Archive for the ‘Equity’ Category

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Groupon Will Not Be Googled

Monday, December 6th, 2010

They can probably find a better deal anyway.

  • Google allegedly offered $6 billion for the popular online coupon company – the most expensive acquisition in Google history. The initial offer was between $3.5 – 4 billion.
  • Online coupons have never been more popular, and Google was eager to get a piece of the action. They think that advertising locally is about to become really, really big.
  • Groupon is currently owned by a private group of investors, but it may go for an initial public offering (IPO) in 2011.

Facts & Figures

  • Over 33 million people subscribe to Groupon’s daily emails
  • Google is currently sitting on $33 billion in cash and other assets
  • Groupon made $500 million in sales this year – it’s growing at a faster rate than Google or Amazon did

Investment Advice From A Banker’s Deathbed

Wednesday, December 1st, 2010

Some people would shatter under the weight of Gordon Murray’s diagnosis. But he channeled his remaining energy into creating a legacy.

  • In 2008, former Wall Street bond salesman Gordon Murray was diagnosed with brain cancer. Five months ago he decided to end his treatment and write “The Investment Answer.”
  • After 25-years of high-level jobs on Wall Street, Mr. Murray says he suddenly realized that everything he knew about investing was wrong. Actively managing (tinkering with) investment portfolios, he says, is useless at best, and harmful at worst.
  • Even as an experienced financial player, Murray found he didn’t actually know much about asset allocation. He learned the ropes in firms like Goldman Sachs and Lehman Brothers, which valued risk and bravado over safety and simplicity. His book, full of simple investment advice, is aimed at investors who are in the same position he was.

Facts & Figures

The five choices Murray says every investor needs to make:

  • Only work with financial advisors who earn commission from you – not mutual funds or insurance companies
  • Diversify! Keep your money allocated between stocks and bonds, big and small, and value and growth
  • Make sure to include foreign investments to guard against economic disasters in the U.S.
  • Be skeptical of actively-managed funds… even experienced fund managers can’t predict the future of the market
  • Rebalance – sell your winners, buy more losers. It’s painful, but improves your returns in the long run

Best Quote

“It’s American to think that if you’re smart or work hard, then you can beat the markets.” – Gordon Murray

Congressional Staff Profit From Suspicious Trades

Monday, October 11th, 2010

If you invest because you know a government bill benefiting a certain industry is going to pass soon, does that make you an inside trader?

  • You may be surprised to learn that insider-trading laws don’t apply to Congress. Some lawmakers have tried to change that with the STOCK (Stop Trading on Congressional Knowledge) Act, but there hasn’t exactly been a lot of momentum to get that law passed.
  • The Wall Street Journal went through financial records of Congressional aides and found that many were trading in stocks whose prices were directly or indirectly impacted by the legislative activities of their bosses. The finance and energy sectors were especially popular among Congressional traders.
  • Because aides don’t technically make the decisions that determine whether laws are passed, some say there is no real conflict of interest. But both members of Congress and the highest-paid Congressional aides (about 11% of all aides) are required to make the details of their personal finances public.

Facts & Figures

  • In 2008 and 2009, 72 Congressional aides have traded stock in companies overseen by their bosses
  • Some of the higher-paid aides earn salaries of $170,000 per year

Best Quote

“Congressional staff are often privy to inside information, and an unscrupulous person could profit off that knowledge. The public should be outraged there is no law specifically banning this.” – Vincent Morris, Spokesman for Rep. Louise Slaughter (D., N.Y.)

U.S. Companies Buying Stock… In Their Own Companies

Thursday, October 7th, 2010

It’s an easy way to make your shares look better, but is it the kind of long-term investment companies need?

  • Companies these days have a lot of cash on hand. Because of the recession, they’ve been scared to spend too freely and risk losing more money. So they’re doing something kind of unusual: they’re buying back stock they’ve sold to investors.
  • Buying up lots of your own company’s shares makes your stock look better to investors because of a statistic called earnings per share. If you reduce the number of total shares available to the public (by buying them back), you make that number go up.
  • Spending cash on shares means not investing in company infrastructure or workforce. Some people say it’s a bad long-term strategy because it’s based on short-term gains, not long-term growth.

Facts & Figures

  • Firms plan to buy back $273 billion of their own shares this year.
  • According to the Federal Reserve, companies (excluding financial firms) held $1.8 trillion in cash and other short-term assets as of June 2010.
  • Some of the companies buying back large amounts of their own stock include Hewlett-Packard, Pepsico, and The Washington Post Co.

Best Quote

“It’s totally wasted money. It does not do anything long-term for companies.” – William Lazonick, Professor and Director of the Center for Industrial Competitiveness at University of MA at Lowell

The Calvert Social Index is…

Wednesday, October 6th, 2010

The Calvert Social Index is a stock market index of companies that are considered socially responsible. It was created by Calvert Investments and uses Calvert’s social criteria to determine whether a company is socially responsible or not. This criteria relates to the environment, product safety, community relations, international operations, weapons contracting, human rights, and workplace issues. While the number changes frequently, as of August 2010, there were over  650 companies in the index.

What does it mean to take a company public?

Wednesday, October 6th, 2010

When a company “goes public” it means that it has decided to expand its ownership to include shareholders from the general public. When a company first goes public it’s called an IPO, or initial public offering. Proceeds (or the money raised from the IPO) can be used to fund further growth or to reward original shareholders (a “payout”). When a company is public, it breaks itself up into shares of stock available to be bought and sold by investors. In the U.S. public companies must register with the Securities and Exchange Commission (SEC) a government agency that regulates U.S. financial markets.  Public companies are also required to file public financial statements with the SEC every quarter.

This isn’t true for every company, though. Many companies are “privately held,” which means that only a few people own the company and benefit from its success. In other words, if someone has created a great new company and gone public, anyone can invest their money in that company and share in its success (or, let’s be honest: failures). Private companies are not required to disclose financial information to the public.

Verizon Refunding Up To $90 Million to Cellular Customers

Tuesday, October 5th, 2010

Getting ripped off? It may pay to speak up – the squeaky wheel gets the $90 million dollar refund.

  • The F.C.C. (Federal Communications Commission) has been receiving consumer complaints about bogus data charges assessed by Verizon Wireless on customers without active data plans.
  • In response, Verizon announced it will voluntarily refund affected customers. The company will likely still face a fee from the FCC.
  • Many customers were charged $1.99 every time they accidentally hit a key that opened their phone’s browser. Verizon has been accused of  refusing to reverse these charges when individual customers called customer service to complain.

Facts & Figures

  • According to a Verizon executive, about 15 million customers without data plans were billed for unintentional data usage in the past few years.
  • Beginning in October, current and former customers will receive credits to their account ranging from $2-$6.
  • In the end, the refunds are estimated to total $50 million.

Best Quote

The agency is “gratified to see the repayment, but for millions of Americans it’s a day late and a $1.99 short.” – Michele Ellison, Chief of the F.C.C. Enforcement Bureau

High-Speed Market Crash Blamed On Impatient Investors

Wednesday, September 29th, 2010

On May 6, 2010, the stock market crashed. For about 20 minutes.

  • No one is exactly sure how it happened, but it had a lot to do with the way electronic trading works (or doesn’t work). After the crash, people began to look carefully at the intended and unintended consequences of digitizing the trading process.
  • High-speed trading systems have made investing cheaper and faster. Wall Street traders demanded greater speed, and SEC and FTC regulators allowed technology upgrades to continue unchecked for a long time.
  • The SEC has been investigating the crash for months and is about to release its official report. As part of that process, the SEC is acknowledging its own role and failings in the regulations leading up to the brief financial meltdown.

Facts & Figures

  • During the crash, the DJIA dropped almost 700 points before rebounding.
  • In January, the SEC showed signs of questioning the new structure of the stock market.

Best Quote

“Who could argue that competition was a bad thing … and that faster trades would be a bad thing?” – Joseph Saluzzi, Co-Head of Trading at Themis Trading

Flipping Positions, Dividends Paying Out More Than Bonds

Wednesday, September 8th, 2010

For the first time in 15 years, a usually-small bonus payout is earning investors more money than long-term corporate bonds!

  • Dividend-paying stocks are handing a higher return percentage to investors than corporate bonds issued by the same companies, in part because in the short-term, companies are pretty flush with cash, but nobody knows what the long term holds.
  • The recession drove down the prices of most S&P 500 companies, but at the same time their profits have soared. This means their stock prices are relatively cheap, considering the health of the companies.
  • Bond yields have been low since the start of the recession for many reasons, including the Fed’s rock-bottom interest rate and uncertainty about the future of the economy.

Facts & Figures

  • Interest on 10-year Treasury bonds was 2.42% last month
  • Kraft dividends are up to 3.82% – that’s 0.18% higher than their bonds expiring in 2018

Best Quote

“The economy is slowing down, but productivity has been so great in this country and companies have been able to make good profits,” said Duessel, the Pittsburgh-based equity market strategist at Federated. “Companies that would have cut their dividends already did so. It’s an unusual time where, yes, their profits are good, their cash is good, they can afford to pay more in dividends.” – Linda Duessel, Equity Market Strategist for Federated Investors

Strong Quarter, Weak Economy?

Friday, July 16th, 2010

Although second quarter reports look strong, the economy may start to level out.

  • Fear of an economic slowdown caused the stock markets to dip.
  • Airlines are expected to make their first annual profit since 2007  due to fuller planes and higher fares.
  • Stronger Asian economies are increasing exports, which helps struggling U.S. shipping companies.
  • Despite all this, there has been poor job growth in the U.S in the past few months.

Facts and Figures

  • New home sales fell 33%, and existing home sales fell 2.2%.
  • Air shipments (mostly Asian exports) increased 30% from last year.

Best Quote

“Bottom line is earnings may hold up, but sales growth is slow and companies aren’t going to invest their record cash holdings until it improves.” – Howard Silverblatt, Senior Index Analyst of Standard & Poor

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