Saturday, December 30, 2006

Just a Great Post by Larry Kudlow

I wish I could say it so well! The suspicion grows that some of the folks trying so hard tp spread gloom out there are trying to justify some bearish market timing they've done. A few may be trying to create their own reality, in the way George Soros says he believes he can do in his book.

Kudlow's Money Politic$: Grateful

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Wednesday, December 27, 2006

Apple & Steve Jobs & Report of Faked Option-Grant Dates

I guess you could think of this as an opinion/editorial. And while the link is to today's story about Apple, Apple is just one company, and many companies are involved.

When games are played with incentive stock options the stockholders get shafted.

Public Corporations 101

Many stories on this sort of thing lately. Each one is reflective of management with the directors' connivance, in essence plundering the stockholders' property (the profits). The Unknown Advisor holds to the old-school idea that the corporation's profits belong to the stockholders, not management. Ideally, they should be either retained and plowed back into the business in an intelligent way or paid out to the owners as cash dividends, not stuffed into management's pockets through options programs. These programs are passed at stockholders' meetings when stockholders don't care enough to vote, and when the corporate directors act in a way to primarily serve the interests of management, not the real owners of the corporate enterprise. All too often, the directors are management. Directors are supposed to hire managers, not be the sycophants of managers or even the managers themselves. These days there are supposed to be some "outside" directors, to help deter, among other things, an unhealthy relationship between the managers and the board whereby the interests of the shareholders get subordinated to those of insiders.

Backdating of options grants. Repricing of options. Packing corporate boards with management sycophants. Resistance to expensing options. Stock repurchase plans that merely serve to mitigate the dilutive effect of the options programs, not to really raise share prices. Do we have enough problems with this subject, or not? This can be an opportunity for shareholders to assert themselves.

I would support mandatory big typeface, bold letter disclosure in each annual report and proxy mailing of the percentage of the corporation's profits going to highly-compensated individuals and to all employees through actual and proposed incentive and employer stock options programs. In the [alleged] words of Senator Hillary Clinton , back from her First Lady days, [there would be] "hell to pay". I would also support voluntary corporate stewardship initiatives at mutual funds and institutional shareholders in general to vote "NO!" on any corporate resolution involving portfolio shares held which would divert more than ten percent of the corporate profits to fund these programs. Small-caps would presumably need an exception on this. What say you, readers?

Apple's stock falls on report of faked option-grant dates - MarketWatch

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Tuesday, December 26, 2006

This is the Story I Saw Earlier Today

MarketWatch is a great site with a humongous collection of free content. But why did I see the negative story and not the positive one there? Why did I have to find the other, more upbeat story at PC World's site?

Visa USA sees disappointing finish to holiday sales - MarketWatch

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Some Stories Get Little Attention at Financial Media Sites

This is what you see on PC World's site. I did not see it among the prominent headlines at the financial sites I looked over earlier today. Perhaps I just missed it. Or it came out later today. Go figure....

PC World - Online Sales Up 26 Percent This Season

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Here's the Kind of Outlook for 2007 I Can Relate To Exclusive

There are plenty of people writing about how they think the market will do this or do that, usually with a significant negative bias in evidence. Some of these people are captivated by an economic theme and cannot let go of it, and some of them have staked their or their clients' portfolios on a market-neutral approach and seem to be trying to "talk the market down". Some actually present a scenario of a recession followed by a more attractive market later in 2007.

Some writers, professing belief in the expertise of market gurus, still are writing about feeling nervous because so many of the gurus are positive.

Count me as an investor and advisor, not a guru, with an appropriate asset allocation, globally-diversified, in place, and a pragmatic but positive outlook. Like most years, 2007 will be a good year to be well invested, that's what it will be.


Saturday, December 23, 2006

Read this Article and You'll Know More about How Well We All are Doing!

It's a stunner. All you seem to see in the mainstream media on this for the last year or so is 'how the middle class is under greater and greater pressure'. It's just not that bad, not that bad at all. The TCS article is part 1 of a three-part article.

TCS Daily - What's Really Happening in the Economy?

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Get It While You Can? Is Mankind Our Business?

So, how do stories like the one below, and some of the others in the same vein leave you feeling?

There is a scene in A Christmas Carol, where Ebenezer Scrooge answers the recriminations of Jacob Marley's ghost: "You were always a good man of business, Jacob."

It is not all about money. Money is not evil, in fact it is a powerful tool, for either good or evil, but it is not life. So, in fairness, would I turn down such a bonus? That would be hard to do. So, the important question is: What will these guys and ladies do with that money? Will any of them try to make a difference for good somewhere?

As Dickens' lost ghost of Jacob Marley cried out in his misery to Ebenezer Scrooge "Mankind was my business!"

This year's bonuses are a big mistake - MarketWatch

Friday, December 22, 2006

Got Money? Serious Money? Watch Out for Tax-Shelter Purveyors

There are various perfectly fine ways to invest sizable holdings in a good, tax-efficient manner. This was not one.

Guilty Plea Made in Trial Over Shelters From KPMG - New York Times

So you pay some taxes. You count your blessings.

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Who Do You Admire? Who Do You Listen To? First In a Series

One of the people I admire and listen to is Ben Stein. I don't know him, and he doesn't know me. But his columns for Yahoo Finance are not to be missed. Can you have relatively small points of disagreement with the people you admire and listen to? Surely. I am genuinely impressed with so much of the thinking he shares in his writing, as well as the wholesome and lively attitude he brings. Perhaps he would not be too annoyed with me for mentioning one thing.

Mr. Stein sometimes suggests the purchase of variable annuities, I guess for the lifetime stream of payments. But oh my, what a price you pay for that security. My take on most of the variable annuity products: You might as well just give the insurance company and its salesman a third or fourth of your money as a gift (commissions, fees, misc. poorly-disclosed charges, etc.), and invest the rest in some randomly-chosen average-to-poor mutual funds. Serious performance issues exist. I will admit that a few exceptions also exist.

Oh well, even outstanding people are entitled to a few clinkers. The latest column: (And incidentally, Mr. Stein has no problem saying "Merry Christmas, everybody and Happy New Year.") is at:

Success Is All in a Day’s Work: How Not to Ruin Your Life - Yahoo! Finance

I'll say it too: Merry Christmas and A Happy New Year.

And since it's not over yet, I trust it's not too late to say Happy Hanukkah! Whatever your holiday, may the lights of this season be beautiful for you.

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Thursday, December 21, 2006

Articles Like This Always Seem to Be Popular With Management!

Or is it just me thinking that?

Relationships, Not Pay, Are Keys to Job Satisfaction (Career Systems International) |


"Fidelity to Pay Funds $42 Million After Gifts Review (Update2)" -- Bloomberg

Say What?? Chartered flights, expensive wines, golf clubs, tickets to Wimbledon and the Super Bowl? Pre-game parties put together by Maxim and Playboy?

The $100 annual limitation on the value of gifts -- exceeded when Fidelity's employees took items such as those above from the brokers who had benefited from trading commissions on Fidelity Funds' trades -- is there for a very serious purpose. It is to prevent a "tit-for-tat, you scratch my back, I'll scratch yours" cozy situation from getting out of control, to the detriment of the funds' investors. And was this a gray area? Did it require geniuses to figure out that this was not allowable? Did anyone at Fidelity object at the time? Say "no thank you, I cannot do that"? Worldwide


The Right Kind of Question You Should be Asking

401(k)s: How much do you need to contribute? - Dec. 19, 2006

This article does a good job of opening up the thought process. Will your retirement be well funded? The free online tools mentioned in the article can tell you some things about how well you are standing, or whether you need to save and invest more. You don't need to invest with the folks who put them on the web to use them. If you identify yourself, you will get some kind of a contact later, but you can put in an alias if you wish. The point is to use the tool, get an initial workup of where you stand. As you go through the exercise, keep your investment returns assumptions conservative, say eight percent per year. You want a real-world, meaningful result, don't you? If it looks like you are somewhat under-funded, do not go into a funk, get moving. Take steps. A new year is a great time to take steps toward a more secure future. You can still make a significant difference. You'll be very glad you did. You will!

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Wednesday, December 20, 2006

It's a Matter of Honor

It's a Matter of Honor - Updated

Morgan Stanley's in the News: "Securities regulators charged Morgan Stanley DW Inc. with failing to hand over millions of e-mail messages to investigators and plaintiffs by falsely saying that the documents had been lost in the Sept. 11, 2001, terrorist attack on the World Trade Center, according to a complaint filed yesterday." -- The Washington Post.

Firm Accused Of Deleting Missing E-Mail -

Things like this seem to crop up sometimes in the news with regard to the big wire-house brokerages. All of them. Not just Morgan Stanley, which I presume is no worse than the others.

They will pay the fines, promise not to do that anymore, fire the culprit, and move on. People are usually held accountable within the organization, so what's the problem? Should the organization not also find and deal with the managers who tolerated those culprits, who promoted, incentivized them, or even supported them in the offending behavior? Is it that the management is not really accountable? Managers are supposed to know what is going on. They either know what is going on, or they are not up to the job. So who ordered all those emails to be deleted, or was silent while it was done?

I have a problem with organizational cultures which do not build in honor, and I don't think I'm alone. Old-fashioned honor. Honor as a prerequisite to advancement or even retention within the organization. It's easy to see if someone is tall, handsome, dresses well, has great connections, and is articulate; and those are not bad things. But they don't mean anything at all if there is no honor. It is not so easy for a manager to see if someone will tell the truth even when the organization doesn't particularly care to hear it. A manager would have to be on the hunt for distinctly honorable behavior, noting it, supporting it. If the organizational culture would see such conduct as foolish, then, well, what you have is an organization which will show up in the news at some point, and an organization which may do things which affect client financial outcomes.

This is pretty radical, I guess: Anyone who puts himself in the position of advising someone else on financial or investment matters should have a pretty serious case of values, and honor, and try very hard to do their work in a way that generally reflects those things. We are all of us imperfect, error-prone people, but there is such a thing as choosing to try to do your best to do things the right way.


Monday, December 18, 2006

Dirty Wall Street Secret: Hedge Funds of Funds Pay T-Bill Rates

Dirty Wall Street Secret: Hedge Funds of Funds Pay T-Bill Rates

Yes, Bloomberg gave this story a rather lurid headline, but the fees are still the usual "about 2 percent of assets and 20 percent of any profits". Who needs that? What a portfolio performance killer. Who are you investing for, you or them? The only thing I can see is that you should get some measure of diversification, at least within the "asset class", except that these things don't really constitute an asset class. At least they won't all go belly up at the same time!

The best take-away line of the article: "For these large institutions gathering assets is the name of the game, not performance".

Here's the story: Exclusive

My two cents' worth -- You can prudently invest, and have the best chance to do quite well over time. Use things with reasonable returns, low fees, and set your weightings in different asset classes to give overall risk/volatility you can handle, emotionally and fiscally. Invest in hope, not fear. Then stir in a good measure of time, measured in years and even decades, not months. A really good advisor knows how to do this for you. or you can do some reading. I'll blog on books you can use if you are so inclined.

As an adviser, yes, I have a conflict here, but I do believe that a good, low-fee adviser adds value and peace of mind. But obviously, that is not the only good way.

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Saturday, December 16, 2006

More Comes Out on the Latest Hedge-fund Demise.

More Comes Out on the Latest Hedge-fund Demise. Read the last line of the story very carefully. Yes, the SEC was sniffing around regarding mutual fund timing questions. Sheesh.

If you are beginning to think the Unknown Advisor is rather down on hedge funds, well you're correct. If you wish to gamble with your money, just go to Vegas.

HEDGE BLOWN AWAY By RODDY BOYD with Bloomberg - New York Post Online Edition: Seven

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Friday, December 15, 2006

Helpful Discussion of Health Insurance, Disability Insurance, Long-term Care Insurance

Possibly the Most Helpful Discussion of Health Insurance, Disability Insurance, Long-term Care Insurance You Will Find.

Consuelo Mack's WealthTrack is so good, so consistently well-crafted. With all due respect, Louis Rukeyser's Wall $treet Week was not this good! She gives you podcasts (audio and video), free online transcripts, and she is such a good, intelligent interviewer. If your PBS station does not carry this show, (mine doesn't) what are they thinking?

Too many folks just parrot the gloom and doom scenarios for healthcare costs, for example. Her guests on this episode had some remarkable things to offer, and Ms. Mack never gets in the way, she just draws out what the guest has to offer.

Read the whole thing.

Consuelo Mack WealthTrack - Transcript November 24, 2006

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Wednesday, December 13, 2006

Beware the "Hot Stocks Syndrome"!

Beware the "Hot Stocks Syndrome"!

To know whether to place much credence in any financial advertizing, infomercial or sales literature you are reading, you must learn to automatically do several things.

First, consider the source. Is the writer trying to sell you something? If you get a shiny brochure in the mail with a "can't miss" opportunity involved, just pitch it. If you can hit the trashcan, you can't miss.

If there is an invitation to a free "seminar" with a free dinner, don't be the lamb going to the slaughter. Those free dinners can be the most expensive meals you will ever eat.

If the pitch, however it comes to you is a little extreme-sounding, as in, "Stop losing money!" you can bet there's an annuity involved.

If the pitch says, "you can get (most) of the upside of the stock market, with a guaranteed return!" then it's most likely some kind of heavily-commissioned insurance product or perhaps an equity-index annuity, which can also be rather heavily-commissioned.

The harder they are selling the thing, the direr they are making your future without this product look the more they hope to make from selling it to you. Caveat Emptor. Do not bite.

If you are old and not financially well-informed, you still probably have pretty good instincts. Trust them. If the salesmen make you feel obligated or pressured in some way, well, that is low and unethical. Do not deal with such people. Talk to the people you know best. Talk to your attorney or accountant. Ask them if they can personally recommend reputable people to deal with.

While there may be things which you need to do to address financial questions or concerns you have, there is almost never a need to make a financial decision with major impact on your life "right now". If a financial product or investment is good now, it will be good tomorrow or in a few days. Use the internet to look up information on the company or product being pitched to you. It can wait long enough for you to make a careful, unpressured decision. Just do make the decision, even if it is to spend a little more time before committing yourself. Another deal will be available.

Sure-Fire Day-Trading Systems! If the system is so good, why isn't the vendor a billionaire? If he's already made his millions and is selling his system now so that others can get in on this great thing, well, why isn't he giving it away if he's so benevolent! If it worked, he wouldn't be letting the secrets get away from him.

Gold! Gold! Gold! Argh! Argh! Argh! If you want some gold, buy GLD or IAU. No markups for him.

"Secret stock charts tell the future!" I don't think so, unless the future is a luxury condo in Boca Raton for the seller if you and others buy.

"Silver is about to go sky high!" Maybe. Maybe not. If you want silver, you could buy some SLV.

"The dollar is about to collapse!" see silver.

"Worldwide Financial Armageddon looms!" If it doesn't happen, where do I find you? Down the hall from the stock charts guy?

"I made a fortune in commodities and with my system you can too!" There's an old joke about how anyone can make a small fortune speculating in commodities. You just have to start with a large fortune.

These pitches all seem so ridiculous, but bright people really do fall for them. Admirable people. Doctors. Lawyers. People who have studied, worked and achieved. Why?


Google's Finance Site Gets Makeover -- I Have Ideas!

Google's Finance Site Gets Makeover -- I Have Ideas!

I took a look at it. Still needs something. The charting is supposed to be enhanced, but I tried to get a chart of IWD, the iShares Russell 1000 Value ETF on the screen, but strangely, it just created an empty chart which said, "no data". That isn't good.

Here are some free ideas for Google: do something better than the competition with your charting feature. Give me a way to create five-year total return charts (dividends reinvested,) for bond mutual funds! Give me a way to create a similar total returns chart for a simple portfolio with user-specified percentages of holdings I choose! Give me a way to match that against a blended index benchmark (like say, 60% S&P 500, and 40% some broad bond index! You have the data! Get beyond ridiculous trader-oriented things like candlesticks and simple moving averages! Put in something real investors can use! By doing so, you will perform a real service, and leave the other finance sites in your dust!

PC World - Google Revamps Finance

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Bloomberg: "Ritchie Capital to Shut Flagship Multistrategy Fund (Update1)"

Bloomberg: "Ritchie Capital to Shut Flagship Multistrategy Fund (Update1)"

The same day I wrote to wait a week or two for the next hedge-fund blowup??? Well, at least this one looks like an orderly shutdown of the fund, perhaps not what you could fairly call a blowup. But due to "unforeseen circumstances"? Worldwide

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"SEC Seen Tightening Hedge-fund Rules" - Marketwatch

Opinion follows.

Thank goodness. Yes, the Unknown Advisor personally favors some additional anti-fraud and access limitation provisions for hedge funds. Too much is at stake, for too many people, and frankly, for the financial markets as a whole. I for one am pretty tired of seeing monthly hedge fund blowups and scandals. Practically every month we see another one. Amaranth. Which one is next? Just wait a week or two.

And frankly, I cannot see a valid way to consider hedge funds as an asset class, which is the supposed rationale for pension plans, like those of the states of California and Florida, et al, putting money in them. An asset class is supposed to possess (as a class, now,) similar characteristics, quantifiable risks and expected returns. Where you have a grab-bag of fourteen or fifteen pretty complex (frequently substantially derivatives-based) strategies, no audited performance numbers, and a definition of "qualified investor" which effectively just requires deep client pockets but not real client comprehension of the risks, well, all I see is something for a prudent investor to avoid, not an asset class. You can do just fine, over time, with more traditional types of investments.

SEC seen tightening hedge-fund rules - MarketWatch

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Tuesday, December 12, 2006

Bloomberg: Goldman sets aside $622,000 Per Employee After Record Earnings Exclusive -- Goldman Sets Aside $622,000 Per Employee After record Earnings

Yes, we know that this did not all come from Goldman's retail brokerage business. But quite a bit of it did. Did you contribute?

Not specifically to pick on Goldman, but really ...

A question for you to mull over: Am I better off with a financial advisor whose fees are set low to benefit me, or am I better off the higher the fees I pay?

Your clue: the answer is really simple. Lower fees mean that there is more money left in your account at the end of the day. But don't all those high fees translate into better investing? They clearly translate into more well-fed, well attired bodies roaming the corridors. very nice corridors too.

Fees do not correlate with investment performance. All the highfalutin' brochures, and oh-so-slick presentations do not make you one cent more well off. Good investing, approaches with objective, academic research to support their likeliness to work, delivered for low, reasonable fees, these, over time, are what have the best chance to pull you ahead. It is simple after all.