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Best Buy Not So Hot First Quarter

Monday, June 21st, 2010
Best Buy quarterly results show that Best Buy sales fell short of predictions.
  • Best Buy’s stock fell 6% after disappointing quarterly results were released on Tuesday.
  • While sales of notebook computers, cell phones, and appliances were strong, sales of games, music, movies, and televisions fell short.
  • Executives are optimistic that customers will continue spending, though, and pull the company out of this rut.

Facts and Figures

  • First quarter net earnings were 36 cents per share (less than predicted 50 cents per share)
  • Reported sales for this quarter were $10.8 billion (less than predicted $10.9 billion)
  • Retail sales fell by 1.2% in May 2010 (they were expected to rise 0.2%)

Savings Bonds are…

Friday, June 18th, 2010

Savings bonds are government-issued debt securities (doled out by the U.S. Department of the Treasury) that help pay for the U.S. government’s borrowing needs. They are supplied in face-value denominations from $50 – $10,000, with local and state tax-free interest and semiannually adjusted interest rates. Savings bonds are considered to be among the safest of investments, as they are backed by the U.S. government.

How do they choose who rings the bell at the NYSE/NASDAQ?

Friday, June 18th, 2010

The first way to answer this question is to address the “they.” The New York Stock Exchange and the NASDAQ are two separate entities, though both are stock markets and both are headquartered in New York City. On both exchanges, “opening” and “closing” bells are rung to signal the beginning and end of each trading day. The trading day starts at 9:30am EST and ends at 4:00pm EST.

The logic of who gets to ring these bells is a more interesting question. It’s basically pure public relations and promotional play to ring the opening or closing bell of the NYSE or NASDAQ. Lebron James might stop by to ring the bell because he is in New York playing with the Knicks, or it could be the CEO of Electronic Arts because his company is about to release the latest version of Rock Band. On some days, no one is scheduled to ring the opening or closing bells, and officials from the exchanges have to do the job themselves. Generally speaking, companies and individuals request to ring the bell and the individual exchanges choose who they will allow to do so.

It’s important to remember, though, that ringing the bell to start or end the trading day is a ceremony and has significance. You wouldn’t want to be remembered as the person who rang in the worst trading day of the year. On the other hand, if your company rings the bell on the opening or closing of the best trading day ever, it’s a victory for pretty much everyone!

LIBOR is…

Friday, June 18th, 2010

LIBOR is an acronym for the London Interbank Offered Rate, a short-term interest rate that top-quality banks offer each other for loans. The rate changes all the time, and is usually expressed as a 1, 3, or 6-month rate for U.S. dollars.

Finance is…

Friday, June 18th, 2010

Finance is the practice (or science) of managing money, which includes allocating resources for spending, growing and giving. It can also refer to the system of money and investment as a whole, or to an activity that involves obtaining or providing money for some project or goal.

The Sharpe Ratio is…

Friday, June 18th, 2010

The Sharpe Ratio is a financial equation invented by Bill Sharpe, a recipient of the Nobel Prize For Economics. It serves as a rough guide to whether the ends justify the means in an investment (the higher the ratio, the better the risk-adjusted returns). In other words, whether the potential rewards from an investment justify the amount of risk involved.

Annuities are…

Friday, June 18th, 2010

Annuities are contracts, or a form of investment, between two parties.  The investor makes an investment and the financial institution (usually an insurance company) agrees to repay the investor, with interest, over different time intervals. Typically, you would make either one lump-sum payment or a series of payments to your insurance company, and in return the insurance company would pay back your investment at agreed points in time and an agreed interest rate. There are three types of annuities: fixed, variable and equity-indexed annuities.

Schemer Buys Yacht, Hangs With Celebs, Is Jailed For 50 Years

Wednesday, June 16th, 2010

A prominent Florida lawyer is the latest example of what not to do as an investor, a business person, or a generally moral person.

  • 47 year-old Scott Rothstein was convicted on charges of money laundering, conspiracy to commit bank transfer fraud, and criminal conspiracy related to the financial system.
  • Rothstein managed to buy several houses, cars, and a yacht before he was caught. He also befriended celebrities and politicians, including Arnold Schwarzenegger.
  • Rothstein used new investors’ money to pay off earlier investors, and just like Bernie Madoff’s famous  Ponzi scheme, he left countless investors with immense losses.

Facts & Figures

  • Rothstein’s fraudulent investment scheme was worth more then $1 billion.
  • He was sentenced to 50 years in prison.
  • Rothstein forged the signatures of at least three federal judges.

Best Quote

“This rags-to-riches-to-jail saga is a humbling reminder of what can happen when greed and ambition run amok.”  - Wifredo Ferrer, U.S. Attorney

An Oil Company Actually Benefits From The Oil Spill

Wednesday, June 16th, 2010
While most oil companies are suffering in the wake of the big spill, investors are becoming more confident in Brazil’s Petrobras because it doesn’t operate in the Gulf of Mexico.
  • As BP shares continue to fall, shares of Brazilian oil company Petrobras have remained stable for weeks.
  • Petrobras plans to make more stock available for sale later this summer, indicating that it’s doing well despite other oil companies suffering from the oil spill.
  • While the oil spill is hurting stocks associated with the Gulf, investors are confident that oil companies elsewhere (like Petrobras) could actually benefit.

Facts and Figures

  • Petrobras plans to offer $25 billion in equity this summer
  • If they do sell all of their offered stock, it would be the second largest equity offering ever
  • Petrobras operates worldwide – from Turkey to New Zealand to, of course, Brazil

Best Quote

“Petrobras does not have the headline risk that BP does right now. Investors are unlikely to move away completely from the oil sector but substitute from one company to another.” – Gerry Sparrow, Chief Investment Officer, Sparrow Capital

Could The Recession Recovery Be A Fakeout?

Monday, June 14th, 2010

With all of today’s turmoil (the Gulf oil spill, Europe’s debt problem, consistently high unemployment rates) it’s no wonder economists have pondered whether or not we’re heading for Recession Part II.

  • It seems that the possibility of a “double dip” recession, in which a recession is followed by a short recovery that slips into another recession, seems to have decreased slightly since last year.
  • Several factors have influenced this positive change, namely that major U.S. companies have reported profit growth in the first quarter of 2010 and a $1 trillion bailout package has been approved been European leaders.
  • But unemployment is still high, and that GDP growth is already slowing.

Facts & Figures

  • Some believe the chance of a double dip recession is 20% now compared to 50% last year. Others says 25% now versus 30% last year.
  • Unemployment is still up at 9. 7%.
  • GDP growth in the fourth quarter of 2009 was 5.6%, the highest in 6 years.
  • Economists predict the growth rate will slow to 3% this year.

Best Quote

“One of the things to remember is conditions do not have to be perfect for the economy to grow, but there’s a limit to how much bad news this economy can take.”  - Mark Vitner, Senior Economist, Wells Fargo Securities

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