One TRILLION dollars. Even with the word emphasized it doesn’t seem like much after hearing it so often in the media.
OneMint.com puts it in perspective with a series of images.
Article is here: http://www.mint.com/blog/finance-core/visualizing-one-trillion-dollars/
(This article first appeared on The Div Net on March 14, 2009)
Simoleon Sense brought to attention an article on the Wall Street Journal that I found interesting.
Should shares in Kraft Foods really be so low they have a dividend yield of about 5 ½%? What about A T & T (7%)? Or DuPont (9 ½%), Altria (8%), American Electric Power (6%), British Petroleum (9 ½%), drinks giant Diageo (5%) cellular network giant Vodafone (8.5%), Merck (6 ½%) or a host of many others?
You be the judge. These are not individual stock tips. You need to do your own homework. And of course dividends can be cut. If business keeps getting worse many will be, right across the market.
But these are, on the whole, pretty solid companies. They are not financials. You’d expect their businesses to hold up pretty well in almost any circumstance except the end of the world. Any one or two companies can get into difficulty, of course, but it would remarkable indeed if they all fared badly.
The “efficient market hypothesis” used to claim that, when it came to the stock market, “the price was always right” – in other words if, say, “Jellyfishforpets.com, Inc.” was trading at $180 a share, then by golly, that’s what it should be trading at, and who could possibly say it was overvalued?
As I read this article, I couldn’t help but agree how efficient market theory is dead. It also led me to wonder how Universities will change their course material. If 2008-2009 doesn’t prove that efficient market theory is rubbish, then I don’t know what does.
There is a continual fear that the Dow could drop another 50% to the 3000 level, but if you remain in the game, stand your ground and wait it out, then the rewards could be enormous. If the market completely implodes and the US and global economy goes with it, then our money would be worth less (or worthless) anyways.
As I continue to search for the screaming bargains that jump out, it’s difficult to ignore where the market is and how bad my portfolio is doing, but then again, anything that is profitable cannot be comfortable.
The CEO of Satyam Computer Services Limited (SAY) has acknowledged that the accounting books for the entire company was a complete sham for several years. The tide has gone out and caught Satyam with its pants down. Actually, Satyam hasn’t been wearing any pants for many years.
Pre-market, the shares are down over 90% with bankruptcy certainly to follow.
“Mr Raju admitted that the September quarter accounts for last year included a non-existent cash and bank balances of Rs50.40bn ($1bn), non-existent accrued interest of Rs3.76bn and other irregularities.
In the September quarter alone, the operating margin was shown as 24 per cent of revenue compared with an actual operating margin of 3 per cent, due to inflated revenue and profit figures.” - FT.com
The full 4 and a half page letter he wrote is quite interesting to read. The full letter in pdf form is here.
Since I have been looking into accounting to better understand a company, I thought it would be interesting to see whether I could detect the fraud in the statements. Disappointingly, I couldn’t see much wrong with the numbers. Maybe it’s because I still have a lot to learn, but the numbers look real, the % differences between each item and the relation to each other over the years are very consistent. Maybe the clue was that it was TOO consistent.
What’s even more boggling is that the statements of cash flows seems to be clean as well. This obviously means that not only was the income inflated, but the cash numbers were massaged by a master masseur.
No wonder people are calling this India’s Enron. The auditing company surely must have been part of this or the CEO is truly a smart guy.
A final interesting point I want to bring up is that the CEO tried to cover up the fraud by chasing acquisitions in order to delay the payments of the acquired company. This now adds to why I dislike companies that seek to grow through acquisitions. So many things can be hidden and a good company can suddenly go from transparent to hazy (just like BAC).
Satyam is certainly a company worth investigating further as a case study and one that will surely be a topic of many business classes in the future.
Disclosure : No position at time of writing.
Technorati Tags: satyam, accounting, scandal, enron
(This article originally appeared on The DIV-Net)
I open my mailbox and I see an attractive and colorful envelope with big attention grabbing text shouting “They’re back…! Dot-Com Profit Stocks. Inside: $2 Net-stock to Blow Google away!”. I lick my lips in anticipation and tear the envelope apart throwing aside the torn paper towards the bin, not caring whether it went in or not. I feel my heart race and gulp as my trembling fingers reach inside and slowly pull out the piece of paper.
I unfold the letter and the words reveal,
“YOU can make $MILLIONS this time - Here’s how”
Yup, sounds like a marketing scam to me.
The reason I bring this up is because Scott Fraser calls himself The Natural Contrarian and a proven master of contrarian strategies. The only contrary thing about this type of investing and marketing is that it goes against all investing basics. Let’s see how this contrarian technique holds up against the logical contrarian.
The dirty thing with marketing gimmicks to separate innocent people, who want to start investing or learn, from their hard earned money is that they aim and prod at your emotions. We’ve all regretted to some point not investing in Google at its IPO and this is the type of sly strategy employed.
“Many of you who hesitated and missed out during the first dot-com stock-boom of the late 1990’s on Yahoo!, Amazon, and AOL - now have a second chance for fortune with CrowdGather.”
IF you had done this, you would be better off. IF you do this, you can get rich quickly. Full of empty IF’s.
Why isn’t the fact that the majority of internet stocks went bankrupt revealed? People didn’t miss out on anything during the tech boom because too many lost everything they had by listening to such folly.
One of the biggest and simplest rule of investing is that when someone touts a stock as the “next” or “new era”, you should put your head down and run like Bolt. That stock tipper is mostly trying to get into your pockets. The stock that the report pumps up is CrowdGather (CRWG). After visiting the site and running through the SEC filings, it is clearly a don’t bother stock for any long term focused investor.
Remember when the universal remote or some other idea was supposed to the next thing? LCD’s were indeed the “next” items and it has become a standard, but it also brought about a boatload of competitors and essentially wiped out the “next” factor.
If you or your financially less inclined family, relatives or friends come across such reports, point them to the fact that these reports have no factual information. The one I have in front of me is filled with “I project”, “I’m tell you to buy” and “you will miss out if you wait”.
Here is another sample of what I am talking about.
“Two recent developments strongly support my high profit expectations for early CRWG shareholders:
1. CrowdGather’s new management team has logged extensive histories at such media titans as Yahoo! ,AOL, LionsGate, and Playboy.
2.CrowdGather’s streamlines $65 million market cap makes the company an almost irresistable acquisition target.”
Who but speculators buy based on their hunch that it could be a takeover target? I call this hunch the “it’s time to sit on the toilet” hunch.
So it seems like this technique revolves around buying penny stocks, spreading rumors, hyping it up some more and then dump it for a personal gain.
Looking at the Natural Contrarian’s site and his buy recommendations, people who listened to him would be poor over and over again. His “recommendations” are ALL OTC, recently public, no history companies now trading around 60% lower from its initial price.
It’s a perverse human nature to want things immediately. We don’t want to wait for anything. It’s been like that since we were born. This is especially more true when it comes to money and it’s a shame that too many eager people fall victim to such rubbish in the hopes of making a million dollars overnight. The sad thing is, you’ll probably die first before it happens.
Why not stick with the safe and sensible way of gaining wealth? Do you hand your money to a gambler and ask him to multiply it 10 fold the next time he goes to the casino?
I also believe that an investor’s role isn’t just constrained to building personal wealth but extends to helping others obtain financial understanding and helping them succeed financially.
Technorati Tags: natural contrarian, scam, penny stock
As I was reading Where Are the Customers’ Yachts, there was a little aptitude test which I found amusing that looks at whether you have what it takes to do well in Wall Street, Old School Style. Ready to take it yourself?
Note that this book was first published in 1940 and during this time, there were no computers or internet so the Street made money by selling securities manually and in person.
“If you have to hesitate in answering them, count the answer wrong.”
Here are the answers.
How’d you do? Got what it takes?
Seems like I certainly don’t.
There are two rules for success:
1. Never tell people everything you know.
No, Berkshire Hathaway is not currently priced with a 50% discount. Instead, I followed this article from Stock Pursuit about a trader who did buy Berkshire B (BRK.B) shares at about 50% discount to its market price.
Basically it goes like this.
A person that put in a sell order at market price was given $2,147 per share instead of the quoted $4,448. Well, if this person lost about 50% off his investment, then someone must have bought at a 50% discount. How? A trader put in a limit buy order at $2,147 and since the sell orders were being filled and there wasn’t much activity going on, the order was filled.
I can imagine the pain and shock of that poor guy.
I’m also one of the people that tend to buy and sell with market orders but I’ll have to protect myself with limit orders from now on as I find myself investing in thinly traded companies.
You can read the article here.
there was a little aptitude test which I found amusing that looks at whether you have what it takes to do well in Wall Street, Old School Style. Ready to take it yourself?