BUCKzology's USA Debt Clock

Nation's Finances
National Debt Clock

Tuesday, September 8, 2009

"Year Of The Bailout (2009)" - Top 5 Worst

Here is another good article I found on SeekingAlpha.com (this one by Rick Newman)...
"Has anything good come from $3 trillion worth of bailouts over the last 18 months? To be fair, probably. After Lehman Brothers failed in September 2008 and other Wall Street firms began to founder, urgent government intervention forestalled a deeper financial panic and perhaps even a depression. Instead of talking about a recovery today, we could be facing steep double-digit unemployment and many more months of misery.

But the Year of the Bailout also entailed some disturbing moments, and there may still be unhappy consequences. Here's my list of the worst bailouts:

AIG. Did the Federal Reserve know what it was getting into on Sept. 16, 2008? That's the day AIG would have collapsed if the Fed hadn't issued $85 billion in credit to the huge insurance company in exchange for a 79.9 percent ownership stake. The problem wasn't AIG's insurance units, which constitute most of the firm, but an internal hedge fund, AIG Financial Products, that was basically backing huge gambles with solid insurance assets. When the hedge fund bet wrong on billions in mortgage-backed securities, it imperiled the entire company.

The Fed's intervention may have prevented deep losses throughout the banking system, but it also committed the government to a tawdry, open-ended bailout that's easily the single-biggest corporate rescue in U.S. history. The March 2009 revelation that AIG paid $165 million in bonuses to executives at the same Financial Products division that sank the firm became the hottest flash point in the Year of the Bailout and the darkest stain on bailout architects like Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke. Barry Ritholtz, author of Bailout Nation, contends that the government could have taken over the Financial Products division and treated it as a failed bank, imposing losses on every firm that did business with the unit. "You're supposed to suffer pain and agony when you put money into a company that's as corrupt as that AIG hedge fund," Ritholtz says. The insurance units, he argues, could have been spun off as a new stand-alone company, freed from the albatross of Financial Products.

Bernanke has argued that since AIG wasn't a bank, the federal government lacked a legal and practical mechanism for taking over and dismantling the company. That's why the Obama administration wants Congress to grant the Fed new powers to take over "systemically significant" institutions like AIG when they fail. Meanwhile, the AIG bailout could wind on for another three or four years, and there's a good chance taxpayers will never get all their money back.

Citigroup (C). When other banks become insolvent, the Federal Deposit Insurance Corp. swoops in, fires management, zeroes out the stock, pays bondholders a portion of their investment, and either sells off the bank in pieces to other banks or runs it until a buyer is found. But not Citigroup. This lumbering giant would have collapsed on its own, but instead of a takeover, Citigroup got $25 billion in bailout funds in October 2008, then another $20 billion three months later. Plus taxpayers are on the hook for a big chunk of $301 billion in mortgage-backed securities and other dodgy assets on Citigroup's books. It could be years before Citigroup is healthy. CEO Vikram Pandit has said that the fazed bank will pay back the taxpayers in full. But there's no deadline, and Pandit himself could be long gone before taxpayers get a dime back.

Bank of America (BAC). If this North Carolina-based bank hadn't picked up ailing brokerage firm Merrill Lynch in September 2008, it might be out of the woods by now. But the Merrill acquisition saddled BofA with billions in losses and made CEO Ken Lewis a corporate pariah. One of the most tawdry episodes in the Year of the Bailout was the battle between Lewis, who reportedly wanted to renege on the Merrill acquisition when he learned that the brokerage would post a $28 billion loss for 2008, and Bernanke, who threatened Lewis with the disapprobation of the Fed if he backed out, which basically equates to death by bank examiner. Lewis caved. Then a couple months later he got to explain why Merrill executives earned $3.6 billion in bonuses while taxpayers were providing $45 billion to keep the firm afloat. Go ahead. Scream.

Goldman Sachs (GS). Wall Street's toniest firm got $10 billion in TARP money in October 2008, along with eight other big banks that got government checks. Eight months later, Goldman was the first big bank to pay back its bailout money, with interest. Hooray for them. But Goldman also got a stealth bailout that will never be returned to taxpayers, courtesy of AIG. When the feds propped up AIG last fall, that allowed Goldman to ease its way out of nearly $6 billion worth of deals with AIG that could have been worth pennies on the dollar in a normal bankruptcy case. And later, Goldman got almost $14 billion of bailout money that went to AIG's trading partners, effectively redeeming Goldman's trading bets with AIG at 100 percent of their face value.

Other banks got a 100 percent redemption out of AIG too, but Goldman got the most. And the fact that Henry Paulson, who was treasury secretary during the first four months of the meltdown, had come straight from a stint as CEO of Goldman Sachs raised the awful prospect that billions in taxpayer money was going to favored Wall Street fat cats. Nobody has ever offered a convincing explanation for the delicate treatment Goldman received, which fuels the worst kind of speculation. Please, say it ain't so.

Bear Stearns. Nobody knew how momentous it was at the time, but the $30 billion deal in March 2008 to keep Bear from completely imploding set the stage for every bailout that followed—and some other disasters as well. Bear was one of the biggest players in the market for mortgage-backed securities, and it fell first when that market began to crumble. The Fed brokered a deal in which JPMorgan bought most of the firm for $1.2 billion, a fraction of Bear's former value, with the Fed taking on $29 billion worth of toxic securities nobody else would touch. The bailout helped calm markets at the time—partly because it created the expectation that the government would rescue any other Wall Street firm that got into trouble.

That led Lehman Brothers to turn down financing offers from Warren Buffett and others when it needed cash, presumably because the firm felt it could hold out for a better deal—from the government, if necessary. When the feds let Lehman fail in September 2008, the chaos that followed partly stemmed from deep confusion over who deserved a bailout and who deserved a bullet. In retrospect, it's plausible that if the feds had let Bear Stearns fail outright, they could have done a better job of forcing Wall Street to work out its own problems—while saving taxpayers several hundred billion dollars. Of course, we'll never know. You only get one chance to get an epic bailout right.
Disclosure: no positions "
(source: article by Rick Newman "The Five Worst Bailouts" from seekingalpha.com)

September - Worst Month For Stocks?

On this past Labor Day Weekend (2009), I was catching up on some investments reading and came across this article by Vitaliy Katsenelson, a contributing writer at SeekingAlpha.com... here is his take on the historical stock investing record for the month of September:

"October. This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. -Mark Twain

September 1st is a very strange day for me. In Russia the school year across the whole country started on September 1st. I vividly remember myself as a child on that day throughout my childhood. The sun always shined brighter that day, the cleanliness of my uniform was at the year’s high. It was the custom to bring flowers to teachers on that day thus the school smelled like a botanic garden. Every year I promised myself that I’d be more serious, to smile less and make fewer jokes. Teachers did not like my smile or my jokes, always called me a class clown. Every year I failed at these goals. Thank God!

This introduction has absolutely nothing to do with what I am about to discuss except that September has just begun and it has historically been the worst month of the year for investors. After looking at the data from 1900 to 2008, it is safe to conclude that September historically was the worst month for investors, period. Stock averages and median returns were -1.16% and -0.56%, respectively. Far worse than any other months. In fact, with the exception of June where median returns were down 3 basis points, no other month of the year had negative median returns other than September. In 63 out of 108 years, September brought negative returns to investors, greater than any other month.

It gets worse: Returns in August were greater than 2% average and median returns in September were -2.29% and -1.44%, respectively. I’ll be honest and say I have no idea why this happened or what this September has in store for us. Maybe investors don’t like the end of summer and the first months of fall? Maybe if some of your stocks are hovering close to fair value you sell now? Or maybe if you were looking to buy a stock you wait a little?" (source: seekingalpha.com)

Monday, September 7, 2009

Wallstreet Brokers And Their Fabulous Lives

Some people seem to be insulated from the financial crisis...here is a look into "The Fabulous Life of Wallstreet Brokers". Ever thought about how those Wallstreet Brokers lived, while speculating with your money and burning it in the financial crisis? In this 44 minute documentary you see the homes of Billionaires and multi Millionaires who earned their money on Wallstreet. But they don’t only have huge apartments and residences, they have their own private jets, luxury yachts and so on. Not even thinking about the small investors they made billions of dollars off of and enjoying their lives. And you - what are you doing now??? (source: documentary24.com

Thursday, July 16, 2009

Stocks-Buy and Hold and Hold and Hold

The idea of investing for the long term seems to be kind of foreign to most investors, especially nowadays with the loss of so many people's retirement savings due to the global financial debacle over the past year or so...take a look at the chart at left (click on it to enlarge for readability) which shows Global Household Savings Rates from the World Bank estimates for several countries...Americans have never really been good savers currently saving at a rate of 1.2% of household income in 2009 (although we are not the worst) with France being the best savers at a rate currently of 12.3%. Long term investing even seems to be less so with young people today as they tend to invest more in the short term for a quick buck to get instant gratification that abounds with youth...but when viewed and analyzed over the long term (20 years or more) stocks never appear to lose money. Here is a surprisingly informative article on this subject from Dr. Jeremy J. Siegel, a contributing editor from Kiplingers.com:

"Buy and Hold? You Bet"
Over periods of 20 years or longer, stocks have never lost money, even after inflation.
Jeremy J. Siegel, Contributing Editor

Stock-market investors are an unhappy bunch. Standard & Poor's 500-stock index is no higher than it was 12 years ago, and over the ten years ended in May, stocks have returned a dismal -1.7% per year. So it's no surprise that investors wonder whether "buy and hold" and "stocks for the long run" are discredited concepts (see
Can You Time the Market?).

The short answer is that stocks are still the best long-term investments. As bad as the past decade has been, there have been other ten-year periods during which stocks have recorded even bigger losses. Yet over periods of 20 years or longer, stocks have never lost money, even after inflation. Including the latest bear market, stock returns have averaged 7.8% per year over the past 20 years and 11% annually over the past 30. Nevertheless, the assault on buy-and-hold investing continues. Robert Arnott, of Research Affiliates, recently observed in a widely publicized article that over the past 40 years, even lowly government bonds had outperformed stocks. Just a few months later, though, events overtook that claim as stocks rallied from their March lows and bond prices skidded.

Brighter future. After periods of sluggish returns, stocks tend to regain their oomph. Stock returns over the past five and ten years have fallen to the bottom quartile when measured against all five- and ten-year periods since 1871. But history shows that after reaching such a low, stocks' average return for the next five years has been almost 9.5% annually after inflation.

Furthermore, once stocks have plunged 50% from their highs, which they have done during the current bear market, investors have always been rewarded with winners over the next five years -- and that includes the Depression decade of the 1930s. In Dec-ember 1930, stocks were 50% off their highs of September 1929. Yet, over the next five years -- when the economy was experiencing the greatest con-traction in its history -- investors were rewarded with an annual return of 7% after inflation.

Value stocks. All the returns I've quoted reflect indexes based on market capitalization, the indexes that are used to measure market performance. But research has shown that investors would have done better if they had tilted their portfolios toward value stocks -- stocks that have higher-than-average dividend yields and lower-than-average price-earnings ratios. Even after the collapse of financial stocks over the past year (most financials fell into the value category), the Russell 3000 Value index has outperformed the capitalization-weighted index over the past five, ten, 20 and 30 years.

Evidence suggests that investors may be able to outdo the indexes by pursuing an activist strategy that shifts into or out of stocks depending on their valuation. However, this strategy requires investors to sell stocks of companies that have done well and buy shares that have done poorly -- an exercise that requires a huge (and often impossible) amount of self-control.

But now there are new indexes that rebalance stocks automatically and have outperformed both capitalization-weighted and even value indexes. These so-called fundamental indexes rank stocks by their dividends or earnings (or some other measure of a company's worth) instead of by their market value. Fundamental indexes automatically sell stocks that move up in price beyond their dividends or earnings and buy stocks whose prices lag. Dividend-weighted indexes have outperformed value indexes over the past ten, 20 and 30 years; earnings-weighted indexes have done even better.

In the long run, stocks are still the way to go. And if you want to give your returns an extra kick, value-oriented stocks and fundamental indexes may be your best bet.

Source: Kiplinger's Personal Finance Magazine August Issue 2009
(Columnist Jeremy J. Siegel is a professor at the University of Pennsylvania's Wharton School and author of "Stocks for the Long Run". He also advises Wisdomtree Investments, which issues low-cost, fundamentally weighted ETFs.

Thursday, July 9, 2009

Visa-2009 Explosive Earnings Growth And In Future

Visa is a favorite stock of mine since I have been in it from its initial public offering back in March of 2008...here is another opinion on the validity of why you should invest in this stock now if you haven't already done so...remember that Visa is not a finance company...it provides financial transaction processing...the more the use of "plastic" (credit & debit cards) by the general public worldwide the greater their business and earnings growth potential:

"In the current difficult macroeconomic environment it is hard to find companies that are earning a meaningful profit, let alone growing earnings. But Visa has
been rewarding investors with explosive earnings growth and stock performance to boot.
Visa (NYSE: V):
"Headquartered in San Francisco, Visa operates the world's largest retail electronic payments network and manages the world's most recognized global financial services brand. Visa has more branded credit and debit cards in circulation, more transactions and greater total volume than any of its competitors. Visa owns a family of well known, widely accepted payment brands, including Visa, Visa Electron, PLUS and Interlink, which they license to customers for use in their payment programs. Visa came public in March 2008, after reorganizing from a private, for profit association.

Earnings Growth:
For the six months ended March 31, 2009, Visa grew its EPS 56% to $1.45. For the three months ended March 31, 2009 grew its EPS 82% to $0.71 on a GAAP basis.

Earnings Prospects:
Analysts on average see Visa earning $2.81 per share this year (FY09), which is up 193% from the $0.96 earned last year (FY08)! Next year (FY10), analysts on average see Visa earning $3.34 per share, which would represent growth of 19%. High estimates for FY10 is $3.78, which would represent earnings growth of 35%! With a shift secular shift toward payments with plastic, solid revenue growth and margin expansion, Visa will continue to show explosive earnings growth for years to come.

Stock Performance:
YTD shares of Visa are up 15.2%, versus a 2.3% slide in the S&P 500. Over the last year, shares of Visa are down 20.3% versus the 29.1% slide in the S&P 500. Visa came public in March 2008 at $44 per share and is up 37% from that price, versus the 33.6% slide in the S&P 500.
V as of 09JUL2009: $60.44
+0.95 +1.60%
Volume: 6,654,013"

source: streetinsider.com

Monday, June 15, 2009

China and India: Investing In "Chindia" Again

Well, it seems its time to start investing in "Chindia" (China and India) again; emerging markets are the way to go now it seems...here are 12 Chinese stocks to consider...for long term investing (the next 3 to 10 years):

Two leading energy plays for both growth and income:
PetroChina (NYSE: PTR)

Growth opportunities in the online gaming sector are the leading players in the Chinese internet gaming industry NetEase.com (NASDAQ: NTES)

There is higher risk speculation in the biotech sector Sinovac (ASE: SVA).

Don't forget the wireless telecom sector as a means of investing in China...current favorites are the two largest wireless carriers in China
China Unicom (NYSE: CHU).

For the more speculatively-inclined there is strong upside potential in a pharmaceutical research firm,

Then there's the medical sector, such as medical diagnostics device maker Mindray Medical (NYSE: MR).

Others in the healthcare field are China Nepstar (NYSE: NPD), a firm that is changing the fragmented market for mom-and-pop drug stores stores to a larger pharmacy chain model.

And of course life insurance, a growing market based on China's demographics

A safer route may be investing with global fund manager Mark Mobius, a "protege of Sir John Templeton."

Another diversified stake in China through a mutual fund could be the
China Fund (NYSE: CHN), which includes companies in China, Taiwan, Hong Kong and Macau.

In addition there is the diversified approach through an ETF. Play China through Hong Kong such as

Finally, while Qualcomm (NASDAQ: QCOM) is not a China-based stock, the wireless technology company is a play on the roll out of a 3G network in China.

(Source: Bloggingstocks.com)

Now, here are 7 India stocks/funds to consider...

HDFC Bank (NYSE: HDB) as the best-run bank in India.

ICICI Bank (NYSE: IBN) is an attractive banking alternative to HDFC.

Dr. Reddy's Labs (NYSE: RDY), a generic-pharmaceutical company with a cost advantage and a global reach.
Yes, those stocks now are at higher prices than they were in February, but interested investors may still want to consider new positions.

Infosys (Nasdaq: INFY), which has exposure to the economic troubles of the West, where the majority of its clients are situated.
Infosys is forecasting its first-ever dollar revenue decline, projecting a fall of between 3% and 7%. And while a weak Indian rupee has meant that earnings measured in rupees have risen, U.S. investors have seen their ADRs lose value in dollar terms. But given that Infosys' growth has been driven by its ability to decrease costs for its customers via its outsourcing strategy, growth should resume once this storm passes.

Then there's Wipro (NYSE: WIT)
WNS Holdings (NYSE: WNS). Like Infosys, Wipro and WNS are geared toward outsourcing -- Wipro in software, WNS in business services from health care to airlines. WNS is much smaller than Wipro and Infosys, so it carries more risk

Finally, a diversified fund approach could be Matthews India (MINDX) fund. The fund has a reasonable expense ratio of 1.29% and owns a mix of mostly large and mid-cap stocks. The fund was hard-hit in 2008 (along with nearly every other equity fund), but the Matthews fund shop is well-regarded...this fund is if you want broader exposure to India.

(Source: Fool.com)

Finance Explained - Check Out Rachelle O'Connar's Blog

Ever wanted to get a succinct overview of general finance and finance-related issues? In these times of economic turmoil be sure to check out Rachelle O'Connar's financial overview blog...she does a great job of explaining the complicated and helping you be smart with your money...the link is: http://financeoverview.blogspot.com/

Rachelle O'Connar is from Boston, MA. She shares her knowledge as it is related to finance. As she states: "We are all acquainted with the word 'finance', but still knowing about it a bit more would help us to gain more knowledge about our rapidly changing economy and its cycle especially its downfall or we can say 'depression' which we are facing presently."
Rachelle offers insights on various topics such as: Find out how health insurance works...choosing cash advance options...the benefits gained if you lease a car...mistakes made when trading an option...avoiding mistakes when investing in real estate...overview of a 529 college savings plan...and many, many others. Here is your opportunity to get informed and get with the SmartMoney crowd.

Monday, January 5, 2009

Best Fund Picks For 2009 Investing

Think the Bear market will be over by June 1st, 2009? Yes I do...I'm not an investment professional...I'm just using a little common-sense and current economic observation with some other published professional advice thrown in for good measure...given the fact that the new U.S. President will be in office for six (6) months by then and things will be starting to get on track economy-wise, also considering that many employers currently surveyed have claimed they will start hiring again by mid-year, and historically speaking the stock market heats up three to nine months prior to the economy hitting rock bottom (some economists currently believe the bottom will be reached by 20NOV2009). Then take into account the late great investor Sir John Templeton's advice to "Buy at the point of maximum pessimism" and viola...this equates to somewhere between March and August (I'd suggest May 2009) is when one should make their play. Again, history has shown that the market in stocks moves up fast and far at the end of bear markets...so go for aggressive funds...here are BUCKzology's Best Fund Picks For 2009:

Bridgeway Aggressive Investors 2 (BRAIX) Houston,TX - long term record of wins, this fund lost 57% -- 5% per year better performance than S&P (18% more than S&P 500-stock index in 2008). Investors have received an annualized 12% return since inception in 1994 on the "Investors 1" fund which is now closed...but consider the same techniques will be used for this fund.

CGM Focus (CGMFX) Boston,MA - lost 50% in 2008; long-term record for the last ten years 18% annualized return; average 19% per year better performance than S&P.

Loomis Sayles Bond (LSBRX) Boston,MA - lost 24% in 2008;a similar fund to this one (initiated in 1991) that they managed gave an 8.5% annualized return.

T. Rowe Price Emerging Markets (PRMSX) Baltimore,MD - lost 62% due to investments in Russia in 2008, but two new fund managers take over in March along with the input from 21 analysts.

Vanguard Primecap Core (VPCCX) Valley Forge, PA - lost 34% in 2008 but still outperformed the S&P 500 by 5%. The fund emphasizes stocks of large, high-quality companies.

Vanguard Primecap (VPMCX) Valley Forge,PA - a fund that is almost closed to new investors is a near clone of Primecap Core; has an annualized return of 12% for the past decade.

Clipper Fund (CFIMX) Canton,MA - value-stock fund

Yacktman Fund (YACKX)Austin,TX - a mid-cap offering

Mairs & Power Growth (MPGFX)ST. Paul, MN - quality blend-equity fund combining growth and value, some large caps

Meridian Value Fund (MVALX)Pawtucket, RI - mid-caps offering the growth and value style

(source: Kiplinger.com, ConsumerReports)

Is More Money Really The Answer?

"Joque Du Jour":

cartoon from www.weblogcartoons.com

Cartoon by Dave Walker. Find more cartoons you can freely re-use on your blog at We Blog Cartoons.