Friday, November 21, 2008

The Great Depression....

Guest Post: The Great Depression, as I remember

By Walter Stoiber

The Great Depression began on Thursday, Oct. 24th, 1929. It would become known as “Black Thursday,” and rightfully so. The stock market crashed, and a record 13 million shares were traded that day. Some of the larger banks tried to help by buying shares at above the quoted prices. It didn’t work. Several corporations suffering today — General Motors (GM), General Electric (GE), Sears (SHLD) — were in dire straits. Some companies’ stocks dropped 50%. After five days, banks began to close. Most depositors were left “holding the bag,” and an empty one at that!

We were an average blue-collar family in Altoona, Pa. My father worked at the silk mill, as a shipping clerk and later as a supervisor. As businesses in Altoona cut back and then closed entirely, the silk mill did too. My father had a backup career, giving piano lessons and playing in a five-piece band for weddings and other events. As the Depression got worse, though, those things were no longer affordable. He took a job as an insurance agent. But people didn’t have the money to buy more insurance.

I was in the sixth grade in 1929. I got a job at our grocery store, stocking shelves for 25 or 50 cents a day, plus a bag of penny candy. My sister, Charlotte, who was in the third grade, helped Mother with chores and meals and made her own doll clothes out of odds and ends. Mother was a great cook. She got vegetables from other families in our neighborhood and made soup. Our butcher would give us soup bones (leaving a little meat on it), free of charge. He remembered that we were good customers in good times.

We couldn’t go to the movies on Saturdays anymore. But we kids had no trouble finding fun things to do. We had a makeshift baseball diamond in the city park. There were eight or 10 of us, and not everyone had a glove. So we would just keep swapping. A ball lasted us a long time. When the cover came off, we would get black friction tape and wrap the ball with it. Eventually we would all have to contribute the pennies we had saved to buy a new ball.

We also had a favorite swimming hole about 10 miles away. We would ride there on our bicycles. Somehow everybody managed to have their own bike. My father’s friend had an old bike gathering dust in his basement, so he gave it to me. We had to work on it, but it lasted me a long time. We also made our own scooters. We’d get a wooden soap box from the grocery store, a three-foot piece of 2×4, and a pair of old roller skates. Soon we were set to go.

Things didn’t get easier for a long time, but we managed. My last two years in high school, I got two part time jobs — ushering at the State Theater, for 25 cents an hour, and delivering special-delivery letters and small packages on my bike for the Altoona Post Office. I was paid a percentage of the postage, and sometimes I made $4 on a weekend! When my father was no longer with us, we couldn’t afford the $35 a month to stay in our home. Luckily, we got an apartment across from the Dutch Kitchen, where my mother got a waitress job. My mother liked her job and made good tips. On a good day, she would make as much as $10.

We got through it. In 1932 Franklin D. Roosevelt was elected our 32nd president and brought with him a number of wonderful programs and signs of recovery. I graduated from high school in1935 and went to work as a meter reader for Penn Edison. Charlotte graduated three years later and got a job as a secretary. Things just seemed to get better as time went on.

So now it’s 2008. We’re now in the midst of another financial crisis — this one global — brought about presumably by “the powers that be” on Wall Street and in the upper echelons of the federal government. A classic display of selfishness, greed, and politics. I’m 91 years old, and I sure don’t want to see another Great Depression. But I wouldn’t part with the experience I had 80 years ago. I learned that we could do without things that we thought we had to have. I learned how to “stretch” a dollar. And I learned that the words on the back of the dollar bill, “In God We Trust,” have merit. Hoping and praying isn’t all we need to do, but it helps.

Walter Stoiber is my uncle and an amazingly healthy 91-year-old. He lives with his wife, Dorothy, in Boardman, Ohio, outside of Youngstown. Charlotte, his sister and my mother, died at 87 in January.

Really? How much worse can it get?

It seems like the current situation that's going on in the world is pretty bad, and they're saying it can get worse??

Its tough to say being someone who did not live through the great depression, but is it going to get that bad? It has seemed like all you have heard on the news over the past months has been bad news, or very pessimistic outloos on the economy, but there is always that one persn out of the group who is optimistic. If you are like me, you will probably take the side of the optimistic one because it makes you feel better about what's going on, even thought he or she may be grossly out numbered, and it makes no statistical sense to take their side, it makes you feel better. At least that's how it is for me, I like to try to make sense of everything optimistic and throw all the rules on statistics out the door and claim the pessimists are missing out on a great opportunity!

Here's an article from msn money.

Economists: US is in recession and will get worse

ANN ARBOR, Mich. (AP) - The U.S. economy is in a recession that will worsen until mid-2009, University of Michigan economists said Thursday in their annual national economic forecast.
They expect the recession to bottom out in the middle part of next year, but say the country will see only modest economic growth in 2010 with unemployment above 8 percent throughout that year.

They expect the nation to lose about 2.4 million jobs over the next 18 months.

Michigan economist Joan Crary characterized the recession as "moderately severe," but said she expects a stimulus package put in place early next year will keep it from becoming worse.

"We're not forecasting economic catastrophe," Crary said. "We expect the set of policies put in place will be successful."

Among the policies she expects to see are stimulus checks given to taxpayers to spur spending, more money for infrastructure improvements and state and local governments, loans for domestic automakers and extended unemployment benefits.

She warned that if steps aren't taken to spur the economy the recession would be worse.

Motor vehicles will continue to slide, from 16.1 million last year to 13.3 million this year and 12.2 million in 2009, the lowest number since 1983, she forecast. She expects sales to pick up to 13.6 million in 2010.

The Michigan economists expect to see a reduction in market share for the domestic automakers but said the forecast isn't built on the demise of any of them.

The forecast said inflation will drop from 4.2 percent this year to 1.3 percent next year before rising again to 2.6 percent in 2010. Falling oil prices will be responsible for some of that drop, with the forecast calling for prices to stabilize at under $60 a barrel in 2009.
It expects housing prices will fall 14 percent this year and 6 percent next year, with new housing starts dropping to a low of 836,000 next year and to improve slightly in 2010, but not to this year's level of 965,000 units.

Wednesday, November 19, 2008

Eddie Lampert

I don't like hearing this stuff about my man Eddie Lampert. I am, and have been ever since I first read about him, a big fan of Eddie Lampert. From reading of his start at Goldman, and then when he left to open his own hedge fund, to when he was kidnapped, up to current day Eddie. So to hear something like this about how poor his company is doing and how people do not like the stock makes me hope, or think that he has an underlying plan, I just have no idea what it could possibly be. He has not been known for being overly people freindly as he rarely gives out much information on his funds or it holdings.

This article was pulled from, and like I said I am hoping he has a master plan and it is not just that his company is slowly falling to its demise.

Whatever you do, don't buy Sears
Investor Daily: Betting on the retail sector these days isn't for the faint of heart. But here's one stock to avoid at all costs.

By Suzanne Kapner, writer
November 18, 2008: 11:50 AM ET

NEW YORK (Fortune) -- Investors who think shares of Sears Holdings are a bargain after plummeting 80% from their peak should think again.

That might sound like a no-brainer after retailers across the board - from Macy's to Best Buy - have been reporting dismal third quarter results amid one of the worst consumer spending downturns in decades. But there are reasons why Sears is likely to disappoint more than most when it reports earnings Dec. 2.

A big chunk of the Hoffman Estates, Ill.-based retailer's sales comes from appliances, tools and electronics - categories that have been decimated by the housing collapse. Sears and its sister retailer Kmart have long been getting clobbered by competitors like J.C. Penney and Wal-Mart. That drubbing is likely to get worse in an economic downturn.

What's more, Sears provides few clues between earnings reports, such as monthly sales figures or earnings guidance, to help analysts make accurate profit predictions. Analysts expect Sears to lose 50 cents a share in the third quarter ended Nov. 1 and earn $2.51 for the year. That compares with break-even for the year-ago quarter and $5.70 in earnings per share for fiscal 2007.

Credit Suisse analyst Gary Balter cut his 2008 earnings estimates last week, to $1.19 a share, but concedes that his revision may be too high.

Meanwhile, Richard Hastings, a consumer strategist at the investment bank Global Hunter Securities, says he's concerned that Sears' sales of big-ticket items were impacted in the third quarter "greater than is generally understood."

Another bearish sign: Hedge fund Pershing Square Capital, run by activist investor William Ackman, recently sold all but 500,000 shares of what had previously been a 6.7 million share stake in Sears.
Sears' stock, which traded above $190 back in April 2007, is now changing hands around $34. Some analysts say the shares have further to fall. Balter thinks the stock could trade as low as $20. At is current level, Sears' trailing price to earnings ratio, at 9.7, is more expensive than most of its major competitors, including J.C. Penney, Macy's and Kohl's.

"It's the most expensive stock we
cover," Balter said.

A years-long decline

Much of that premium is predicated on the expectation that Eddie Lampert, the billionaire hedge fund manager who controls Sears, will live up to his boy wonder status and magically turn Sears' lemons to lemonade.

The company owns valuable brands, including Kenmore appliances, Craftsmen tools and Lands End apparel, as well as a pile of real estate. But those assets are worth less than they were in November 2004, when Lampert, after rescuing Kmart from bankruptcy, used its shares to buy Sears, Roebuck & Co. and create what is now called Sears Holdings.

So what does the future hold for Sears, one of the oldest names in American retailing? Despite a brief revival in the 1990s, Sears long ago lost its way. The company's problems, including a lack of focus and eroding customer service, predate Lampert's involvement. But Sears' slow decline doesn't mean it can limp along indefinitely.

While Sears is sitting on a $1.3 billion cushion - the difference between the cash it brings in from operations and what it owes in rent and interest payments - that safety net is expected to shrink in coming years as sales continue to decline.
"Sears is about as badly positioned as anyone we cover," said Morgan Stanley analyst Gregory Melich.
Also key to its survival is maintaining the confidence of suppliers.

Electronics retailer Circuit City, which filed last week for Chapter 11 bankruptcy protection, was pushed to the edge when vendors stopped shipping goods. One important difference in Sears' case: collateral - essentially its inventory - is more than double its credit line, which should reassure vendors.
Sears spokesman Chris Brathwaite denies that the retailer is in dire straits. "Sears Holdings has consistently maintained a strong capital structure with more than adequate liquidity," he said. At the end of the second quarter, Sears had $1.5 billion in cash and a $4 billion revolving credit facility in place, which doesn't expire until 2010.

Still, it's not clear that Lampert wants Sears to survive. He has not made the usual store upgrades necessary to keep Sears competitive with peers, which suggests he is running the company for the cash it generates. Lampert has used some of the cash for buybacks, which typically boost a company's share price.

But you can only milk a cow for so long before it runs dry - one reason why investors should steer clear of this stock.

Tuesday, November 18, 2008

From WSJ

Maybe There Is an Upside to This Mess

The market has tumbled, the financial system is wobbling, and global economies likely are in a deep
But one big positive has emerged: The plunge in prices of all kinds of commodities, from oil and natural gas to steel and copper. These moves will ease some pressure on strapped consumers and will give a boost to a range of companies by reducing their costs and increasing demand for
some of their products.

Searching for stocks likely to be helped by tumbling commodity prices can be tricky, however, because the benefits can be offset by growing problems elsewhere. Companies in the gambling business, for instance, will be aided by falling oil prices as travel to casinos becomes cheaper. But rising unemployment, housing troubles and other issues plague their customers, even as some casinos deal with heavy debts, making these shares look risky.

Look for an Energy Lift

Analysts say the best move is to focus on companies that are helped by falling energy prices and are in relatively stable businesses -- ones that aren't dependent on consumer spending or other areas of weakness.
"Energy costs represent only one dimension to the business," notes Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "Without evaluating their overall business environment, you could get caught with the right idea but the wrong company."

Last week, the Dow Jones Industrial Average was down 5%, leaving it down 36% so far this year.

The Nasdaq Composite index was down nearly 8%, bringing its 2008 drop to 43%.

Energy prices continued to plunge, as did other commodity prices. Oil, which closed at $57.04 on Friday, now is off more than 60% from its record close of $145.29 on July 3.
Falling energy prices hurt companies in the oil patch, of course. But many others rely on energy as a key input to make their products. These companies are seeing their own costs drop sharply.

One company likely to benefit: Pactiv, the maker of Hefty trash bags, plastic containers and other products such as plastic plates, cups and cutlery. Pactiv relies on polypropylene and polyethylene, both oil-based resins. Cash flow is impressive. The shares were selling Friday for a price-earnings multiple of about 16.
Pactiv's products are relatively stable, even in a global slowdown. During the 2000-2002 downturn, the stock climbed, a sign of its defensive nature; shares are basically flat from a year ago. Pactiv has raised prices on its products in recent months, a healthy sign.

The company's third-quarter results fell compared with a year ago, in part because energy prices soared earlier this year and its products became more costly to produce. But Chairman and Chief Executive Richard L. Wambold late last month said, "As we move into the fourth quarter, this situation will change as a result of our pricing actions in the third quarter, and [because of] resin-cost decreases, which are expected in the fourth quarter."

It's in the Bag

Pactiv is a "perfect example of a company that has benefited from lower crude prices," says Harris Private Bank's Mr. Ablin.

The falling costs of commodities such as resin, diesel and other raw materials also will help consumer-products maker Clorox. Meanwhile, about one-third of Goodyear Tire & Rubber's costs of goods sold are products derived from oil. While the company could be hurt by the continuing troubles of the U.S. auto makers, sales of replacement tires -- 80% of Goodyear's business -- are tied to miles driven, which should rebound if gasoline prices fall further.
Airlines benefit from lower oil prices, and many investors rush into these shares when crude drops. These companies added fees over the summer to compensate for the higher energy costs they were dealing with at the time. Now that fuel has fallen, many carriers have simply incorporated their former fuel surcharges into ticket prices, which could lead to profits. Shares of AMR, parent of American Airlines, have almost doubled since mid-July. But airlines have deep difficulties, such as fierce competition and heavy employee-pension costs, making the area highly risky.

By contrast, companies that cater to the aerospace industry, which includes both commercial and military business, appear more attractive, according to some investors. Precision Castparts, which makes rivets and metal parts for aircraft, as well as fasteners for automobiles, could be a beneficiary of any improved airline health.

Precision shares have fallen 60% so far this year, but as the outlook for its customers improves, so will Precision's. It also will be helped by falling metal prices. The stock trades at about 12 times its expected profits for the next year, a relatively attractive multiple. An industrial-gas-turbine business is growing, even as sales of fasteners to auto makers slow. Most analysts have a "buy" rating on the stock.

Flying Higher?

Aircraft-component manufacturer TransDigm Group, down about 40% in the year to date, is trading at a P/E ratio of about 11. The company, which makes ignition systems, gear pumps, cockpit security devices and other components for commercial and military airplanes, recently authorized a stock-buyback plan, a healthy sign.
Defense spending could fall in the Obama administration, but some analysts say those concerns are overstated (see Barron's Insight).
Dean Machado, managing partner of New York hedge fund Akita Capital, says he is a fan of BE Aerospace, a maker of aircraft interiors. Its shares are down about 84% in the year to date, and it recently cut its earnings expectations for next year. But the stock now trades for just four times these estimates, getting Mr. Machado excited.

"While energy isn't a major input, the company is a major supplier to airlines and aerospace, and to the extent that airlines now are healthier ... BE shares should benefit," he says.

Monday, November 17, 2008

Article from another great blog

Stockmanmarc wrote...

The Dhando Investor: Mohnish Pabrai
For those of you that are not familiar with Mohnish Pabrai, he is a devout disciple on the teachings by Warren Buffett and Ben Graham. Mohnish runs a fund identical to Warren Buffett's original Buffett Partnership which was the predecessor of Berkshire Hathaway(BRKA,BRKB). Pabrai wrote a book about a year ago titled the Dhando Investor. The word Dhando which is pronounced dhun-doe is a Gujarati(a state in India) word. Dhan comes from the Sanskrit root word Dhana meaning wealth. Dhan-dho, literally translated, means "endeavors to create wealth".

Pabrai is a focus investor usually holding about 12-18 stocks in his portfolio. Pabrai likes to put no more than about 10% in each stock. Currently Pabrai holds about 16 stocks in his portfolio with about 320 million under management. Fairfax Financial(FFH), Harvest Natural(HNR), and Sears Holdings(SHLD) represent his 3 top holdings. The current 13F filings show that Pabrai increased his holdings by 52% in Wellcare(WCG) while selling most of his position in Jackson Hewitt(JTX).

For those of you that have not read the Dhando Investor, you should, it is simple to understand and makes a lot of sense.

Thursday, November 13, 2008

Values in the market?

Its tough to decide what stocks are values or what stocks you'll keep dollar cost averging down to zero. Check out this Forbes slide show and see some that they think are selling for some low prices...

Tuesday, November 11, 2008

Investing for tough times

7 investing themes for tough times
Investor Daily: Here's where to find the few stocks that could beat the bear market.

NEW YORK (Fortune) -- As the bear market becomes situation normal, successful investing has become more a matter of "my stocks are down less than your stocks." But should it be? The old adage is that any fool can make money in a bull market and we saw that writ large over the past couple of years. Making money in today's market takes real skill. The question really then is what kind of stocks could possibly go up in this market?

Well, first of all not many. Or at least not many over the past couple of months. Only about 2% of U.S. stocks are trading above their 200-day moving average, which in plain English means that some 98% of all stocks sell for below their average trading price year-to-date. (Next to none are trading at their 52-week highs, by the way.) So stocks are beaten down, which means they could be a bargain, but they could also fall lower. The frustrating point is that SOME stocks will go up over the next year; we just don't know which ones.

To help narrow down the search, I've come up with some investing brain food. Themes that might help you find that select group of stocks that go up.

BE OBAMA-FRIENDLY: A recent Bloomberg article tapped into bullishness about the president-elect's position on compressed natural gas as a source of automobile fuel. That moved stocks like Chesapeake Energy (CHK, Fortune 500), Devon Energy (DVN, Fortune 500) and XTO Energy (XTO, Fortune 500).

TAKEOVER BAIT: There will still be mergers. In fact bear markets can spur this activity. In tech, giants like Oracle (ORCL, Fortune 500) and Cisco (CSCO, Fortune 500) are known to be acquisitive during such times - i.e. take a look at smaller software and networking companies. (And don't forget Yahoo (YHOO, Fortune 500)!) Banks will also be bought out, but that is a most dangerous game. Energy too: Chesapeake (see above) has been mentioned as a takeover candidate. You didn't want to own these stocks on the way down, but now the time may be ripe.

THEORY OF RELATIVITY: This is all about not having to run faster than the bear, just running faster than your fellow hiker. (Ouch!) Time Warner (TWX, Fortune 500) - yes my parent company - recently announced third-quarter earnings that were decidedly blah, but here's how the AP saw it: "Time Warner 3Q profits beat expectations." And so TWX stock is up a smidge over the past ten days (I'm using that period because it includes trading days before the announcement whereby investors may have anticipated the news) while the S&P 500 and competitor Disney (DIS, Fortune 500) is down. Of course that is a small victory for long-suffering TWX shareholders, but you get my point about beating expectations.

BUYBACKS: Yes we know this can be a false promise, but with lower stock prices this strategy might actually make sense. An example here would be US Cellular parent Telephone and Data Systems (TDS, Fortune 500) announcing a $250 million buyback. Not huge but enough perhaps. That stock has been up recently.

DIVIDENDS ARE YOUR FRIEND: Cash is king in this environment as Fortune's Shawn Tully recently wrote. (Why do I always confuse Shawn with Cary Grant?) I don't think that it's too late to buy stocks after companies announce dividend increases, by the way, because in this environment you can see investors moving more and more to dividend payers. Check out Questar (STR), Emerson Electric (EMR, Fortune 500) and even Vornado (VNO) if you can imagine.

FRUGALITY: As in look for companies that are cutting costs, or even scaling down. But be careful here. Look at this story: "Investors send Genco Shipping shares higher after it drops orders for six ships, freeing up cash." Only problem is the market changed its mind about the move and soon sent Genco southbound. (Oh. Never mind.)

EARNINGS: Remember some universal truths still apply. John Eade, who is the CEO and director of research at Argus Research, says this: "What makes stocks go up, consistently across the board, in any kind of market, are growing earnings. We've been in a market environment for five quarters where overall, corporate earnings have been falling and [we're] looking ahead toward lower earnings in 2009."

Is there any hope John? "The areas where our analysts are actually seeing some strength would be healthcare. They have been increasing their estimates for pharmaceuticals, biotech and medical devices." What names? Eade says companies like Baxter International (BAX, Fortune 500), Abbott Labs (ABT, Fortune 500), Schering-Plough (SGP, Fortune 500), and Johnson & Johnson (JNJ, Fortune 500). The other area is in for-profit education. "I guess people are losing their jobs and thinking it's going to be a while before they get a job. They're going back to school and taking courses at traditional colleges and schools but also these for-profit universities." Here Eade points to ITT Educational Services (ESI) and Corinthian Colleges (COCO). Makes sense, right?

Again, some stocks will be winners. Finding them is the trick. Let's hope by this time next year things are looking up.

Friday, November 7, 2008

Obama is having an economic strategy meeting today

Apparently Barack Obama is having a meeting today to figure out the strategic plans to fix our economy. According to CNBC the group is called Transition Economic Advisory Board, TEAB. The guys who are on this board all have pretty good track records of success and it seems likely they could help our economy. Members of the group are former Fed Reserve Chairman Paul Volcker, former Treasury secretary Robert Rubin, Google Chairman Eric Schmidt and of course, the infamous Warren Buffett.

I don't know a ton about all of them, but I do know that Robert Rubin and Warren Buffett are probably two of the best guys to have on a board like that, so I wish them the best of luck in fixing our nations problems.
Sent from my Verizon Wireless BlackBerry

Flash Back - Article from 2005

Greed on Wall Street
The Rise and Fall of Tyco's Dennis Kozlowski

Nov. 11, 2005

This fall's art season brought a gathering of multimillionaires to New York's famed auction houses, where connoisseurs competed for the latest
must-have works of art.

"It's a big night for money," the actor Steve Martin said as he mixed into the crowd heading into Christie's at Rockefeller Center for the evening's auction of postwar and contemporary art.

The bidding was fast and furious, with works by Warhol, DeKooning and Lichtenstein changing hands for tens of millions of dollars.

"It's amazing. It's like grand opera. You have egos fighting other egos," said Brett Gorvy, international co-head of the Post-War and Contemporary Art Collection for Christie's in New York.

The night's star was Homage to Matisse by Mark Rothko, which set a new record when it sold for $22.4 million.

One Multimillionaire Missing from the Crowd

Yet, while the auction houses filled with collectors, the face of one multimillionaire art aficionado was missing from the scene. His name is Dennis Kozlowski, and his attempts to become part of the world of wealth and prestige led to his downfall.

Today Kozlowski, the former chief of Tyco, is known as New York State inmate #05A4820.

"Greed is one of the seven deadly sins," reminds author Tom Wolfe, whose novel "Bonfire of the Vanities" profiled the men who considered themselves "Masters of the Universe."
"If you feel you are a master of the universe, then a lot of rules just don't apply," he says.

That appears to have been the mindset of Kozlowski. Earlier this year, he was convicted of stealing hundreds of millions of dollars from the company he ran to finance a worldwide spending spree.
"The airplanes, the cars, the courtiers, the chefs, it really was something that you would have expected to see at Louis XIV's court at Versailles," described author James Stewart, a contributor to the New Yorker, who chronicled Kozlowski's rise and fall in the world of the rich and the greedy.

Kozlowski wanted to be a part of that exclusive world. Indeed, he "felt he needed to be a part of it in order to take his place among the ranks of the corporate chieftains that he thought he deserved to be compared to," Stewart explained.

As the head of Tyco International, Kozlowski became known as the country's most aggressive CEO as he made millions for himself and the company.

"He was entitled to draw a very large salary legitimately, and yet he still decided well, that was not enough," Stewart continued. "He first began cutting corners and then cutting more than corners, and then just going full tilt into pretty much whatever he could get his hands on to the tune of millions and millions and millions of dollars."

Kozlowski's downfall began with art, in particular his failure to pay the New York State sales tax on several multimillion-dollar paintings.

"If we had not asked the question, what about the taxes, that would have ended the investigation," John Moscow, the assistant district attorney who discovered Kozlowski's failure to pay the sales tax, recounted.

"If you can afford the paintings, you should be able to afford the tax," he said of the taxes, which totaled more than $1 million.

Investigation Shows Life of Extravagance

Moscow's investigation slowly began to reveal how Kozlowski, the son of a New Jersey policeman, came to afford his grand lifestyle.

He kept homes in Nantucket and Boca Raton, Fla., in addition to his lavishly decorated Fifth Avenue apartment in Manhattan containing a $6,000 shower curtain, a $15,000 umbrella stand and almost half a million dollars in draperies and 17th-century antiques, all of which were bought with company money.

He also bought the famed sailing yacht Endeavor with his own money and hired a full-time crew of nine to help maintain it.

"Baby, if you've got it, flaunt it," said Wolfe.

"I think people in many cases are dying to flaunt it. If you're 59 and you've made a fortune, and you're still not attractive to women because you can't explain to them what you do, and you can't go around the beach with a sign hanging around your neck saying 'Financial Giant,' you have to call attention to yourself," Wolfe said.

And Kozlowski did. To celebrate his second wife's 40th birthday, Kozlowski rented a five-star resort on the Italian island of Sardinia. On a videotape of the party, later played at his criminal trial, waiters in togas greeted guests while Jimmy Buffett and a band flown in from Nantucket serenaded them. A life-size cake in the image of his wife had breasts made of icing that later exploded. Vodka was served out of an ice sculpture of Michelangelo's David.
"He was nouveau riche. No question about it. Old money would not be throwing that kind of party in Sardinia," New Yorker contributor Stewart said.

"That was a dreadful waste of money," assistant district attorney Moscow agreed. "He certainly was willing to spend other people's money at an incredible rate for himself -- we call that stealing."
The affair of Kozlowski capped an era of unchecked greed in corporate America that began in the 1980s and was celebrated in the famed movie "Wall Street." Since then, the country has watched several multimillionaires, from Bernard Ebbers and Scott Sullivan of MCI WorldCom to Kenneth Lay of Enron, be asked to explain their avaricious behavior.

Sent from my Verizon Wireless BlackBerry

Thursday, November 6, 2008

Took this from - wanted to give everyone some more information on the President Elect

Obama’s 10 Big Challenges

The president-elect faces a recession, a revamping of the world’s financial system and two wars -- just for starters.

President-elect Barack Obama won’t have much time to savor his historic victory as the 44th president of the United States. It may be an exaggeration to say that becoming the first African-American president of the United States was easy compared with what comes next, but there’s much truth in it.

That’s why Obama and his aides have been quietly planning the transition and the first 100 days, hoping to use the superb organizational skills that helped win the election to get a new administration up and running in record time.

Expect the president-elect to move quickly on several fronts. In the next several days, he’ll reach out to reassure Republicans, independents and those Democrats who didn’t vote for him. He’ll move to restore public confidence and signal his intentions in Iraq and Afghanistan. The freshness of his election will probably boost optimism among the huge number of Americans eager for change, and Obama will try to channel that into a mandate for many of the things he wants to do.

Mandates are easier claimed than realized, however, even with the large majorities that Democrats will have in the House and Senate. Obama will find that out when he tries to tackle the 10 big challenges he’ll face first.

1. Naming his economic, foreign policy and defense and security teams. He’ll move on this very soon, perhaps within days. The aim is to send a message to the markets and to foreign leaders that a smooth transition -- even if it brings a host of policy changes -- is coming.

2. The economy. The economy will dominate Obama’s first year, and maybe his entire term. He’ll start to put his imprint on the issue within days by urging Congress to pass a stimulus bill in a lame-duck session in November. Obama has called for another round of rebates, aid to states, an extension of unemployment benefits, new spending for roads and other infrastructure needs and a new tax credit for domestic hiring. The president-elect will have to decide how far to go in pushing for what he wants, even before taking office, and how much to compromise with Republicans, who favor a smaller package.

3. Financial market fix. Obama’s economic team will get involved quickly with the implementation of the $700-billion debt rescue plan. Treasury Secretary Henry Paulson has said he wants to involve officials of the new administration in the debt rescue effort as soon as possible. Obama supports giving the Treasury Department and the Federal Deposit Insurance Corp. wide latitude to move rapidly where needed to save teetering institutions and promote credit lending. The unprecedented government intervention will be a major headache for months, if not years.

4. Economic summits. President Bush will consult with Obama on plans for the world economic summit on Nov. 15. The aim of the meeting is to set goals for a new worldwide financial regulatory framework, and foreign leaders will want to be sure that Obama and Bush are on the same track. The meeting will bring to Washington two dozen world leaders, many of whom may get a chance to meet privately with the president-elect.

5. Naming remaining Cabinet. Immediately after naming his economic and national security teams, Obama will get to work on the rest of the Cabinet. His transition team has already narrowed the list of potential picks, and relatively early decisions are likely. He’ll name some Republicans to show he’s serious about wanting to end the partisan divides that infect Washington. All in all, Obama has about 5000 political appointees to name, as well as ambassadors. About one in five requires Senate confirmation, a process that takes time.

6. Iraq and Afghanistan. Obama will meet soon with military commanders and the joint chiefs of staff to plan an orderly reduction of troops from Iraq and an increase of troops in Afghanistan. General timelines will be mentioned, but no firm deadlines will be set. The U.S. will have a significant presence in Iraq for a few years yet.

7. Regulatory environment. Obama will try to reverse many late Bush initiatives and then set to work on several changes aimed at tightening regulations at the Securities and Exchange Commission for investment banks, hedge funds and credit rating firms.

8. Setting a legislative agenda. Obama’s first challenge will be to unify Democrats behind his agenda, rather than be pulled along by congressional leaders, who have a long list of pent-up priorities. Obama will have to decide whether to move quickly on major issues such as health care, climate change, energy and tax plans or aim lower initially and get some legislative wins under his belt on less controversial matters such as children’s health care, stem cell research and a new federal aviation law. Best bet is that Obama will try to set a bold agenda, but move cautiously to rack up some early wins. Republicans will want to cooperate to some extent rather than risk getting tagged as obstructionists, but they will stick together and block some moves, lest they appear irrelevant to their supporters.

9. Dealing with the deficit. It will haunt his domestic plans, requiring him to scale back on investments in green technology research, student loan assistance and possibly a middle class tax cut. He won’t scrap his ideas, but some will be pared back and delayed. It’s possible a staggering $1-trillion deficit will be on the books next year, due to the financial and housing market rescue.

10. Foreign relations. Obama is unlikely to start with a flurry of foreign trips, but he will need to establish good initial communications and relations as president-elect with allies the world over. He’ll turn early to the Palestinian issue, as well as with the threat of a nuclear Iran.

I read about this the other day and it is a pretty cool program, its worth checking out, it only takes a few minutes and can save you some money. I used it to check my cell phone plan and it was pretty impressive how it worked. It checked all the other companies around as well as checked all their plans and took into consideration the service you can get in the particular area that you use your phone most. Look into it, it could be worthwhile for you...

Wednesday, November 5, 2008

How will the election effect investments, from Fortune

Red stocks, blue stocks
Investor Daily: Here's how to choose a presidential portfolio.

NEW YORK (Fortune) -- Does your faith in your candidate extend to your investment portfolio? If so, this column is for you.

While Barack Obama, John McCain and their respective supporters may argue over who would be a better president for the stock market, there are specific investments for which no debate is necessary.

The candidates' policy proposals so favor or so disfavor particular companies and industries that the outcome of the election (assuming we have a clear winner) is almost certain to have an impact when markets open Wednesday - though given the country's fiscal and economic condition, how long any victory glow lasts is another question entirely.

Let's start with the blue stocks - investments most likely to benefit from an Obama win and from Democratic gains in the House and Senate.

PowerShares WilderHill Clean Energy Portfolio. The case for buying this exchange traded fund, which owns shares in alternative energy companies, is simple. Obama has said that his top priority as president will be ending U.S. dependence on Middle Eastern oil, and that the path to freedom lies in investing $150 billion over the next 10 years in renewable energy. He also wants to require utilities to generate 10% of their electricity from renewable sources.

All of this adds up to a potential bonanza for the solar, wind, biofuel and other companies included in the PowerShares WilderHill (PBW) ETF. Best of all you'd be buying low: the ETF's price has sunk from $29 to $10 a share since last December.
Jacobs Engineering. Jacobs is another buy-low, blue-stock opportunity. Obama's economic stimulus plan calls for the creation of a "National Infrastructure Reinvestment Bank" that would spend $60 billion over 10 years on roads, bridges, ports, airports and rail lines.

This would a boon to Jacobs (JEC)a contract engineering firm that specializes in municipal infrastructure. The stock is down 63% this year due to concerns about whether in a weakening economy states and cities can afford new infrastructure projects.
Municipal Bonds. This isn't a stock pick, but munis are a no-brainer for anyone in a high tax bracket. Obama has made no bones about the fact that he intends to raise income taxes on anyone earning more than $250,000 a year, and with Democrats controlling both houses of Congress, he's likely to get his way. That would make munis' tax-exempt income more valuable.

Plus, munis are great value even at today's tax rates. Munis normally yield less than U.S. Treasury bonds, but today the yield on a triple-A-rated 10-year municipal bonds is 4.48% versus 4.0% for comparable Treasuries, according to Bloomberg.
Our red stocks won't so much benefit from a McCain administration as much as they will gain in the absence of an Obama administration.
Take utility stocks, for instance. One reason utilities are popular is their high dividend yields. Chuck Gabriel, a veteran Washington analyst now with Capital Alpha Partners, thinks the utility sector has been depressed by the likelihood of Obama rolling back President Bush's 2002 dividend tax cut. (Dividends used to be taxed as regular income; now they're taxed at 15%.) Thus a McCain upset should lead to a big rally in utility stocks.
Our favorite way to play this: Utilities Select Sector SPDR (XLU),an ETF with 4.1% dividend yield.

Transocean. The conventional wisdom in Washington is that Obama would revive at least a partial ban on offshore drilling in the Outer Continental Shelf were he elected, whereas McCain "would push very hard for more drilling," says Dan Clifton, Washington analyst for Strategas Group. That's good news for the offshore drillers. Transocean (RIG)in particular is incredibly cheap, trading at only five times projected 2009 earnings.

Sunday, November 2, 2008

Stressed about the Economy?

An article I read, though it is from about a month ago, is probably still true or maybe the percentages have gotten higher. 80% of people in the US are stressed about their personal finances and the economy, says the American Psychological Association. Apparently most people are drawn to counseling because of relationship problems with marriage and children, depression and anxiety, but now, 8 out 10 people that go see doctors for counseling are there for reasons related to personal finance.

Thats sick that so many people lay sleepless at night (says the article) about money. I was talking with my Grandfather last Thanksgiving and he was going on a rant about how when he was a kid they would work and earn a few cents and they would go to the bank and deposit it into their accounts and mark it up in their ledger, and everyone of his friends had an account like that, that they took care of and followed closely with their money. I don't know what he was getting at really, if he was saying that the internet might have something to do with the change or what, but I started thinking about it, and I think he may have meant that at such a young age he and all of his friends were caring after their own money and not having the parents watch after it, therefore instilling a strong sense of what a dollar is worth at a young age.

I can see that...I know people who up through college did not manage their personal finances, and even myself, I don't think that I manage my personal finances well enough. I had a checking account opened as soon as I got my first job, and I had learned to keep the ledger and knew how to write checks, go to the ATM and make deposits. I still think though, even as of right now, I don't budget well, or stick to budgets well, and I don't watch money as closely as I should and maybe if I had grown up in my Grandfathers time it would be different...who knows.

Think about it now though, if everyone paid a bit closer attention to everything thats been going on, maybe they wouldnt have to be stressed. A lot of baby boomers are most likely stressed out about this financial crisis right now as they are closing in on retirement and they have just lost 30 or more percent of their retirement nest egg. Though, Bogle, the Vanguard founder, says that if they had listened to his investment philosophies and used target retirement accounts that automatically adjust for you based on your retirement year, they would not have gotten hit hard at all because as you get closer to retirement he would have had your investments switch to more conservative investments, such as cash, bonds, etc...

Who knows the right way to invest, it all depends on what you are personally comfortable with, but what is money worth if you can even sleep well at night, and you are constantly stressed out? Though I am younger than these baby boomer's my advice to anyone is to pay yourself first, put money aside to an emergency fund that is in a high yield savings account, then consistently put money away into investment accounts (IRA's, 401k's, and brokerage accounts) to invest for your future. I feel that if you follow those simple instructions always put some money away for yourself, and choose investments that are right for you as well as right for your retirement time line, that should alleviate a lot of stress. Start as early as you can, and put as much money as you feel comfortable doing, it'll start to add up quickly and it will feel great and make you want to do it more.

Also, the best thing you can do is to educate yourself on personal finances, investments and the economy. There are plenty of magazines out there, books, and websites that can help you learn so that you can take control of your money as opposed to have someone else constantly take some of your earnings every money in investment management fees. And hey, be real with yourself, if you don't have the time to master your investments, leave it to someone else then, you dont want to risk losing that nest egg of yours.

Friday, October 31, 2008 says US has cut spending for the first time in 2 years

Personally I think that is great news. The reasoning as to why the US has cut spending is not good news by any means (stock market, job loss, financial uncertainty, etc...) but the fact people have decided to cut spending can hopefully help them curve their long term spending habits. As a while the US spends more than we make, so we are never actually getting ahead at all, we(individually) are constantly falling behind.
We should always pay ourselves first before we even consider spending money. A good idea may be to automatically have 10% of your paycheck go into a savings account you rarely if ever look at, that way you are putting some money away for a rainy day.
This time of economic uncertainty can bring it to peoples attentions that that paycheck that gets deposited every week may sometime disappear, and you will have to find a way to pay bills and survive without for a period of time. I do not want anyone to lose their jobs, I just want the idea to be in their head that's its possible, that way we will as a whole stop spending like crazy and we can turn the savings rate from a negative to a positive.
Nobody will be there to bail you out as individuals when you lose your job, or you get a pay cut, or as an entrepreneur your customers cut their spending, therefore resulting in less profit each week. Living below our means, though boring and not fun is proven as the best way to get to personal financial solvency.

As soon as you cut your spending and put that extra cash into a savings account, you not only are saving that dollar value, but that money you saved is now working for you and gaining interest, so your then making extra money for yourself, passive income, making money for doing nothing.

Thursday, October 30, 2008

Wall Street Jobless Try B-School, Mix Purple Hooters

By Matt Jarzemsky

Oct. 30 (Bloomberg) -- Bryan Gunderson tried to master the intricacies of structured-equity investments until he lost his job at JPMorgan Chase & Co. Now he's learning the subtleties of Purple Hooters.

After collecting his last severance check in August and getting no offers from more than 100 resumes he sent to friends, companies and employment agencies, the 25-year-old graduate of Loyola College in Baltimore decided to go to B-school -- for bartending.
``It's come to the point where, yes, I need another job,'' said Gunderson, who has a bachelor's degree in finance and is looking for bartending work. ``I always frequent bars, so why not be on the other side?'' he said in an interview at New York Bartending School in Manhattan.

Gunderson lost his job amid a credit crisis that threatens to leave 165,000 people unemployed in New York City in the next 24 months, including 35,000 in the financial industry, according to the city's comptroller.

A growing number of out-of-work New Yorkers are turning to bartending, according to school directors. Enrollment in the American Bartending School in Manhattan climbed 53 percent from last October to 84 pupils, the most for the month in five years, director Joe Bruno said in an interview.
``This will be a huge year for us,'' Bruno said. ``Generally, when the economy is bad we do well because people need supplementary or primary income.''

Enrollment Gains

Gunderson recently graduated from the New York Bartending School, which has had an 18 percent jump in enrollment, said Tom Sisson, school director. The credit crisis and layoffs are driving the growth, said Sisson, who declined to say how many students he has.

``The increase I'm talking about, it's definitely that corporate, Wall Street, finance kind of thing,'' Sisson said.
The number of people working in food and beverage services in the largest U.S. city climbed 3.6 percent in September from last year to 201,800, according to state Labor Department data. Employment in securities, commodities and other financial businesses fell 7 percent to 174,700.
``A lot of people that are looking for careers in other industries seek employment in our industry,'' said Chuck Hunt, executive vice president of the New York State Restaurant Association
The 40-hour course offered at New York Bartending School costs $695 and typically draws ``physicians, attorneys, people in the corporate world, people who've suffered a job loss, people who are burned out and are having the so-called mid-life crisis,'' Sisson said.

Purple Hooters

At the final exam, students must pass a written test and mix 20 drinks in six minutes. An instructor picks the speed-test cocktails from a list of 200 that includes the Purple Hooter, made with vodka and raspberry liqueur, and the Red Devil, which contains Southern Comfort, sloe gin, amaretto, orange juice, vodka, triple sec and lime juice.
Billy Achitsaikhan, 27, says he didn't worry about finding work again when he left New York to trek through Central America in 2006. The graduate of Skidmore College in Saratoga Springs, New York, said he had joined Morgan Stanley after internships at Bear Stearns Cos. and Smith Barney Holdings Inc.

``Two years ago, there were days when I would go to Wall Street and meet up with two different headhunters and they would literally offer me more than 10 jobs apiece,'' Achitsaikhan said in an interview.

Since he returned to Wall Street last month and posted his resume, ``no one has called me,'' he said. Achitsaikhan graduated from the American Bartending School on Oct. 17 and said he plans to look for bartending work.

Not Recession-Proof

The median annual income, including reported tips, for a full-time bartender in New York City was $30,540 as of May, while the median for all jobs was $42,600, the state Labor Department said. Securities, commodities and financial services sales agents' median income was $111,160. Gunderson and Achitsaikhan declined to say how much they earned in their previous positions.

Tending bar isn't recession-proof, said James Brown, a state Labor Department analyst.

Restaurants are facing the toughest environment since the 2001 terrorist attacks because of the slumping economy, record rents and an increase in food prices, Hunt said. Eateries may be more likely to hire an experienced bartender who is out of work because a restaurant closed than someone fresh out of training, he said.
``Eating establishments and drinking places tend to lose employment during downturns,'' Brown said. ``People spend less, tourism drops, expense accounts get cut.''

At least gas prices are down...

During this turbulent market where it is difficult to know what the news everyday is going to do to the market and how investors are going to react, we can all enjoy one thing and that's a lower cost to fill our gas tanks. I believe as of last night 6 states in the US registered gas prices under $2 a gallon.

Oil has come down dramatically in prices, and has risen a bit in the past couple days, but still oil sitting around $60 or $70 a barrel is much better then where it was. I read a report where an analyst thought that oil prices could get to $20 a barrel---a few months ago that was unthinkable. (I don't even know if it is currently "think able", but that's neither here nor there). It makes driving by a gas station, either to pump or just to look at the prices, to see the costs going down as opposed to going dramatically up each day. It got as high for one gallon of gas as a lunch in your work cafeteria in some places.

I am not sure what you as a consumer can do to help keep the prices where they are but I believe from what I did hear is you can help. Numerous sources have said to just don't get greedy with the gas, remember where it was before and don't have a short term memory. Know how quickly and dramatically gas prices can sky rocket. Use gas as you would have before when the prices were higher, sometimes you can control it of course, but if you we're car pooling to work, keep doing it, it'll only keep more money in your pocket.

Wednesday, October 29, 2008

Buy n' Hold for everyone?

Its a tough question to ask to certain people, there are certain people (most notably, Warren Buffett) who will live and die by the buy and hold philosophy of stock investing. They say historically the stocks perform better and when you trade frequently you water down your profits (or increase your losses) by trading expenses. As I've been reading, it seems as if the buy and hold philosophy would have returned you nothing over the last ten years, actually, you would have lost 11%. Ouch.

If you ever watch Jim Cramer and listen to him rant and rave about every stock under the sun, first you might think to yourself, "jesus, he talks to fast and churns through so many stocks in such a short period of time, how could I ever follow his advice?" and you also may think, "how can anyone with a full time job and a life (other than investing) keep up with him. So, for those reasons alone, you may think buy and hold is easier than trading frequently, but Jim Cramer will tell you different and he has had a very successful career as an investor, sans a few big hiccups he has had recently with his stock picks.

You may get a rush out of actively trading, and making a few bucks real quick, which is always a good feeling (hurts worse losing money real quick though). But you really need to access your goals, your time frame, your ability to handle risks (ups and downs, news, etc...) and the amount of free time you have to pick stocks and follow the active traders to see what they'll do before you can figure out what strategy is right for you.

Ill leave you with the thought that continues to occupy my mind as I think about these two strategies, and that is the number under Warren Buffetts name every year in Forbes or when you see him in the WSJ, the richest man, or very close to it.

Monday, October 27, 2008

This can mean great things for investors-from businessweek

'Perma-Bear' Backs Other Value Investors: Buy Now

Jeremy Grantham, chairman of Boston-based asset manager GMO, is feeling vindicated. In 1998, Grantham recalls, he forecast that in 10 years the total inflation-adjusted return of the Standard & Poor's 500-stock index would be -1.1%. In October, "it slashed through that, and marked the end of the Great Bubble," he says.

Now, Grantham, whose firm manages more than $120 billion in assets, is almost gleeful. The value manager, who earned the sobriquet "perma-bear" for his long-standing bearish outlook, is buying. Like Warren Buffett and a growing number of savvy value investors -- among them, Third Avenue Management's Marty Whitman and Longleaf Partners' Mason Hawkins -- Grantham is seeing opportunities in the cheap prices created by this autumn's rapid stock market unraveling. Stocks, Grantham says, are now cheaper than they've been since 1987. "You are looking at the best prices in 20 years, and you should be making 7% to 8% to 9% real (inflation-adjusted) returns. The last time I was this optimistic was in the summer of 1982."

Not that Grantham's blindly upbeat. "It's optimism with great trepidation," he says. That trepidation reflects the fact that Grantham doesn't know if the market will fall further. But he's not the type to try to time the bottom. In fact, he says, bubbles historically overcorrect, and usually quite dramatically. That's what happened after the stock market crash of 1929, the 1965 collapse of the Nifty Fifty, and the contraction in Japan in 1989. "We are reconciled to buying too soon," says the money manager. "A value manager buys too soon and sells too soon. That's the nature of the beast."
Values at Home and Abroad
Grantham, who is repositioning both his personal portfolio and his clients' funds, has "equal enthusiasm" for emerging markets stocks and high-quality U.S. blue chips.

Among U.S. stocks, Grantham's betting on big-cap blue chips -- the most solid of companies with strong franchises, little debt, and stable history. "I'm not personally recommending Coca-Cola, or J&J, or P&G but these are the essence of what I am talking about," says Grantham. "These super-high-quality franchise companies got left behind in what I call the 'greatest suckers' rally. They are cheap and have been cheaper than the market for a long time."
Overseas, Grantham is looking at emerging markets, which are trading at around 25% off from what he considers their fair value, making them the cheapest prospects. Within emerging markets, he particularly likes Brazil. However, he's pessimistic on commodities, which he believes could be pushed to new two-year lows on slowing growth prospects in China and elsewhere.

What about financials, that most battered of battered sectors? Grantham's not as pessimistic on them as he's been previously, but he still prefers to invest elsewhere. "I don't think financials would make the list," he says, "but I think they are cheap relative to long-term expectations."
With a stomach of steel and a keen sense of history, Grantham feels no qualms about buying now: "I don't have any anxiety. I feel so much better with history on my side. Truly. I've been looking forward to this for years."

Vanguard founder finds value on the far horizon

The search for wisdom in personal finance will take you sooner or later to John Bogle, who founded Vanguard, created the first index mutual fund and still preaches the gospel of long-term, low-cost, diversified investing.
Bogle, 79, has been warning for years about the excesses of Wall Street, where, he says, the triumph of "salesmanship" over financial "stewardship" produced colossal losses for millions of people. He is armed with statistics showing that a vast majority of investors - including most professional investment managers - should not even bother trying to pick individual stocks.

They are just not very good at it, he says. Better to invest in the broad market through index funds with low costs, allowing the shareholders, and not the investment managers, to profit when times are good.

As for trying to time the ups and downs of the market, Bogle contends that the chances of being right over any extended period are so negligible that it's a fool's errand to try.

Yet for simple, straightforward reasons, he says that this is a very good time to put money into stocks - not for short-term trades, mind you, but as part of a diversified portfolio that you hold for many years.

"The probabilities for stock market investing right now are very compelling," Bogle said by telephone from his office at the Bogle Financial Markets Research Center, on the Vanguard campus in Malvern, Pennsylvania. The cataclysm in world financial markets has brought down valuations to fairly attractive levels, he said, improving the prospects that the broad stock market, over the next decade, can earn an annualized return of perhaps 9 percent.

So this isn't the time to sell, he said, but he allows one big exception: "If you cannot afford to lose another penny, then you simply have no recourse but to get out of the stock market."
Stocks could easily fall further, and if you aren't in a position to absorb more losses, you must protect yourself. And retirees should hold a big dollop of bonds, which generate income and provide ballast in a shaky market. "Investing isn't just about probabilities," he said. "It's about consequences, and you've got to be prepared for them."
But for long-term investors who can afford to wait a decade or more before cashing out, the probabilities are much better right now than a year ago, precisely because of the terrible beating the market has taken.
Of course, that doesn't mean you should put all of your holdings into stocks - "unless you're just starting out in investing and you're very young, and you have very little to lose, and an awful lot to gain," he said. Everyone needs to examine their particular situations and tailor an individual strategy. Nonetheless, he offered some rules of thumb that, he said, "will keep you out of trouble."

First, hold bonds - preferably in a truly diversified, low-cost index fund, and in an allocation roughly equal, in percentage terms, to your age. If you're 50, for example, consider holding 50 percent bonds and 50 percent stocks. "This is simplistic, and of course you need to look at your own situation," he said, and adjust the bond proportion up or down depending on your needs and level of risk-aversion.

If half of your portfolio was in the Vanguard Total Bond Market Index fund this year, that fixed-income portion would have held its own - on Thursday, it was down 0.2 percent for the year - and mitigated sharp losses in the equity part of your portfolio.

If the equity half was in the Vanguard Total Stock Market Index fund, your equity allocation would have lost 37.4 percent through Thursday. The net loss in your portfolio would have been just a bit more than half of that, or 18.8 percent. If you held more of the bond fund, your losses would have been lower.

Once you've set up a conservative, balanced, broadly diversified portfolio, as well as a way to add to it regularly, try to let it be. Don't check your returns daily.

Unless you're a market pro, and maybe even if you are, daily market averages are mainly noise, distractions without much meaning or use, he said.
Bogle has lived with a transplanted heart since 1996, and while he has retired from management of Vanguard, he still works energetically, giving speeches and writing books about Wall Street's mistakes and the benefits of investing with a low-cost index fund approach.
He says that despite "an orgy of speculation" that has hurt the global economy, he remains convinced that if long-term investors stick to the basics, "put blinders on" and try to have "strong stomachs," they can ride out the rough patches and ultimately prosper.

"If you were to put your money away and not look at it for many years, until you were ready for retirement," he said, "when you finally looked at it, you'd probably faint with amazement at how much money is in there."

Friday, October 24, 2008

Yahoo! - We heard a lot of talk about it months ago, but all that has calmed down, what's up with it?

Five reasons to buy Yahoo stock
The struggling Internet company may look like a basket case but now's the time to jump in.

SAN FRANCISCO (Fortune) -- Here's why you should buy, not bail, on Yahoo.

1. Eventually, management will get tossed.
Starting with the least scientific or analytical reason for owning Yahoo, there's every reason to believe the days are numbered for CEO Jerry Yang and President Susan Decker. By all accounts fine people, they simply haven't led Yahoo well.

The former excelled as Chief Yahoo, dabbling in deals and motivating the troops. But Yang hasn't been a decision leader and is "lurching from crisis to crisis," as The New York Times aptly phrased his tenure. Decker, in turn, is widely derided in Silicon Valley as too much the finance chief, not enough the operations guru.

Yahoo's doormat board tolerated Yang's ascension to CEO as a way of appearing to not have fired his predecessor, Terry Semel. Now that raider Carl Icahn - who has been quiet of late regarding Yahoo - is on the board, though, action is far more likely. Were the board to dump Yang and Decker it's an easy bet the stock would pop, even if they didn't immediately name a successor.

2. Microsoft will return.
Microsoft continues to deny that it's interested in bidding again for Yahoo. It is forced to make these protestations because Steve Ballmer can't seem to stop talking  about why such a deal would make sense.

The math is pretty straightforward here. Microsoft offered to buy Yahoo for $31 per share. Yang thought his company shouldn't fetch a dime less than $37. Microsoft said it was willing to pay $33. Today, Yahoo has been nosing below $12. Microsoft, instead, has been talking about buying back more stock.
Just wait. Microsoft likely is waiting to see what the Justice Department has to say about Yahoo's search-advertising deal with Google. When that's all done, a Microsoft-Yahoo tie-up makes as much sense as ever, especially considering that Microsoft, amazingly, still can't make money in its online business. It needs Yahoo's scale to get profitable.
There is another Microsoft option that could benefit Yahoo and its stock price. "We believe Microsoft is waiting in the wings to replace Google as a search outsourcing partner," writes Marianne Wolk of Susquehanna Financial Group, "which could afford Yahoo some upside lift to [its] earnings forecasts, assuming there is a minimum guarantee from Microsoft to exceed Yahoo's internal figures as incentive to get the deal done."
That's a good thought: If Google can't help Yahoo make money, Microsoft will.

3. Investors are looking for reasons to buy this stock.
In the initial hours after Yahoo reported a generally atrocious third quarter and a bleak outlook Tuesday, its stock popped. The various reasons postulated by observers were amusing when taken as a whole. The San Francisco Chronicle guessed this was due to "relief that Yahoo's fourth-quarter financial guidance wasn't as bad as feared."
Others chalked it up to the cost reductions associated with announced layoffs of 10% of Yahoo's workforce - even though the layoffs were widely expected and therefore shouldn't have affected the stock price. One analyst, Mark Mahaney of Citigroup, praised Yahoo for having had the foresight to avoid stock buybacks until now - and then prognosticated the positive impact of future buybacks. "We note that the company ended [the third quarter] with about $3.3 billion in cash and no debt," he wrote, adding that buybacks were likely.

4. Long-term trends favor Yahoo.
Yes, Yahoo is losing share to Google. Yes, Yahoo is barely growing. Yes, it's a tired argument that Yahoo is one of the strongest brands in the media world. Yes, this argument for owning its stock hasn't worked in a long time. Yet the argument still holds water. The company global page views grew 17% in the third quarter. It's part of an industry, online advertising, that will continue to grow (or at least take share) no matter the economy. Compared with The New York Times, a sterling brand in a declining industry, Yahoo is a powerful brand in a growing industry.

5. It's cheap.
There's always that. Morgan Stanley's Mary Meeker figures that given the value of Yahoo's cash and its publicly traded Asian assets (even taking into account the difficulty in selling stakes in other companies), investors value Yahoo's core business at just $6 per share, or eight times Wall Street's estimates of 2009 profits. That's an extraordinarily low multiple for any company with the opportunities in front of it that Yahoo has. Yahoo's management thought Yahoo was cheap at $30, of course. Today, investors would do quite nicely for a fraction of that amount...

Thursday, October 23, 2008, Inc.

I am no stock picker and I do not claim to be. But it seems as if, Inc (AMZN) has gotten banged up pretty good over the past year or so. As of right now it is selling closer to its 52 week low than its 52 week high, and they are not forecasting great results forthcoming. That makes no sense to me. I would think that as we approach, or are already in a recession people would become much more aware of where their dollars are going. Me personally, if I want a book, I am going to order it from (and I would have even before this recession), because I can get it much cheaper all I have to do is wait a few days for it to ship. Not that Barnes and Noble or Borders are rip offs, but if you have just a little patience you can save yourself like 50% of your order cost. This is just books that I am talking about too, how about all of the other items you can buy online that you can get at huge discounts from the brick and mortar stores.

Also, we have this new population of people, people that have grown up from their very young childhoods using computers, so they may be more comfortable placing an order online then some of the older folk, who just started using computers and are not yet as comfortable. As this generation of computer savvy people starts taking up more and more of the population, I feel as if more and more things will be purchased at quite a discount online. I have not actually read the business model, but I am going to assume they take a piece of every sale on the site, otherwise it wouldn't make sense for them to sell items on the site. All of this information is pointing to more money in Amazon;s pockets and more traffic to the website, therefore more people talking about their experiences on Amazon, then leading to NEW customers to In summation, I feel that, Inc (AMZN) is worthy of people taking a look at it and maybe picking up a few shares somewhere down the line. Not only did I just discuss how more people are going to be shopping on there, but come on, again - we are in a recession, everyone is going to be looking for a cheaper deal on things, and that's online.

Think about it. Like I said, I'm not expert, but I think it might be something if you were to buy and hold for a very long time, you would be a happy investor.

From the Wall Street Journal

Weill Seeks to Gain From Pain --- Considers Fund to Invest in Battered Financials

Sanford Weill, the architect of Citigroup Inc., is considering a plan to profit from the same turmoil that has clobbered the banking giant.

Mr. Weill, who pulled off the deal that created Citigroup a decade ago and became its chairman and chief executive, is in talks about launching a private-equity fund that would invest in beaten-down financial companies and assets, according to people familiar with the matter.

Mr. Weill's potential partners are Michael Klein, who was co-head of Citigroup's investment bank until he left in July, and Michael Masin, former chief operating officer at the New York company.
Such ventures often fizzle before getting off the ground, so it isn't clear if Mr. Weill will go through with the plan. In recent weeks, though, Mr. Weill's team has reached out to potential investors, including sovereign-wealth funds, outlining their strategy and gauging interest in putting money into such a fund, people familiar with the discussions said. The tentative goal is to raise about $5 billion.

Launching the fund would mark a new chapter in Mr. Weill's storied financial career. In 1986, he bought a troubled Baltimore-based lender that became a vehicle for building a global financial juggernaut that culminated in Citigroup. Now 75 years old, Mr. Weill stepped down as CEO in 2003 and as chairman in 2006.

In recent years, Mr. Weill has devoted much of his time to two philanthropic ventures, Carnegie Hall and the Weill Cornell Medical College.

Meanwhile, Citigroup has suffered, piling up four straight quarterly losses that have caused its shares to plunge 55% since the beginning of the year.
In 2005, Mr. Weill was preparing to launch a private-equity fund but shelved the idea following an outcry from Citigroup's board, which worried that the venture might compete against the company.

Mr. Weill has remained obsessed with Citigroup, frequently offering his advice to bank executives. Last year, after handpicked successor Charles Prince resigned under pressure, Mr. Weill volunteered to return to the company. Citigroup directors declined his offer.
Earlier this year, he joined sovereign-wealth funds, public pension funds and other investors who pumped $12.5 billion into Citigroup in exchange for preferred stock. At the time, Citigroup's stock was trading at about $28 a share.
The shares fell 6.1%, or 86 cents, to $13.32 apiece in New York Stock Exchange composite trading Wednesday at 4 p.m.

Mr. Klein is a charismatic investment banker with a bulging Rolodex. Since leaving Citigroup, he has advised the U.K. government on handling the financial crisis and recently landed a fellowship at Princeton University's Woodrow Wilson School of Public & International Affairs.

Mr. Masin got to know Mr. Weill during their time together as trustees at Carnegie Hall. Mr. Weill recruited him to join Citigroup's board and later hired him as chief operating officer. Mr. Masin left Citigroup in 2004 and is now a senior partner at law firm O'Melveny & Myers LLP.

Messrs. Weill, Klein and Masin either declined to comment or didn't respond to requests.

Wednesday, October 22, 2008

I've posted his stuff before-from yahoo!-Ben Stein

Why I'm Still Buying

This is my most serious column yet. So let's get to it.

I get a fair amount of mail about the economy. Lately, much of it asks the same questions:
* What the heck happened to our economy so suddenly and powerfully that it caused the immense uproar and fear and stock market crashes we have had lately?
* Why didn't I, Ben Stein, famous so-called braino, get what was happening and why did I remain optimistic so long?
* What is the future going to bring?

First of all, obviously, I don't know what the future will bring. If I knew the future, I would be the richest man on the planet very soon and I assure you I am very far from that.

But I now see what has happened and I can explain that, and it might give a tiny bit of insight into what will happen in the future.

Start around 1995. Groups involved with civil rights issues and activities for poor people began to complain that poor people and especially non-white poor people got mortgages much less often than white well to do people. Many economists, including me, explained that it was not at all surprising that poorer, less credit worthy people were often turned down for credit. That's how credit is supposed to work: you lend to people who will pay you back.

But the advocates for poor and black people had immense political clout. Under President Bill Clinton, they passed legislation that called on banks to be required to lend to non credit worthy borrowers. The laws, including the Community Reinvestment Act, the CRA, required two large government sponsored enterprises, Fannie Mae and Freddie Mac, to buy those lower quality mortgages from the banks, guarantee them, and sell them to the public. These were bundled into immense pools of subprime mortgages as they were called, and sold all over the world.

Soon, the private sector got into the act in a vast way. They also went to banks and bought their subprime loans, packaged them, and sold them as Collateralized Mortgage Obligations all over the world.

Supposedly, the subprime collateralized mortgage obligations (CMOs) were sliced up in such a way that buyers could have a very high likelihood that they would be repaid even if many of the mortgages in the portfolio defaulted. This assumption was based on a misunderstanding of poor quality credit that had been popularized during the era of the junk bond investment powerhouse, Drexel Burnham Lambert.

As it happened, these low quality mortgage bonds were recognized as highly likely to have real problems very soon after they started to be issued by private banks in the billions. The people who recognized the high likelihood of defaults were able to profit from that likelihood:

First, they could sell the mortgage securities short, a straightforward wager that has long been available.

Second, they could buy credit default swaps (CDS) from financial entities. These were essentially a side bet that anyone could make about a certain mortgage bond (or any other kind of security). It paid off fantastically if the bond went into default or was close to default. The people who sold these CDS were banks and insurers, especially Merrill Lynch and A.I.G., that believed the mortgage bonds would not default and therefore charged very little to the other side, the counterparty, to make the bet.

Things went along well for everyone on the long side for several years as the housing market boomed. Even if borrowers could not repay their mortgages, they could refinance the mortgages for more money than was owed on the original mortgage, pay off the first mortgage and live happily in their new home. The mortgage in question in the bond would - again-- be paid off and the bond would continue happily in its owners hands.
Then, the housing market started to stabilize and soon fall, as housing prices do. They move in cycles, although around a rising mean, as we economists say.

Now, when the subprime mortgage holder could not pay off his mortgage, he could not refinance. Instead, he had to default. When a lot of these mortgages defaulted, the bonds into which they had been lumped declined in value.

So far, I, your humble servant, followed the deal just fine. It was extremely similar to the collapse of the Drexel Burnham Lambert junk bond empire. This had caused barely a ripple in the national economy when it fell apart in the early 1990's. I assumed that the same would happen with junk mortgages. There would be some failed banks and insurers, but the Federal Reserve, the Federal Deposit Insurance Corporation, and the Treasury could make all of those losses good. The total amount of subprime mortgage bonds was large but not compared with bank capital or the regenerative powers of the Fed.

So, I assumed, and wrote, things would be fine.

Where I missed the boat was not realizing how large were the CDS based on the junk mortgage bonds. They were not only large, but absolutely staggeringly large. Where the junk mortgage bonds were in the hundreds of billions, the CDS were in the tens of TRILLIONS. If the sellers of the CDS had to pay off in large part, the liability greatly exceeded the total bank capital in the United States and maybe in the world. That is, the derivatives based upon the junk mortgage bonds could be - and were - not in any way limited to the size of the mortgage bonds themselves, and this I did not know until a few months ago.

It is this liability that swamped the banks, investment banks, and insurers. It is the CDS liability that broke AIG and Lehman.

When I realized the extent of this problem, I wrongly thought the federal government would step in and in some way rescue everyone who had sold CDS. They did, except they 'forgot' to rescue Lehman. Lehman was so large that when it failed, it was like a torpedo striking an ocean liner below the water line. A gaping hole was left in the whole world finance system.

Bankers panicked. If Lehman could fail, then anyone could fail. In that case, the banks that were still solvent figured they had better hoard their assets and stop making loans. This led to the ongoing credit freeze. This led to a rapidly gathering economic downturn and a drastic fall in prices of all kinds of securities, real estate and commodities. It also led to a severe credit squeeze on hedge funds, which saw credit dry up and their asset prices fall suddenly, and were forced to sell stocks and other assets on a dramatic scale, leading to still greater falls in securities prices, and the worldwide panic that it still unfolding.

In turn, this led to huge infusions of liquidity into the banks of the world, the semi-nationalization of the banks of the United States and of many other nations to shore them up, thaw credit, and bolster world markets and economies. These were drastic steps for drastic times, all generated by derivatives. Warren Buffett had warned us against them, and he was dead right, as always.

Now, these acts should help. But it might not do the job all by itself. Major lender solvency issues remain. If housing prices keep falling, more mortgage bonds will default and the liability attached to the credit default swaps based upon them will still be in the trillions or even tens of trillions.
I might well be too alarmist here, but I think the only rational possibility is for the federal government or the New York State government (because most of the CDS were entered into in New York) to simply annul the credit default swaps as void as being against public policy. After all, there was no insurable interest in most cases, which tends to void insurance contracts, which is what a CDS is.

Once that happens, the banks can breathe freely again, take risks, and the economy can revive. Or, perhaps the housing market will stabilize, mortgage based bonds will rally, and the CDS will be out of the money and will not be a threat to the lenders. But something has got to happen to defuse these deadly derivatives.

In any event, we now know a lot we did not know before. Credit default swaps are way too dangerous. Derivatives generally are dangerous. There is much that Ben Stein does not know. I hope this explains some of how we got to this precarious place, I apologize for not seeing it sooner. But I am still optimistic that the government will save us from the CDS, and we will go on to renewed prosperity. In other words, I am still buying.

Tuesday, October 21, 2008

A few ways to save a few bucks

Next time you get some time on your hands and your sitting around watching TV or you're bored out of your mind doing nothing, you can take a few minutes and save yourself a few bucks. You'll also have a great feeling of satisfaction after because you did something to help yourself!

1) Cell Phone - Call up your current cell phone service provider and let them know that you have been shopping around for better deals and you have found one. Let them know that you have run a break even analysis and even with the large fee that you may be charged for cancelling your contract with them, over the next few years you will be saving a lot more money. Now, don't get pissed off and start yelling because you really should have no intention on cancelling with them. Tell them, you've liked the service you have received from them for however long you have been with them, and if they could help you out somewhere along the way (more minutes of you need them, free texting, shave a few bucks off each months bill) you would be more than happy to stay with them. This should be good for a small break in the monthly service fees or some free minutes and texting.

2) Car Insurance - I did this just the other day, it only took a few minutes and the person with Geico was actually pretty helpful. I called and told them I was looking to shave some costs off my car insurance monthly bill but I also wanted to make sure I was well insured still. We went through my entire policy and we were able to make sure I was still very well insured and I took a few dollars off each months bill. ALSO, with car insurances, you can save money based on how you pay you bill. If you pay lump sum every 6 months you won't be hit with any fees, but sometimes if you pay monthly they charge a convenience fee, which can add up to be like $50 a year, so see if you can work something out with the insurance company. You could also pay the insurance for a year or 6 months on a 0% apr credit card, that way as long as you pay it on time monthly you wouldn't be hit with any fees.

3) Credit Cards - This can be helpful if you have a card with a balance on it or if you just have a credit card for emergencies. Call up your credit card company and let them know that you have been shipping around for credit cards with better rates and you have found one. You can make up a card company (chase, citi, amex, whatever) and say they are offering a rate lower than what you are currently getting with your current card. Again, like the cell phone, you don't need to yell at them because its very possible you have no ambition to switch credit cards. Just let them know there are better rates out there, reiterate you haven't had problems with the current card, or if you did they weren't huge ones and you are just looking out for your best interest. If you do carry a balance that can safe you a ton of money a year, and if you don't, when you have an emergency and have to use your card it won't be quite as painful.

4) Reconciliation - Go through all of bank statements and credit card statements and look at all of the charges. Make sure you know what every charge is and you need every charge. Make sure you don't have a small fee getting charged every month from your credit report, or if you don't listen to satellite radio, call and cancel it, this can save you $30 or more each month (if you cancelled your credit report and satellite radio). There are other ways out there to get a credit report for free, you don't need to pay $15 a month.

Follow these steps and be that much closer to positive cash flows at the end of every month.

Monday, October 20, 2008

Better to listen to them, than me

So as Ive said before, I think there could be some good opportunities out there in the stock market to buy at some historically low prices. But who am I to say, a twenty-something year old investor and stock researcher, but I haven't LIVED through the ups and downs like some of the following guys have.

Buffett says hes is buying US stocks based on his simple philosophy: be fearful when others are greedy and greedy when others are fearful.

John Nuff, who was in charge of the Windsor Fund at Vangaurd for a few decades says that it is time to start buying again.

Buffett talking to Reuters:

(Reuters) - Billionaire investor Warren Buffett is buying U.S. stocks, he wrote in an opinion column in the New York Times.

"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful," Buffett wrote in the paper.

Buffett acknowledged the economic news was bad, with the financial world in a mess, unemployment rising and business activity faltering.

"What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up," he said. "So if you wait for the robins, spring will be over."

Buffett, who made his money by building his company Berkshire Hathaway Inc, into a $199 billion conglomerate, wrote that investors were right to be wary of highly leveraged entities or businesses in weak competitive positions.

"But fears regarding the long-term prosperity of the nation's many sound companies make no sense," he said.

Buffett said major companies would suffer earnings hiccups, but added they "will be setting new profit records five, 10 and 20 years from now."

Neff talking about his outlook:

In a small office in West Conshohocken, a legendary stock market bottom feeder has been having a feast.

John B. Neff, who racked up record gains as manager of Vanguard's Windsor Fund over three decades, is buying stocks again.

And while the actions of one person may mean little in a multitrillion-dollar market, Neff's renewed romance with stocks signals that, to him, the worst is over.
As of Friday, he has put cash that he had held on the sidelines for the last year back into the stock market. He retired from Windsor in 1995, after 31 years, so the world no longer watches him. He manages a portfolio for himself and for some small charities.

But at age 77, he has not tired of what he calls "the ultimate ball game," the stock market.
About 18 months ago, Neff started to keep more of the stock portion of his portfolio in cash. (He noted that since he left Windsor, he has kept about 30 percent of his portfolio in tax-free municipal funds to preserve wealth.)

Neff likes bargains, stocks that sell for prices of five or six times their earnings. It is like shopping only when prices are marked down 60 percent or more.

Few stocks were that cheap last year, so he sold some of his investments to take gains and did not reinvest. For much of the last year, he has had about 15 percent to 20 percent of his stock portfolio in cash.

It is not that he saw the downturn coming.

"I wasn't greatly concerned about the level of the market, or I would have had more than 15 percent in cash," he said. "I was just having a tough time finding the kind of stuff I like, with a low P/E [price-to-earnings] ratio and a high dividend yield."

Like a P/E, a dividend yield, calculated by dividing dividends paid yearly by the stock price, may indicate whether a stock is a bargain.

So does it mean anything that he has put his cash back in the game?

"It does," he said. "It says in fact that an awful lot of things are available at a friendly price. It's the kind of market I'd take advantage of."

He is not completely bullish.

"There's some real tough sledding out there," he said. He said he believed that the economy might experience a recession but that he thought it would be mild because retailers were marking down prices and consumers would buy.

And before anyone even considers following his investing lead, he cautions that he "really got killed the last couple of weeks."

Last year, his portfolio lost about 11 percent, although the overall market was up slightly. But since he left Windsor, he said, he has earned about 19 percent yearly, far better than the overall market. In the 31 years he oversaw Windsor, he beat the Standard & Poor's 500 index 22 times - by about 3.5 percentage points a year.

As Windsor manager, he was a maverick. (Neff, a lifelong Republican, is supporting John McCain for president.) Conventional investing wisdom says people should diversify, buying many stocks to reduce the risk of losing a lot on one. Neff liked to make big bets - and still does.

His current portfolio contains about seven stocks. His on-again, off-again love affair with banking giant Citigroup Inc. is on again. He famously bought a big stake in that company for Windsor in the early 1990s when bad loans in real estate and in developing countries pummeled its shares.
He has been buying Citigroup again, believing that its stellar network of offices around the world will help it thrive when the global economy recovers. Citigroup now accounts for about 13 percent of his portfolio.

He also likes Seagate Technology Inc., which makes hard-disk drives. Neff said he thought that business would continue to grow as corporations sought computer storage.

He also likes energy companies ConocoPhillips and Swift Energy Co. and computer-maker Hewlett-Packard Co.

Several of his positions remain underwater, but he has regained some of that ground in the last two days.

"Citigroup is up 18 percent today," he said after yesterday's market close. He still has a long way to go. Citigroup shares closed at $18.62 yesterday. He paid about $45 a share for previous Citigroup purchases.

So he continues to toil, almost as hard as he did when he was managing billions of other people's money. He works about 60 hours a week in the West Conshohocken office offered to him by his friend Paul Miller, a founder of the money management firm Miller, Anderson & Sherrerd that later became part of Morgan Stanley.

Neff said he remained a product of his youth in the Midwest and in Texas.

"I'm a combination of Michigan substance and Texas bull," he said. By bull, he said, he means that he has strong opinions and few fears about expressing them.

His opinions remain strong, but his body has faltered a bit. He has retired from various boards of directors. He tires more easily than he used to and dislikes the harried nature of today's business travel. He says he is occasionally forgetful and confesses to requiring a short midafternoon nap.
"It's just a little hard to keep up. I still keep up with the marketplace, I think."