Finance & Accounting

Thanks for sharing! It is true that most people are just looking for reassurance. The news of such a bank failure can be unnerving, and it is great of your banker to provide information to his customers.

7/17/08 at 4:26 PM

I talked with my banker today and he said he has spent almost every minute this week meeting with nervous customers (depositors). He held a class on Monday to refresh the entire branch crew on FDIC insurance and is happy he did. Customers just want to be reassured.

7/15/08 at 7:25 PM

What do you think the best route to go is if your creditors will not work with you? I have a friend that fell behind and tried to get her creditors to work with her in the beginning to lower her payments, etc. They refused. It amazed me since I was the one that told her to call them and work with them to keep her credit. They will not lower her payments and she cannot afford them. Before she lost her job, she always made her payments on time. She said she was late once on one of her cards but it was about 2 years ago. Since the creditor refuses to work with her, she has just stopped paying them altogether. Of course, she knows thats not a good option, but in the light of things, she would rather keep her car than her credit cards! What do you think she should do now??

7/7/08 at 2:46 PM

Thank you for this rather thorough and in-depth look at stocks.

7/3/08 at 1:28 PM

When All Stocks Are Value Stocks - Think QDI

Value stocks are those that tend to trade at lower prices relative to their fundamental characteristics than their more speculative cousins, the growth stocks; they have higher than usual dividend yields and lower P/E and P/B ratios. So when all stock prices are down significantly, have they all become value stocks? Or, based on the panicky fear that tends to overwhelm media and financial experts alike, haven't they all taken on the speculative characteristics of growth stocks?

Well, to a certain extent they have, because the lower value stock prices go, the more likely it is that they will eventually experience the 15% ROE that typifies the classic growth stock. Interestingly, by definition, growth stocks are expected to be associated with profitable companies, a fact that speculators often lose site of. There are three features that separate value stocks from growth stocks and two that separate Investment Grade Value (IGV) stocks from the average, run-of-the-mill, variety.

Value stocks pay dividends, and have lower ratios than growth stocks. IGV stock companies also have long-term histories of profitability and an S & P rating of B+ or higher. Would you be surprised to learn that neither the DJIA nor the S & P 500 contains particularly high numbers of IGV stocks? Still, since 1982, value stocks have outperformed growth stocks 62% of the time. So when an ugly correction has a makeover, it's likely that all value stocks transform themselves into growth stocks, at least temporarily.

Will Rogers summed up the stock selection quandary nicely with: "Only buy stocks that go up. If they aren't going to go up, don't buy them." Many have misunderstood this tongue-in-cheek observation and joined the buy-anything-high investment club. You need dig no further than the current lists (June '08) of "most advancing issues" to see how investors are buying commodity companies and financial futures at the highest prices in the history of mankind.

This while they are shunning IGVSI (Investment Grade Value Stock Index) companies that have plummeted to their most attractive price levels in three to five years. Many of the very best multinational companies in the world are at historically low prices. Wall Street smiles knowingly (and greedily) as Main Street hucksters tout gold, currencies, and oil futures as retirement plan safety nets. Regulatory agencies look the other way as speculations worm their way into qualified plans of all varieties. Surely those markets will be regulated some day--- after the next Bazooka-pink, gooey mess becomes history.

How much financial bloodshed is necessary before we realize that there is no safe and easy shortcut to investment success? When do we learn that most of our mistakes involve greed, fear, or unrealistic expectations about what we own? Eventually, successful investors begin to allocate assets in a goal directed manner by adopting a more realistic investment strategy--- one with security selection guidelines and realistic performance definitions and expectations.

If you are thinking of trying a strategy for a year to see if it works, you're being too short-term sighted--- the investment markets operate in cycles. If you insist on comparing your performance with indices and averages, you'll rarely be satisfied. A viable investment strategy will be a three-dimensional decision model, and all three decisions are equally important. Few strategies include a targeted profit taking discipline--- dimension two. The first dimension involves the selection of securities. The third?

How should an investor determine what stocks to buy, and when to buy them? We've discussed the features of value and growth stocks and seen how any number of companies can qualify as either dependent upon where we are in terms of the market cycle or where they are in terms of their own industry, sector, or business cycles. Value stocks (and the debt securities of value stock companies) tend to be safer than growth stocks. But IGVSI stocks are super-screened by a unique rating system that is based on company survival statistics--- very important stuff.

In the late 90's, it was rumored that a well-known value fund manager was asked why he wasn't buying dot-coms, IPOs, etc. When he said that they didn't qualify as value stocks, he was told to change his definition--- or else. IGV stocks include a quality element that minimizes the risk of loss and normally smoothes the angles in the market cycle. The market value highs are typically not as high, but the market value lows are most often not as low as they are with either growth or Wall Street definition value stocks. They work best in conjunction with portfolios that have an income allocation of at least 30%--- you need to know why.

How do we create a confidence building IGV stock selection universe without getting bogged down in endless research? Here are five filters you can ...

7/2/08 at 2:33 PM

Although your point is made on the need for retention of a good, reputable attorney who knows what he/she is doing, and the importance of initial funds to help businesses in crisis, but what about smaller businesses? Are there any steps that you can suggest for smaller businesses that would not have that type of capital available? I know, bigger company, bigger problems ? but small businesses can have need of guidance in these situations as well. Or, is it just a given outcome that a small business in crisis should just shut the doors?

6/30/08 at 10:35 PM

You're right. We should step back, look at our personal finances, and do what's right for our financial situations -- mostly by cutting back. If we did that, we'd start to move away from the debt based and consumer spending economy we have now and gravitate back toward an economy that is oriented more toward strong individual finances.

6/30/08 at 1:04 PM

All the news today can be so depressing! They should learn how to "spin" it the right way instead of always for the worse. Miranda can attest to the fact that I am a pretty optimistic person and try to see the good in things instead of always doom and gloom. Although confidence in our US Institutions is clearly lacking - if you look at the Gallup Poll chart, you will notice that there are 16 different institutions listed. Twelve out of the sixteen have actually gained a few confidence level points over the last year. That's good! Although the confidence level clearly needs to come up, especially on a few of the ones listed, it is an improvement over last year. Hopefully next year it will improve more! Banks have definitely taken the hardest hit. It's good to see that America still has faith in our military, as we should!
Small businesses seem to bolster confidence as well, and I am glad to see that! I know as well as everyone else that times are tough. Spending has been halted on many projects, especially by small business owners. But one thing you need to remember is those that have made it this far are generally those who run an honest business and are not just out for a buck. I?m not saying all of them were, but I run a small mortgage business and I can tell you that many of the mortgage companies that have shut down were those that charged borrowers outrageous prices and made as much off of each deal as possible.
No matter what business you're in, gas prices are getting to everyone except the major players who are reaping in record profits. Someone told me the other day they heard that gas could be at $7 a gallon within 3 or 4 months. I sincerely hope it won't. In fact, I can't even imagine it being that high. No one can tell exactly what will happen, but I have heard of an investigation that has been launched into the price we pay for gas, so maybe it will halt the rising of prices.
This country has been through some hard times before and came out stronger than ever. The mainstream generation has just been extremely fortunate that for their whole lives, there has been prosperity and not any major attacks on their freedom. Now they're seeing the other side and it prompts panic. This unfortunately sets off a whole new set of problems induced from those that are in decision making roles.
Those who set the gas and oil prices don?t have to pay them. Those that have the power to do something about it have enough money that it makes no impact on them. The trucking industry has tried to make a stand by slowing down all the highway traffic, just to let them know we?re out here. Why does it take a nationwide catastrophe to bring this country together? If Congress can actually work together as they did after 9-11, they may be able to help all of us by doing something about the prices being raised again and again. I have noticed many of the gas stations in my area got so tired of climbing up to the sign and changing the price, they installed digital ones. Congress and the bigger powers that be should know that if they actually did something about what affects the rest of the population and maybe even take a pay cut instead of voting themselves another raise (that seems to be the only thing they do agree on), they may bolster a bit more confidence in their positions as well. They need it considering they are the lowest US Institution on the confidence scale, as they deserve to be.
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6/29/08 at 9:54 PM

I totally agree, there are no quick fixes and the more they try to fix, the worse they make it! I think we've all seen that! It is time to cut back and ride out the storm, I'm just hoping to see the storm let up!! Have a good one!!

6/29/08 at 6:37 PM

it IS crucial to be prepared and do your homework before prospecting, and definitely google in quotes the name of the person you are about to meet.

I also like your point about setting small, achievable goals. Thanks for taking the time to write.

6/29/08 at 2:43 PM