research.

It is NOT intended to be comprehensive or representative of all possible financial web sites... or to be a list of recommendations... or even a list of the very best financial information web sites... just a starting point for further academic research before you actually invest or spend money. Use with caution and at your own risk!

You might want to keep this link handy for future reference... and feel free to share this information with your friends!

Dan's Finance & Investment Communications for You:

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Wall Street Warriors - early review

Wall Street Warriors - Season1: Episodes 2 & 6; Season 2: Episodes 1, 2, 5, 7, 8 & 10

Wall Street Warriors - Questions for discussion

Clubs

Investment Clubs

Money Club - Introduction

Money Club

Money Club Article

Smart Cookies

Smart Cookies - book

Apple iPhone Applications

PortfolioLive

StockRazor

Finance Principles

10 Fundamentals of Finance

10 Basic Investment Concepts

Stop Wasting Money

Corporate Governance Challenges

The Compelling Case for Change

Aspen Principles

Corporation 20/20

Economy

Financial Crisis Explained - Video

End of Credit Era - But What's Next?

The Big Picture

Briefing.Com

Who Killed the Economy?

Visual Guide to the Financial Crisis

History of Government Bailouts

Economic Doom PPT

Morgan Stanley - Mary Meeker Projections

Venture Capital Business is Broken

Economic Projections - Consumer Electronics

Google is optimistic about 2009!

Basics

100 Corporations That Will Survive 100 Years

Yahoo Finance

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International Investing

Sane Bull

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FiLife

Teach Me Finance

Free Credit Reports - Forget copycat sites. This is the official Web site where you can get a
free report from each of the three credit bureaus once a year.

Credit Score - Buy your score from one credit bureau for $15.95 or from all three for
$47.85. Plus, get advice on how to raise your score, and use the site's
EZ Error Correct system to dispute mistakes.

FICO Score - educational info

Tax-withholding calculator

Social Security calculator - Type your name, Social Security number, birth date, birthplace and
mother's name into this secure site, and it will show your estimated
benefits based on your up-to-date earnings record.

Health Insurance Quotes - Provides immediate quotes for most major health insurers and compares
policies. For personalized attention, call 800-977-8860 or find a local broker.

Health Insurance for people with medical conditions or modest incomes.

Medicare - detailed information about Medicare, with excellent tools to help you
pick the best Part D plan or Medicare Advantage policy based on your
specific medications and health condition.

Term Life Insurance - An easy way to get term-insurance rates from many of the top companies.
Call 800-442-9899 for personalized help, especially if you have a
medical condition.

Term Life Insurance - Use this site to see the detailed criteria you must meet to qualify for each company's term-insurance rates.

Auto Insurance - Lets you compare price quotes from several major insurers (the number
varies by state). Also a good resource for money-saving tips on every
kind of insurance. For personal help, contact an agent.

Homeowners Insurance - For a fee of $7.95, you can calculate how much coverage you need. Plug
in data about your home's age, building materials and other details,
and get an immediate estimate of its replacement cost.

Complaints - National Association of Insurance Commissioners
maintains complaint records for each insurer in every state. Focus on
the complaint ratio: the number of complaints for every dollar the
insurer collects in premiums.

Insurance Quotes

Asset Allocation

Diversification Example

Harvard University Portfolio

America's Challenges:

Shift Happens

Perot Charts

Pickens Plan

Pump the Plug

Water Crisis (free book)

Crowdsourcing

The World Is Flat

Hot, Flat & Crowded

Auto Industry Collapse

Google Clean Energy 2030

All About Google PPT

3 Basic Choices...

1. Savings & Interest Rates:

Save for a specific goal - FDIC-insured, minimum goal of $250 and a $25 deposit. Your timetable must be at least three months and no longer than 50 years.Tell SmartyPig how much you need to save and when you need the
money, and it will suggest a monthly contribution to be deducted from
your checking account. And here's SmartyPig's stroke of genius: You can make your account public so family and friends can chip in toward your goal. SmartyPig offers a generous annual yield on the account.
And the company has partnered with more than 25 retailers, such as Amazon.com and Macy's, where you can redeem your savings for a gift card with a bonus of up to 5 percent.

Banks & Rate Info

US Treasuries Rate & Info

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3. Stock Valuation

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Fundamental Research:

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MSN Stock Research Wizard - Apple Example

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FinViz

InvestSide

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Know the Company

Technical Research:

Technical Analysis

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Wall Street Journal Big Charts

MACD

Stock Mood (free registration required)

Interactive Charts

Stock Alerts

Depression Investing:

Euro Pacific Capital

Corporate Bonds:

Investment Grade Corporate Bonds - LQD

Junk Bonds:

If you think they are going UP in value...

iShares IBoxx High Yield Corporate Bond Fund - HYG

If you think they are going DOWN in value...

Rydex Inverse High Yield Strategy Fund - RYIHX

Employee Benefit Plans:

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Excalibur Financial

Play Money Stock Exchanges:

WeSeed

kaChing

Fantasy Stock Exchange

Wall Street Survivor

CNBC - open from time to time

Virtual Stock Exchange

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Covestor

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Portfolio Monkey

Detailed Academic Explanation

Crowd Opinions

Options (i.e. Citigroup, Symbol: C )

Yahoo Finance

Yahoo Options Education

Options Videos

CBOE Volatility Index

CBOE Volatility Index - defined

The expected movement in the S&P 500 index over the next 30-day period, on an annualized basis. For example, if the VIX is at 15, this represents an expected annual change of 15%.

CBOE Volatility Index Options

Indices:

Index Funds

What is an index fund?

Index investing - partial book chapter

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SDS - Options

Example - 9/29/08

Example - 10/9/08

Risk

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Post Modern Portfolio Theory

Prof. William F. Sharpe - Stanford - Modern Portfolio Theory

Video Meeting of Laureates in Economic Sciences, 2004

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Audio Part 1, ProMoney Talk, 2006 (Starts at 8:10)

Audio Part 2, ProMoney Talk, 2006 (Starts at 2:25)

Post Retirement Economics

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Compare Mutual Funds (i.e., Symbol: TEPLX vs. VFINX )

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Brokers:

Sharebuilder - Buy by Dollar Amount

E*TRADE

E*TRADE plans to enable U.S. Retail customers to trade on 42 international exchanges (6 currently available) while holding multiple currencies in a single dollar-denominated E*TRADE account.

Interactive Brokers - access over 70 markets worldwide

Currency Trading:

Currency Trading (practice for fun!)

Exchange Traded Notes

FXCM - mentioned on Wall Street Warriors

DailyFX.Com

Currency Mutual Fund

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UK

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Financial Planning:

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US Investment Publications:

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Investment Information:

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Investment Clubs

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Investors can improve on index-style investing by also holding stocks with low price-to-earnings ratios and high dividend yields, and by putting as much as 40% of their stock portfolios into foreign issues.

Wharton Professor ETF Index Funds

Ben Stein's Best Thoughts

Second Life Stock Exchange

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Mozo

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Blogs

23/7 Wall Street - 25 Best Financial Blogs

1. Mish’s Global Economic Trend Analysis
(7,903 links). Although Mish (aka Mike Shedlock) is not an economist by
training, he adroitly gets into the thick of economic data. Mish looks
at comments made by the major media, so–called experts and government
officials and serves up trenchant analysis based on his impression of
their relevance and validity. The author is not afraid to attack
conventional wisdom.

2. Footnoted.org (598
links). The blog’s author, Michelle Leder, digs through SEC filings
and comes up with some of the best insights about the “hidden” comments
found in 8Ks, 10Qs, and other government filings that rarely get as
careful a review. This is one of the oldest financial blogs, founded
in 2003.

3. Bill Cara’s Cara Community
(389 links) analyzes the capital markets, stock movements, and the
economy with an eye to technical guides including volatility, cash
flows, trading volume, and price performance and is prolific almost
beyond comparison.

4. Infectious Greed (3,822
links). Blogger, Paul Kedrosky, is considered one the preeminent
financial market pundits. His site reflects the perspective of a
former technology analyst, institutional money manager, and venture
capitalist. Infectious greed provides a running commentary on global
markets, economic trends, and emerging business trends.

5. Bespoke Invest,
also known as “Think Big” (6,112 links), is the blog for a money
management and research firm. The site provides a combination of
technical analysis and commentary on macroeconomic trends, major
sectors of the stock market, and currencies.

6. Angry Bear (2,447
links) is the product of a half dozen Ph.D economists, an historian,
and financial professionals. The writers provide individual
perspectives on broad sectors of the economy based on their unique
training. They look at topics as varied as worldwide trade and
industrial production as well as US government programs and regulations
like Social Security.

7. The Big Picture by Barry Ritholtz (11,223 links) has recently moved from his long-standing site on typepad, where he's been since 2002, to http://www.ritholtz.com.
Ritholtz is one of the most well-respected market and economic pundits
and bloggers who manages money as his day job. Multiple posts a day on
subjects as diverse as criticisms of the business press, digital media,
and key economic indicators. Sophisticated analysis made clear by an
unmistakably irreverent voice and excellent use of charts, tables, and
graphs.

8. Naked Shorts
(833 links) covers ETFs, hedge funds, monetary policy, and current
events. Bangs on hedgies and the accounting profession and its
practices. Not fond of the practices of many US government agencies.

9. A VC (2,777 links). Long-time
venture capitalist Fred Wilson passes along his opinions on new
technology and how it converges with emerging parts of the economy.
Wilson talks in detail about where he is investing his venture capital
money and why. His Union Square Ventures has taken positions in new
ventures including Del.icio.us, Feedburner, and Twitter.

10. SeekingAlpha (63,563
links), the grandfather of financial blog aggregation, also has its own
editors and columnists. This is by far the largest collection of
financial blog posts in the world. Readers who want to find articles
from hundreds of sites get a one-stop-shop at SeekingAlpha. If it were
not for this web site, a large number of blogs would have almost no
readers.

11. Clusterstock
(1,613) links) follows and comments on business, the stock market, and
economic news throughout the day. It has a staff of several
outstanding writers lead by Henry Blodget. Articles by John Carney are
particularly good. It is now combined with another strong site called
Silicon Alley Insider.

12. 1440 Wall Street
(1,216 link). Although the site is “intended for the institutional
equities crowd,” we won’t hold it against them - it’s still very good.
Covers money markets, sell side, buy side, private equity, Wall St.
research, and media. Strong analysis. Strong on multimedia.

13. The Kirk Report
(1,571 links). This is one of the oldest financial blogs and it has
been consistently good. It has a number of articles which are simply
links to other sites. Strong on stock analysis, market
recommendations, and volume investing. Too bad some of the content
requires being a “member.”

14. Calculated Risk
(11,057 links) is among the most thoughtful and thorough financial
commentary on the internet. Period. Tears apart poor economic
assumptions. Gets to the heart of the elements that move the economy
and markets. Big focus on housing and economic analysis

15. Abnormal Returns
(1,009 links). Disregarding our own rules for what blogs should be on
this list, this site is the only one that simply provides lists of
links to other financial sites. However, there’s a reason we’re making
an exception as these are carefully selected and come with good short
intros. Links are regularly organized by subject.

16. TraderFeed
(2,437 links). The author, Brett Steenbarger, is one of the most
intelligent voices in the financial blog business. Strong on technical
analysis, broad market commentary, and the psychology behind trading
behavior.

17. Alpha Trends
(1,046 links). Extremely strong technical analysis. Good video
commentary which it claims is the highest subscription membership for
financial videos on YouTube. Covers stocks, ETF, and index movement.

18. Econbrowser (6,597
links). Run by two professors, both with economic backgrounds. What
readers would expect from academics looking at the markets. Indepth and
often complex analysis of a broad range of topics from infrastructure
to policy making to consumer spendings. More than any other site on
this list, Econ Browser is not for sisses.

19. Peridot Capitalist
(192 links). Written by a money manager, one of the oldest and better
regarded financial blogs. Good corporate earnings analysis and looks at
undervalued stocks.

20. Information Arbitrage
(957 links) The author has been in the M&A and derivatives
businesses for some time. Strong and rich commentary on current
financial events, investment risks and rewards, and the current credit
and economic crisis.

21. Maoxian (290 links). Strong
pieces on day trading, technical trading, balance sheets, and ETFs.
Strange graphics. Writer tries to be anonymous, but it hasn’t worked.

22. 10Q Detective
(277 links). Writer has been an equity analyst. Good at digging through
government filings to find information for investors which is both
helpful and sometimes amusing. Good place to read how public companies
“game” the process of SEC reporting.

23. Ticker Sense (538
links). This site may be the most well known for its weekly poll of
financial blogger sentiments about the market. Written by money
management firm Birinyi Associates. Has excellent analysis of global
economy and major sectors of the stock market. Use of tables and graphs
is among the best.

24. Upside Trader
(356 links) Good technical analysis which follows the market carefully.
Strong charting on individual companies. Great place for day traders.

25. Carl Futia (133
links). One of the best financial forecasting blogs. Employs various
technical analysis including some he has developed. Notable for his
thoughtful and approachable writing. Posts very regularly.

Seeking Alpha

Wikivest Wire

Drug Companies

PKS Miami Blog

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Blog Post Map Mashup

Ratings Agency

Moodys Sample Report

Commodities

ICE - contracts based on crude oil and refined products, natural gas, power and emissions, as well as agricultural commodities including cocoa, coffee, cotton, ethanol, orange juice, wood pulp and sugar, in addition to foreign currency and equity index futures and options.

Exchange Traded Notes

Day Trading (NOT recommended!)

Trading Tips

SMB Capital (mentioned on Wall Street Warriors)

Trader Daily

Velez Capital Management

Online Trading Platform

Trader's Library

Betting (NOT Legal in the US)

The Unlawful Internet Gambling Enforcement Act of 2006 made it illegal for banks and other financial institutions to process online wagers. The goal was to find an indirect way to regulate offshore casinos [… and sportsbooks… and real-money prediction exchanges…], which are outside the jurisdiction of American law enforcement. In short: the casinos are out of reach, but not the banks in the United States that process their transactions.

Bet on the Markets

Research Tools:

Google Docs & Slides

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Google Web Site Creation Tool

FlowGram - present using web pages, PowerPoints, photos and voice

WorldCat

Stakeholder Management Template

10 Types of Innovation

@Risk

Business Plan Outline

Business Model

8th Habit

Six Disciplines

Country Research:

Country - Korea

Laws - Korea - free registration required

Laws - Florida - free registration required

Culture Video - Korea

Consultant - Korea

Securities Licensing:

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2007-10-09T10:45:00.000-07:00

Small Business Administration introduces... Patriot Express!

Military personnel and veterans now eligible for SBA loans known as Patriot Express.

The new Patriot Express loan is offered by SBA’s network of participating lenders nationwide and features the fastest turnaround time for loan approvals. Loans are available up to $500,000 and qualify for SBA’s maximum guaranty of up to 85 percent for loans of $150,000 or less and up to 75 percent for loans over $150,000 up to $500,000. For loans above $350,000, lenders are required to take all available collateral.

The Patriot Express loan can be used for most business purposes, including start-up, expansion, equipment purchases, working capital, inventory or business-occupied real-estate purchases.

Patriot Express loans feature SBA’s lowest interest rates for business loans, generally 2.25 percent to 4.75 percent over prime depending upon the size and maturity of the loan. Local SBA district offices will have a listing of Patriot Express lenders in the area.

2007-09-29T14:09:00.000-07:00

Currency Trading: The Case for Exchange Traded Funds...

The New York Times on Sunday carried an interesting article that examines the case for investing in currency denominated "Exchange Traded Funds", also known as "ETFs".

This is another great example of how new investment instruments make it much easier for average investors... to invest in ETFs... to diversify their portfolios... or to hedge other investments.

Certainly, a "must read" article!

NYSE

2007-09-25T08:31:00.000-07:00

NYSE is Changing!

The New York Times on Sunday carried an interesting article about the changing face of the New York Stock Exchange.

In the old days, much of the trading activity took place on the floor of the exchange.

1932...
2007...

October 2008...
Fewer Floor Brokers, NY Times, November 3, 2008

Now, the exchange plans to significantly decrease floor space, after moving much trading online.

2007-09-12T13:24:00.000-07:00

2007-07-13T12:26:00.000-07:00

US Dollar Hits New Low...

Is it just me... or is there something seriously wrong with this picture?

Anybody else out there concerned about this?

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

Dollar Hits All-Time Low Vs. Euro

Friday July 13, 11:07 am ET

By Matt Moore, AP Business Writer

Euro Tops $1.38 to Reach Another All-Time High

FRANKFURT, Germany (AP) -- Worries about the strength of the U.S. economy sent the dollar stumbling in Europe Friday, where the euro broke through the $1.38 mark for the first time.

The 13-nation euro moved as high as $1.3813 in afternoon European trading before falling back to $1.3786. That was up from $1.3783 in New York late Thursday.

The dollar, which has been under pressure all week, fell after the U.S. Commerce Department reported that retail sales in June fell by 0.9 percent compared with the previous month. That was its biggest drop since August 2005, and came as demand for cars, furniture and building supplies plummeted.

U.S. economic data are being scrutinized closely for hints on the U.S. Federal Reserve's future interest rate course.

The Fed has left its benchmark rate unchanged at 5.25 percent for a year after two years of steady increases.

That contrasts with the course of the European Central Bank, which has raised rates steadily and is expected to do so again to 4.25 percent in September. The Bank of England last week increased its benchmark rate to 5.75 percent, a six-year high.

Higher interest rates, a weapon against inflation, can bolster a currency by giving better returns on fixed-income investments.

Concerns about the strength of the U.S. economy, fueled largely by woes in the subprime housing sector, have boosted the euro against the dollar.

Higher interest rates and the economic slowdown have lead to more defaults in subprime mortgages, which are loans to borrowers with weak or spotty credit histories.

The British pound continued to trade around 26-year highs against the dollar Friday. On Friday, it rose to $2.0334 from its level late Thursday of $2.0304.

The dollar slipped to 122.21 Japanese yen from 122.41 yen.

2007-07-11T11:35:00.000-07:00

Scholarly articles used as references in term papers...

Last evening we had an interesting discussion in my MBA class "Maximizing Shareholder Wealth" about the purpose and value of using scholarly, peer-reviewed references in research papers submitted in the class.

There was some question about why this might be important, and what separates scholarly research from other journalistic references, such as articles in popular newspapers and magazines.

The following article appeared last November, but the points it makes are continuously relevant.

Please note that the prestigious scholarly journal Science concluded that "the environment for science now presents increased incentives for the production of work that is intentionally misleading or distorted by self-interest," and that "special attention (be given) to a relatively small number of papers that are likely to be especially visible or influential".

Science said that in 2005 it accepted for publication only 8% of the 12,000 studies submitted.

US journal Science to tighten standards

November 29, 2006

The prestigious United States journal Science will tighten safeguards to
prevent a repeat of the 2005 episode when it was forced to retract fraudulent stem-cell research by a South Korean scientist, the magazine's editor said.

Editor Donald Kennedy said in a letter published on the journal's website on Tuesday that it accepts the conclusions of a panel looking into the fiasco and vows to elaborate new rules to prevent such fraud.

The six-member panel report "points out forcefully that the environment for science now presents increased incentives for the production of work that is intentionally misleading or distorted by self-interest," he wrote.

The report "urges us to give a special attention to a relatively small number of papers that are likely to be especially visible or influential".

"We are now formulating ways to respond to this advice."

The report especially recommends developing a "risk assessment" template.

"We have been conducting discussions among ourselves and with the committee members to develop criteria for deciding which papers deserve particularly careful editorial scrutiny," Kennedy wrote.

Research papers that may fall in that category include those "that are of substantial public interest, present results that are unexpected and/or counterintuitive, or touch on area of high political controversy".

In January Science announced it was retracting an article by South Korean stem-cell scientist Hwang Woo-Suk and others from May 2005 in which the scientist had detailed what was then regarded as startling work on tailoring stem cells.

An investigation in Seoul said Hwang had produced no stem cells at all, and that his claims of a breakthrough in stem-cell technology were bogus.

Science separately retracted another article by Hwang from 2004 in which he claimed to have derived stem cells from a human embryo.

A probe by Seoul National University found that the experiment had been faked.

Science said that in 2005 it accepted for publication only 8% of the 12,000 studies submitted. - Reuters

2007-06-10T10:14:00.000-07:00

Do-It-Yourself Investing

Most investors probably are better off letting professionals pick stocks for them. But for that hearty band that insists on doing it yourself, here is one approach that may help.

The local paper on Saturday carried an interesting article about a local group of individual investors that meet regularly to pick stocks.

This particular group uses a daily newspaper called "Investor's Business Daily". You can also get free web headlines from this publication.

If you have both the time and fortitude to do stock picking yourself, you might find this approach to be interesting!

2007-06-05T11:20:00.000-07:00

Interested in learning investment concepts from one of the masters?

John C. Bogle, Founder of the Vanguard Group, offers keen investment insight in his new book, "The Little Book of Common Sense Investing".

Bogle is known for his commitment to providing value to Vanguard clients, and profits to its investors. He even has his personal groupies, called "Bogleheads", who follow his investment style.

In a nutshell, that style proclaims that low-cost index funds and exchange traded funds (ETFs) will yield superior returns for most small investors in the long run, by avoiding excessive fees and taxes. Check his results here.

If you are inclined to believe that "slow and steady wins the race", you might enjoy reading this insightful new book!

2007-05-31T12:10:00.000-07:00

Could Money Grow on Trees?

Last Sunday's New York Times carried an interesting article that highlights a new asset class, in addition to stocks and bonds, that some might consider adding to their portfolio... much like alternative investments in gold, oil and real estate.

It's timber... trees!

Read the article to get the full story, but there are specific investments now available that make it possible for the individual investor to put money directly into timber investments.

In addition to obvious uses, such as for building supplies and paper, timber investments have a low correlation to the movements of the stock market in general... and... have the potential for being used as a new fuel to substitute for oil, if certain chemical enzyme reactions can make this process economically feasible.

Maybe money DOES grow on trees!

2007-05-22T09:12:00.000-07:00

Tribute to Louis Rukeyser

Rarely can an individual point with absolute assurance to a person or event that changed their life forever.

For me, the interest and joy that I have in the world of stock market investment surely dates back to those Friday evenings, long ago, at exactly 8:30 PM Eastern Time, when our local pubic TV station in New York City broadcast "Wall Street Week with Louis Rukeyser".

I don't remember how or why my father started watching the program. Public television was definitely not his first choice in TV viewing (unless you count his devotion to the Lawrence Welk Show in later life). But watch it he did... and so did I.

What caught my immediate attention was the show's theme music..."TWX in 12 bars", composed by Donald Swartz, which featured percussion supplied by a Teletype ASR-33 machine. This music plays in my head, even today, and I would love to find a recording of it online. If anyone knows where I can find it, PLEASE contact me!

[Update 4/30/08 Commemorating second anniversary of his passing, I checked out the great man himself in action on several clips from the Charlie Rose Show here, here, here and here. Enjoy! But I would STILL like to have an mp3 file of the music!]

[Update 4/22/2010 Reader Fard Muhammad, Illinois Tech and DePaul Alum, of Berwyn, Illinois was extremely kind enough to finally point me in the right direction. He suggested the following link:

TWX in 12 bars (otherwise known as the Wall Street Week theme music)

Thank you, Fard! I think this addition to this posting is a most appropriate way to commemorate the 4th anniversary of the passing of Louis Rykeyser, who continues to be my personal inspiration.]

What investment advice is available on cable TV today, like Jim Cramer on CNBC ripping the head off a toy bear, then raking his audience with machine-gun sound effects, is a poor substitute for the solid investment information offered every Friday night by Rukeyser after the markets closed.

Louis Rukeyser passed away last year in May... and I thought it worth remembering the anniversary of the person who first generated my keen interest in stocks. I can still hear his voice today... the theme music of his show... with the common sense approach he took to investment.

Thank you, Lou! There is a little of you in every finance class I teach today....

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

May 3, 2006

Louis Rukeyser, Television Host, Dies at 73

BY JAMES GRANT

Louis Rukeyser, the exquisitely tailored and pun-loving television host who helped millions of Americans believe that they could get rich in the stock market, or at least begin to understand it, died yesterday at his home in Greenwich, Conn. He was 73.

He died of multiple myeloma, said his brother Bud Rukeyser.

When "Wall Street Week" was broadcast for the first time on Nov. 20, 1970, probably nobody, not even the always self-assured Mr. Rukeyser, dreamed that the show would run for 32 years while attracting the biggest audience on public television and making its host a celebrity in the improbable field of light-hearted, free-market-oriented financial commentary. The Dow Jones Industrial Average was then languishing, and the population of American mutual funds numbered a scant 323.

And though the Dow continued to languish (not until 1982 did it push above 1,000, a mark it had first set in 1966), "Wall Street Week" prospered. "I invented the job of economic commentary on television," Mr. Rukeyser said in 1980. He was already well along in inventing the medium of investment broadcasting.

"Fridays at 8:30 find me — amply fed, digestive organs ruminating contentedly to the rhythmic sloshing of martini juice — sitting in my Louis Quinze armchair awaiting another installment of 'Wall Street Week,' " wrote Russell Baker in The New York Times at the beginning of the show's second decade. "By 8:33 my mind is reeling so wildly with gyrations of the Dow Jones average and the pinwheeling of money funds, Treasury bills and gold markets that I often require a calming infusion of brandy."

The show attained its biggest audience, some six million viewers, in the mid-1980's.

Mr. Rukeyser, though he prodded the financial gurus who appeared on the program to forecast the stock market (the rosier the outlook, the better he liked it, as a rule), he usually kept his own predictive counsel.

But when, in 1980, he uncharacteristically ventured part way out on a limb — "I think we have entered the decade of the common stock," he said — he proved only partly correct. In fact, the market had embarked on a nearly two-decade up-cycle, and Mr. Rukeyser was started on his own professional bull market.

"Wall Street Week" had as its point of origin not the beating heart of American finance in Lower Manhattan but the leafy Baltimore suburb of Owings Mills, Md. The show was the brainchild of Anne Truax Darlington, a producer with Maryland Public Broadcasting, and the original corps of panelists was recruited from the Baltimore financial community, not previously noted for its telegenic possibilities.

Mr. Rukeyser's supporting cast members (later augmented by experts from outside Baltimore) became little celebrities in their own right. "I get recognized in bus lines," one long-serving panelist, Monte Gordon, remarked in 1990. "I get recognized when I'm eating in restaurants. There's a lot of psychic satisfaction to being on the show."

There was money at stake, too. The value of an appearance on "Wall Street Week" to each week's "special guest"— mutual-fund portfolio manager, bank trust officer, economist — climbed as the bull stock market went higher and higher.

"So how badly do people want to get on?" The Times asked a New York publicist, Len Kessler, in 1990. "It's spelled k-i-l-l," said Mr. Kessler.

Louis Richard Rukeyser was second of four sons of the financial journalist Merryle S. Rukeyser, who wrote a syndicated column in the Hearst newspapers.

Louis Rukeyser graduated from the Woodrow Wilson School of Princeton University in 1954. He took a reporting job at The Baltimore Sun and, within five years, was made London bureau chief, an unusually swift rise through the newsroom ranks. He joined ABC News in 1965 as a correspondent and commentator. Not until 1973 did he judge it safe to quit his day job for a still-unproven "Wall Street Week."

It was a decision that he never regretted. After 20 years on the air, Mr. Rukeyser was earning $300,000 a year from the show and $1 million or more in annual speaking income, each speech bearing the same title, "What's Ahead for the Economy" — the echo of the title of a book he wrote for Simon & Schuster in 1983.

He produced, in addition, a thrice-weekly newspaper column and a book on investing ("How to Make Money in Wall Street," Doubleday, 1974). Later he added a pair of newsletters, Louis Rukeyser's Wall Street and Louis Rukeyser's Mutual Funds. He flew first class, loved to gamble, slept in the best and gaudiest suites in the finest hotels and dressed every inch the sybarite he was. In 1991, The Fashion Foundation of America pronounced him the "best-dressed man in finance."

The host of "Wall Street Week" ("with Louis Rukeyser," he never failed to add to the show's title) and self-described champion of the "little guy" could be openly contemptuous of professional investors, a sentiment many of them warmly reciprocated. Mr. Rukeyser reserved his most withering scorn for the "gloomy Guses" and "Wrong-Way Corrigans" who warned of financial troubles that, during the prosperous 1990's, never transpired.

An eternal bull on the stock market, the more bullish, and less tolerant of dissenting bears he became, the higher the averages climbed. On the program of Nov. 5, 1999, Mr. Rukeyser announced the firing of the veteran panelist Gail Dudak for her 156 consecutive weeks of bearishly errant forecasting. Ms. Dudak heard the news from her neighbors the next morning. The stock market peaked four months later.

Though "Wall Street Week" never fell from the top of the heap of TV financial programs (a pile that owed much of its impressive height to Mr. Rukeyser's success), viewership slipped as stock prices fell and as competition from other financial media increased. In March 2002, Maryland Public TV announced that the snowy-haired Mr. Rukeyser would be eased out to make room for a youth movement led by the staff of Fortune Magazine.

Mr. Rukeyser would have none of it. "I want you to rise up out of your chairs," he summoned his viewers from the set of "Wall Street Week' the next Friday evening, "not to shout, 'I'm mad as hell and not going to take it anymore!' but," he added, to "write or e-mail your local PBS station saying you heard Louis Rukeyser is still going to have a program and that you'd like to see it."

Mr. Rukeyser was fired. But he quickly re-established the show at CNBC. He took pride in his new success and glee in the spectacle of Maryland Public Broadcasting suffering a forced retrenchment as his sponsors decamped from public television with him. (The Fortune version of "Wall Street Week" was canceled in 2005.)

Failing health forced Mr. Rukeyser off the air in 2003. He was presented with the Gerald Loeb Lifetime Achievement Emmy for Business and Financial Reporting in 2004.

Besides his brother Bud, of West Palm Beach, Fla., he is survived by his wife, Alexandra; three daughters, Beverley Bellisio of Middletown, Conn., Susan Rukeyser of Amarillo, Tex., and Stacy Rukeyser of West Hollywood, Calif.; two grandchildren; and two other brothers, William S., of Knoxville, Tenn., and Robert, of Greenwich.

One cost of celebrity for Mr. Rukeyser was the jibes he would have to bear while indulging his fondness for casino gambling. No sooner had he settled into a blackjack game, he once recalled, than someone would ask him if the odds at the table were really better than those on Wall Street.

James Grant was a panelist on "Wall Street Week" for 10 years, beginning in 1988.

2007-05-18T08:25:00.000-07:00

Is the US Government Running Out of Money?

Our local newspaper this morning carried an interesting column by Debra J. Saunders of the San Francisco Chronicle discussing a new novel called "Boomsday".

Now I'm not the type of person who regularly comments about novels, any novels, because I'm a true non-fiction fan myself. But sometimes fiction can make an important humorous point that would otherwise go unnoticed, because every day living, and government statistics, really can be boring and dull.

Enter "Boomsday".... the day that Baby Boomers, like me, start retiring in droves. What will happen to the economy? How will the US Government pay for all the retirement benefits that have been promised to my generation?

I won't spoil all the fun... and some of the authors projections are clearly preposterous... but the humor in this new novel may cause you to take a serious look at the economic situation we all face... and that's no laughing matter at all.

2007-05-14T09:31:00.000-07:00

Another Berkshire Hathaway?

Those who know me know that I have great respect for Warren Buffett and Berkshire Hathaway.

If you are interested in owning a piece of Berkshire Hathaway, you can get Class B shares through Sharebuilder.com:

BRK B BERKSHIRE HATHAWAY INC CL B

What you might not know is that there is ANOTHER company, that is structured very much like, and operates on similar principles to, Berkshire Hathaway. It is called Markel Corporation, and it is ALSO available through Sharebuilder.Com:

MKL MARKEL CRP

You might want to take a look... and consider adding it to your portfolio!

2007-05-05T10:26:00.000-07:00

High-Wage, High-Growth Occupations

High-wage, high-growth occupations as reported by the Bureau of Labor Statistics' 2006-2007 Occupational Outlook Handbook. Here are the top 50 jobs that are both growing faster than the average for total employment (13.0 percent) and have annual earnings above median of $28,770.

1. Registered nurses: $52,330

2. Postsecondary teachers: $51,800

3. General and operations managers: $77,420

4. Elementary school teachers, except special education: $43,160

5. Accountants and auditors: $50,770

6. Business operation specialists, all other: $53,460

7. Computer software engineers, applications: $74,980

8. Maintenance and repair workers, general: $30,710

9. Carpenters: $34,900

10. Computer systems analysts: $66,460

11. Secondary school teachers, except special and vocational education: $45,650

12. Computer software engineers, systems software: $79,740

13. Physicians and surgeons: $145,600

14. Network systems and data communications analysts: $60,600

15. Automotive service technicians and mechanics: $32,450

16. Licensed practical and licensed vocational nurses: $33,970

17. Management analysts: $63,450

18. Computer support specialists: $40,430

19. Lawyers: $94,930

20. Network and computer systems administrators: $58,190

21. Police and sheriff's patrol officers: $45,210

22. Middle school teachers, except special and vocational education: $43,670

23. Plumbers, pipefitters, and steamfitters: $41,290

24. Financial managers: $81,880

25. Computer and information systems managers: $92,570

26. Sales representatives, services, all other: $47,000

27. Fire fighters: $38,330

28. Dental hygienists: $58,350

29. Paralegals and legal assistants: $39,130

30. Sales managers: $84,220

31. Chief executives: $140,350

32. Self-enrichment education teachers: $30,880

33. Physical therapists: $60,180

34. Pharmacists: $84,900

35. Medical and health services managers: $67,430

36. Sales representatives, wholesale and manufacturing, technical and scientific products:
$58,580

37. Employment, recruitment, and placement specialists: $41,190

38. Property, real estate, and community association managers: $39,980

39. Child, family, and school social workers: $34,820

40. Heating, air conditioning, and refrigeration mechanics and installers: $36,260

41. Real estate sales agents: $35,670

42. Special education teachers, preschool, kindergarten, and elementary school: $43,570

43. Legal secretaries: $36,720

44. Training and development specialists: $44,570

45. First-line supervisors/managers of housekeeping and janitorial workers: $29,510

46. Administrative services managers: $60,290

47. Public relations specialists: $43,830

48. Radiologic technologists and technicians: $43,350

49. Sales and related workers, all other: $31,380

50. Personal financial advisors: $62,700

2007-04-23T15:11:00.000-07:00

New Index Funds.................................................

USA Today carried an interesting article last week about Index Funds.

It's a debate between John Bogle, founder of the Vanguard Group, and Jeremy Siegel, a professor at the University of Pennsylvania's Wharton School and author of Stocks for the Long Run.

The essence of the debate centers around the fact that dividend paying stocks tend to do better over the long run, as compared to stocks in general.

The problem is that dividend paying stocks tend to be in fields like financial services. By emphasizing those stocks, the investor is avoiding other fast growing fields, such as technology stocks, which rarely pay dividends.

Read the debate... and make up your own mind.

Recommended.

2007-04-09T08:26:00.000-07:00

A Caution Signal on Profits. A Red Light for Stocks?

Paul J. Lim, financial writer at U.S. News & World Report, had an interesting, but cautionary article in Sunday's New York Times.

Corporate profit growth is already decelerating at a significant pace. And so, too, are earnings expectations for the coming year.

Many market strategists believe that earnings have a bigger influence on the stock market than the overall economy does.

What’s important is not just the rate of earnings growth, but also the underlying trends. When earnings growth is low but on the upswing, it’s often a good time to invest, said Tim Hayes, chief investment strategist at Ned Davis Research in Venice, Fla. That’s because investors are anticipating better times to come. But periods when the earnings growth is high but falling tend to be challenging for the market, Mr. Hayes said.

The already slowing profit picture indicates that the economy has been weak for some time and may be weaker than some people have assumed.

And if that’s the case, investors may start to question what exactly is propping up the current bull market.