How You Can Profit From a Failing Economy

Investment article

How You Can Profit From a Failing Economy by Simon P Smith

Unless you have been living under a rock for the past few months you will no doubt have noticed the economy and financial markets are failing.
A Forcast Event

Many financial strategist have been discussing this for quite some time. Robert Kiyosaki even wrote a book about it titled "Prophecy". Written in 2002 it discusses why the biggest stock market crash in history is still coming and how you can prepare yourself and profit from it.

Now it is here we can no longer shrug it off as some silly "doom and gloom" view… .

If it is going to be as bad as the gloom and doom merchants in the media are wanting us to belive most people haven't felt the pinch yet. Any financial strain you've felt so far is just the tip of the iceberg compared to what's headed our way. And the biggest impact will be on the middle class around Christmas.

Understandably, many people are scared as their financial future is far from being secure. Having said that it is not the time to be stuffing your money into your mattress or hiding under the bed.

You shouldn't do that, nor should you panic. The regulators around the world are working hard and taking swift action to bring stability to the market. The best thing you can do is ride out the short-term ups and downs with just a few prudent adjustments where necessary until it all shakes out.

The Smart People are Planning Their Future

Don't get caught in what I call the "herd mentality". A little rule I have used myself when I find myself in a tight spot is ask myself "What is the herd doing?" And then do the exact opposite. Now is the time to take a common sense approach. Following are a few tips for a failing economy you may find useful:-

What You Shouldn't Do

* Bail out. Right now everyone is running around dumping stocks or equity mutual funds now. This is silly as the values are especially low and it is simply guaranteeing that you'll turn paper losses into real ones. Even if there's more downside to come, staying on course often pays off during times of economic uncertainty. You'll only realise a loss if you sell. What happens after a recession? A Boom. What happens after the sun sets in the west? It rises in the east.

* Stop saving. Those regular contributions you've been making to your savings or retirement accounts are an important part of good financial discipline, and there's no reason to stop them now. The strategy of dollar-cost averaging your investments-making periodic contributions to your accounts, regardless of where the market is heading is still good advice.

* Speculate. While lower prices for investments create opportunities, betting on the markets can easily get you into trouble, especially with the wild swings we're seeing now. Small, measured investments are usually better than large, hasty ones intended to make a quick killing. Be especially wary if you get tips from e-mail, the Internet, or elsewhere for certain stocks, commodities, and other "once-in-a-lifetime" opportunities

* Take on new debt. Be careful about acquiring new debt. Economic downturns can affect job stability and investment income, making it difficult to determine how much debt you can handle.If you must borrow, say, to put a child through college or make an emergency repair to your home, be doubly sure that you've examined all the options and risks, especially if you're planning to use the equity in your home

* Stop living. Although these times demand extra caution, there's such a thing as over-reacting. Whether it's buying gifts for the holidays or taking your family on vacation, life has to go on. And some cutbacks can have negative consequences for your wallet, such as putting off maintenance for your house or car or canceling insurance policies. So don't overreact. Instead reflect carefully and, where necessary, adjust.

What You Should Do

* Get your finances in order. There's never been a better time to make a budget and start paying down your debt, credit card and otherwise

* Rethink your plans to retire. If you're expecting to retire soon, consider holding off for a while, if possible, until things calm down. That will give you time to reassess and, if need be, modify your plans

* Speak with your financial adviser. With end-of-the-year tax planning an annual ritual, now is a good time to make an appointment with your tax adviser no matter what the economic outlook. He or she may have some advice on how to tweak your finances as you ride out the current storm.

* Consider a Plan B. Instead of being scared, I'm encouraging you to look at starting or ramping up your Plan B. It's never been more important than it is right now to re-plan how you make your money.

You need to do something different to create a stable financial future for yourself. One of the easiest ways to to this is to have your own home based business.

Now is the time to take action and learn how to build your own home based business… to apply yourself… to work smarter not harder … to find the time to get it done.

So what's the smartest thing a person can do to build their own home based business, or any small business in this economy-successfully, and without a lot of risk?

Network Marketing has been hailed by many as the ideal home based business. Network Marketing is the best home based business opportunity particularly if you find a mentor in the network marketing business of your choice. This is a great short cut to home based business success as the mentor has already successfully travelled the road you want to travel. Consider this network marketing mentor option.



About the Author
Simon Smith has been working in the financial services industry for over 20 years and building his fortune in the Network Marketing Industry. If you are ready to get out of the Rat Race pick up your free report at Simons Network Marketing Mentor Blog

How the Subprime Scandal Started

Investment article

How the Subprime Scandal Started by Danny Schechter

According to a Senate report, the starting point of this crisis was in 1997, during the reign of the Clinton Administration. It was then that a period of housing price appreciation began - increasing by nearly 85% until 2006. Home prices jumped by 124%. This was unusual, having occurred only once before in American history, right after World War II.
Soon the housing sector was driving the American economy. Within the next few years, seven million families bought homes with subprime loans.

Homeowners who may have been cash poor, became house rich, by dipping into inflating home equity either by refinancing or taking out low-cost equity loans. As this business boomed, underwriting standards began to "deteriorate." The banks and other lenders had found a new way to make money - and fast. These loans helped homeowners stave off foreclosures.

They were made possible by deregulation lobbied for by financial institutions, credit card companies, and homebuilders, the industries most likely to benefit.

As John Atlas and Peter Dreier explain in the American Prospect, they won support from the Democrats and Republicans under the cover of the "Reagan Revolution" to undercut reforms made in the 1970s.

In the 1970s, when community groups discovered that lenders and the FHA were engaged in systematic racial discrimination against minority consumers and neighborhoods - a practice called "redlining" - they mobilized and got Congress, led by Wisconsin Senator William Proxmire, to adopt the Community Reinvestment Act and the Home Mortgage Disclosure Act, which together have significantly reduced racial disparities in lending. But by the early 1980s, the lending industry used its political clout to push back against government regulation.

This was also the period of major bank consolidation through mergers and the S&L crisis, which saw the closures of scores of banks and major losses because of illegal practices including mortgage lending.

A few bankers were prosecuted but most were bailed out by the Congress. As a blog named the Last Hurrah explained: "Without understanding cause, or the reason for these plain Jane savings organizations in sustaining middle and working class home ownership - Congress just bailed out the lenders who had the wit to reorganize, and let it go at that. Essentially they financed the next bump in housing inflation, whether it be in inflated prices for existing homes, speculation in lots for tear-downs in good areas, or McMansion housing far from jobs and culture in the exurbs, that requires vast investment in infrastructure on the part of existing home owners and the states."

Interest rate ceilings imposed by state usury laws dating from "reforms" in the 1980s were then rolled back. The lenders understood that these changes meant that now they could target a large potential market who wanted home ownership but could not qualify. And they could charge them high fees and interest.

The subprime loan was crafted for this community and promoted as a reform, a positive way for minorities to become part of the American Dream of homeownership for all. In this period, the Bush administration was hyping the promise of the "ownership society."

(Now, given the foreclosure rate, ownership may actually decline under his "watch.")

Most subprime borrowers were sold loans called "2/28" and "3/27" hybrid adjustable rate mortgages (ARMs). These loans typically had a low fixed interest rate - called a "teaser rate "by the industry - but only applicable during the first two-year period. After two years, the rate is reset every six months based on an interest-rate benchmark. In many cases, payments rose 30%, which made them un-affordable to people whose wages and income were barely rising. By 2004, 90 percent of the subprime loans had these ARMs.

Bear in mind also that the most vulnerable and hence "higher risk" subprime borrowers - many with low FICO credit scores and poor credit histories - were charged substantially higher interest rates and fees than other borrowers. They were more likely to be subject to prepayment penalties, which make it costly to refinance loans. It was known in the industry that these are the borrowers who are most likely to default or become delinquent in payments and face foreclosure.

No one can fully explain why housing prices went up so quickly either, leaving the door open to explanations based on deceptive and fraudulent practices such as inflated appraisals.

Quickly, so-called "intermediaries," unregulated and often unscrupulous mortgage brokers, hustled their way into the housing market and quickly dominated, taking a vast market share by a variety of tactics ranging from deceptive advertising to block-by-block solicitations to get people to buy and sell, always promising more than they can deliver.

These efforts were buttressed by large-scale advertising campaigns for firms like DiTech - which used an actor/comedian known for his appearances on Saturday Night Live - to hype the mortgages being backed by the General Motors Acceptance Corporation. (For a while the car company was making more on loans than selling automobiles.) Online lenders then joined the carnival of competition with more ads. Media companies raked in several billion from this advertising, which provided little incentive to expose these practices.

Speculators fielded street teams known as "birddogs," rewarded for hunting down and signing up prospects. Abusive, illegal, and predatory practices were common. They enticed. They seduced, and in some cases, they threatened. I was told by a mortgage professional in the know that muscle was used, and that people were murdered in property battles.

According to the Joint Economic Report, "For 2006, Inside Mortgage Finance estimates that 63.3 percent of all subprime originations came through brokers, with 19.4 percent coming through retail channels, and the remaining 17.4 percent through correspondent lenders. Their data show the broker share increasing from 2003 through 2006."

These companies were not regulated and did not come under safety and soundness regulations. The percentage of subprime mortgage securitized rose rapidly after 2001, reaching a peak value of more than 81 percent in 2005.

Underscore that: 81%!

As housing sales boomed, lenders just dumped their traditional criteria for originating loans. The Senate later found: "The share of loans originated for borrowers unable to verify information about employment, income or other credit-related information ('low-documentation' or 'no documentation' loans) jumped from more than 28 percent to more than 50 percent. The share of ARM originations on which borrowers paid interest only, with nothing going to repay principal, increased from zero to more than 22 percent. Over this period the share of subprime ARMs multiplied dramatically that were originated."



About the Author
Danny Schechter edits Mediachannel. He was an Emmy Award winning producer for ABC News, director of the film In Debt We Trust and author of the new book: PLUNDER: Investigating Our Economic Calamity.

Investment article

Five Things We Need to Know About This Economic Disaster; The Ways the Media Missed It

Five Things We Need to Know About This Economic Disaster; The Ways the Media Missed It by Danny Schechter

1. IT WAS NOT A MISTAKE: IT WAS A SCHEME
Many people thing the economy is in free fall because some businesses made mistakes or because "everyone's to blame." Irresponsible borrowers are being equated with irresponsible lenders. Republicans are blaming Democrats, and vice versa. What the blame game misses is that this was at the heart of the collapse of the housing market that started the financial avalanche was a scheme and scam called Predatory Lending, often racially discriminatory and unscrupulous practices.

How do we know? The FBI tells us so as they open 2400 cases, say that crime is pervasive, open 1400 cases, indicted 400 people in the mortgage industry and announce a criminal investigation of 26 top companies. This is just the beginning. Even Alan Greenspan, the former head of the Federal Reserve blames fraud and corruption. Remember Franklin D Roosevelt's word for the folks behind the depression? He called them "banksters"

That's why I say we need a "jailout," not a bailout.

2. WALL STREET "SUCTION" COMPOUNDED THE CRIME

It was Wall Street firms that figured out how make real money on the peddling of subprime mortgages. The idea: get as many as people on the hook for cheap mortgages with no documentation so we can securitize them, by slicing them into investment pools and selling them worldwide as "asset backed securities." They pushed the brokers at the bottom to cut corners and get them more paper so they could turn straw into gold/ The problem: often there were no assets backing up asset-backed securities. The result, investors in other countries were defrauded and banks were forced to write down BILLIONS. This led to a lack of confidence and the credit crisis. Business writer Dean Starkman summed it up with one word: CORRUPTON. The same institutions were hiring lobbyists and making political donations to make sure they got their way. Corrupt themselves, they corrupted the political system further.

3. THE REGULATORS WERE NOT REGULATING

The head of the Securities and Exchange Commission admits that his agency did not do its job and regulate. Why? Because this administration didn't believe in regulation and supported all sorts of measures to let the "free market" do its thing. In addition, slick operators created a "shadow banking system" which was totally unregulated. The result, no one was watching the store or worrying about risk. Soon the law of karma went into effect -- what went around came around. The Banks got what they wanted and now they don't want it. Now they say, please bail us out.

4. THE MEDIA MISSED THE STORY

Where was the media exposing the this problem before it became a crisis, before three and half million families were forced into foreclosure, before the Congress passed a 700 BILLION dollar bailout that everyone in the know expects will go higher. The subprime lending book started after the http://dot.com boom went bust back in 2002. The market for these securities melted down in 2007. In that period, five years there were very few investigations perhaps because at this time, lenders and credit card companies spent $3 Billion advertising in the media. We need to investigate the Investigators.

5. WHERE WAS THE PUBLIC?

We can blame the kleptocrats on Wall Street and the compromised politicians, some of whom were sent to jail. We can even express our frustration with a media that barely covered the story when it might have done some good, and when they did cover tended to glorify high paying CEOs while not reporting on mounting economic inequality... But what about us, the people? Why were we in denial and not pressing our politicians to act in our interest?

One reason may be that we live in a charge-it society where we are constantly being told to shop until we drop. Many of us don't really understand high interest, especially about how it compounds. So many of us are in debt and obsessed with personal economic problems that make it hard to have the time to relate to a larger economic debate. Yet, it seems clear that we all need to understand these issues more clearly, and base our opinions on real information.

I am not an economic "expert" but I pushed myself to investigate our economic calamity. My findings appear in the book PLUNDER (Cosimo) My hope is that readers will find it of value and get into the conversation. If I can learn about these problems and the need for change, so can you.


About the Author
Danny Schechter edits Mediachannel. He was an Emmy Award winning producer for ABC News, director of the film In Debt We Trust and author of the new book: PLUNDER: Investigating Our Economic Calamity.

investment article -

The Sub-Prime Loans Crisis

The Sub-Prime Loans Crisis
by Ioannis - Evangelos Haramis

Subprime loans, also called "B" loans or "second chance loans" are loans originated to borrowers who do not qualify for market interest rates because of problems in their credit history.
Borrowers who have a credit score below 620 (on a scale from 380 to 850) are generally defined as sub prime borrowers.

Subprime loans are generally considered risky for both the borrower and the lender.

It's risky for the lender because borrowers usually have lower incomes and a poor record for paying debt, which increases their default probability.

It is also extremely risky for borrowers.

To offset the risk of defaults, lenders will charge high rates of interest to offset the risk. The high interest rates however are strenuous for borrowers which further increases their likelihood of default.

Subprime loans were created with the realization that a lot of money could be made to borrowers with poor credit who could not get conventional loans.

Conventional lenders would not take the risk to lend to people with credit scores below the firm threshold. This opened many opportunities for subprime lenders to lend to people with below acceptable credit scores.

21% of mortgage applications between 2004 and 2006 were subprime compared to 9% between 1996 and 2004.

Subprime mortgages reached a record of US$ 805 billion in 2005. In 2006 they totaled approximately US$ 600 billion.

There are various different types of subprime mortgages including "interest only mortgages," which allow borrowers to only pay interest for a period of time, "pick a payment," which gives the borrower the option on how to repay the loan and "initial fixed rate mortgages," which convert to variable rate loans.

The subrime story begins with borrowers who have a poor credit history looking to buy a house and are prepared to pay a mortgage rate typically 2% higher than rates charged to people with good credit.

Borrowers approach mortgage brokers or conversely get brokers to cold call them.

Brokers handle approximately 70% of the origination. Brokers match prospective borrowers with lenders who further lure borrowers with exotic mortgages such as "no doc" mortgages, which do not require any evidence of income or savings.

Big banks and wholesale lenders buy the debt, repackage them and sell them to Wall Street firms.

Wall Street banks and investment houses further repackage these loans in mortgage backed securities (MBS) and collateralized debt obligations (CDO).

These structured products very often yield high rates of return and are sold to pension funds, hedge funds and institutions.

Many economists are blaming the crisis on exuberant brokers who lure borrowers into mortgage deals.

These borrowers very often do not understand the types of loans or the contracts they sign, which denies the ability to asses true risk. The problem includes appraisers using inflated figures to value houses.

Lack of government regulation has also been blamed as being the cause of the problem.

Subprime lenders naturally foreclose on properties at a much higher rate than conventional lenders. Statistics show that approximately 3.3% of subprime loans end up in foreclosure compared to 1.1% for conventional loans.

The subprime meltdown is said to have begun in 2006, with escalating number of subprime house foreclosures.

The relationship between subprime meltdown and house prices is as follows:

As house prices drop, the equity value of home mortgages goes down, this creates an increase in mortgage defaults which will cause a further drop in house prices.

This positive feedback relationship will simply create a snowball effect until the economy has reasons to believe that there are reasons for the reverse to happen.

The subprime problem could also seep into other sectors in the economy. The housing slump is estimated to be able to strip 1-2 points off the GDP figure, furthermore, the downturn in the housing market will drag down the construction sector which will further affect other industries like i.e. plumbing, furniture and home improvements.

The FED responded to the crisis by prescribing methods to regulate the mortgage industry and enhancing laws where high levels of due diligence is needed in assessing borrowers ability to pay as well as make sure there is a much clearer understanding on the terms of the loans.

These guidelines were put forth with the hope to prevent or at least reduce fraud and abusive lending in the future.

About author:
Ioannis - Evangelos Haramis
I was born in Athens, Greece and I studied Business Administration, Marketing and Economics in Greece, in the U.S.A. and in Belgium.

I am the publisher and editor of the "Learn to Invest" www.GreekShares.com web site and the author of "The Stock Market Guide to Profitable Investments" book.


Investment/investing article

Retirement Planning: A Food Lovers' Approach to Planning for the Future

I am still coming to grips with it. Like many of you, I am rapidly approaching retirement. We read the statistics about how few of us are prepared. Mere mention of the words, "investments" or "retirement planning" can seem like carrying around a ball and chain. Well I want to make this journey one that is more appetizing. After all, I love those late-night conversations with my spouse about where we might be in twenty years. Should we live near the beach or in the mountains? Does planning for the years ahead have to be so complicated that we feel like avoiding it altogether? Here is a food lovers' approach to planning for the future.

How many of you like to entertain, have guests to your house? I really enjoy having people over. My favorite part of planning an intimate evening is the food. I want to cook something special that satisfies the soul. I think many of us share this feeling of wanting to put forth the extra effort to ensure a nice setting, with good food and fun conversation. I want my guests to wake up the next morning and say, "Wow, we really had a great time last night."

Think about all the effort that we put into planning a dinner party. We give extra consideration to the menu and our choice of ingredients. We may have a special bottle of wine. We'll clean up the house a little more, buy flowers, and put out the nice tablecloth and napkins. Why do we do this? Because we value our friends. We want them to feel welcome in our homes. We want to give something of ourselves to them. It is a direct expression of our values.

Our values are the starting point in thinking about retirement and investing for the future. People often think the most important thing is, "I gotta have a big pile of money to retire." That may or may not be true and you won't know unless you do some planning. When you are thinking about the future, think about what your daily life will look like, and about what is important to you. And here is the key, treat the future with the same care and sense of joyful anticipation you would in planning a party for your friends. How do you like to spend your days? Write these things down and start your menu for the future.

A well thought out menu is an essential ingredient for planning. As a fun little diversion here are some items from a Chez Panisse menu on a Friday night. The first course, heirloom tomatoes, you've seen them at market, with their gorgeous array of colors. The second course is Alaskan salmon with nasturtiums and mint. For the main course they are serving marinated and grilled squab with squab liver toast. (Squab liver is so good it makes me want to howl at the moon!) Then, for dessert, is a summer berry tartlet. The menu, as you're beginning to sense, builds anticipation as we envision what it will be like when we get there.

Another thing to note when looking at the menu is the nice variety of ingredients going into this meal. In investment terms we would say this is a diverse, or well-diversified menu. One of the most important things to consider for your retirement investments is that they be diverse. Think about this when you read your monthly financial statements. They should look like a Chez Panisse menu, well diversified, with numerous investments and many different flavors.

When you arrive at Chez Panisse and walk into the dining room, there are usually some platters piled high with great produce. It has the feeling of seasonal bounty, like a cornucopia, a sense of plenty. Having a diversified portfolio of investments can help create this sense of anticipation and bounty that you will reap in your future.

That is how I'd like to approach planning for the future, with a sense of anticipation and bounty. Like the anticipation we feel prior to the arrival of our friends, or anticipating a meal at a great restaurant. This is our future we are talking about. Wouldn't it be great to take the extra time and care such that when we arrive in our future, we have that same sense of delight and appreciation that our guests feel when they arrive at our homes? We can't know the future, just as we can't know if all our guests will get along on a particular evening. But regardless of the amount of money we have, or how nice the china is, we put our best foot forward for our guests. Let's do the same for ourselves. The anticipation of the arrival is half the joy and the appreciation that ensues when you get there will make all your efforts worthwhile.

Investment article by Jeffrey Stoffer CFA, CFP, Principal of Stoffer Wealth Advisors. We are an investment management and financial planning firm serving individuals, families, and business owners in the San Francisco Bay Area. Visit our website at http://www.stofferwealthadvisors.com

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Value investment Blog

Financial Storm : How to Survive Economy

Today the most serious crises are affecting almost everyone. Some lost lots of money, savings, 401K and other investments. Seems like in January we noticed something was wrong. But no-one expected closures of banks, Dow Jones jaw opening loses and other negative economic turmoil which is still not over.
During September more events occurred as the government's seized Fannie Mae and Freddie Mac and rescued American International Group; than the bankruptcy of Lehman Brothers and pending sale of Merrill Lynch, a series of bank sales; and a federal bailout plan that could carry a $700 to $900 billion price tag.

Economy:

While everything seemed so perfect in this power machine of money, something did go wrong. In 2001 right after the internet bubble, FED was afraid we will go to recession, so therefore, their response was to slash rates all the way to 1%.

This opened another door. Mortgages with 1% introductory rates, adjustable rate mortgages, interest only loans were introduced as "getting you into a loan fast" in most cases, without any qualifications such as taxes, pay-stubs, etc.

Wall Street investors got even better idea of creating tradable bonds from those risky mortgages, mix them with some other loans with a good rating and sell them. Bond rating agencies provided a very high rating on those mortgage bonds.

Than, subprime homeowners start to slowly default on mortgages and banks were racing to raise capital by borrowing more money from each other or Federal Reserve.

Everyone is to blame here; everyone is pointing fingers at each other whose fault it is. Maybe it is banks fault of providing ARM loans, maybe it is customer fault of not clearly understanding ARM loans or maybe it is bond rating fault of providing an excellent rating on loans that may go to default.

Where can we go from here?

Corporate profits are already on the verge of falling for a fifth straight quarter. People are afraid what will happen to their money, some are already taking money out and keeping it save someplace else.

Companies that have seen slowdown had to lay off workers, close businesses as credit market got worse. But still outside of finance market and housing, economy is strong.

The weak dollar is boosting demand for our goods abroad and we might expect a mild recession that ends next spring. Growth should happen in 2009 as Fed is pumping billions into market and banking system.

Of course, that all can change if banks will remain scared of credit market and stop lending or allow lending only for selected borrowers. If that happens, home values could fall even more, crimping confidence and Wall Street will respond in negative way.


Higher Taxes?

Who ever wins the presidency you would have to pay higher taxes. As of this moment it is hard to tell what final bill of $700 billion rescue plan will be. Some estimated at $900 billion, some go over a trillion dollars.

If the economy continues to move into a deeper recession, dragging the housing market along with it, then the costs to the taxpayers easily could move even higher.


Savings

Your savings are protected; there is no doubt about that. Bank money-market accounts and CDs are as protected as well. Even though banks may still go down, your money are FDIC insured.

For investments such as 401K plans make sure your plan is diversified. You don not want all stock 401K at this time. Also consider stable value funds as they have yield of 2%-4%.

Deposits up to $250,000 per person per institution and $500,000 for joint accounts will be protected by the FDIC.


Stocks

If you own 500 shares of Apple and your broker collapses, your investment is still there and will be most likely transferred to another broker. If government seizes a certain bank, your automatically loose all your investment. Look what happened to Washington Mutual. There were many speculators when Washington Mutual started to gain share again only that one day Fed seized the whole bank and all investments were gone.

Your stocks, bonds and mutual funds will be covered, foreign currency, precious metals and commodity futures contracts won't be.


Insurance

If your insurance suddenly goes bankrupt, which is most unlikely. AIG, American Insurance Group went bankrupt because AIG insurers mortgage bonds. But AIG received $85 billion loan guarantee from federal government.

However you do have a protection. If you have an outstanding claim when your insurer fails, a state guaranty fund will cover it. The rules vary, but funds typically pay up to $300,000 in claims on most policies.

With variable annuity you are protected because you are investing in a mutual like fund held in your name and insurance companies by law cannot touch that when they go bankrupt.

For most other insurance, typically you have 30 days to find another insurer. If you have up front a large sum, you can apply for a refund from your state insurance fund.


Real Estate

The new bailout plan includes few things. First government was trying to buy out bad mortgages and when Wall Street did not responded well, Congress looked in to Europe, especial into UK where government injected funds directly to banks. This plan is currently being worked at with direct injection of funds; this should prompt banks to lend again.

But this may not help real estate because home prices have to do with the scarcity of land. Homes for sale are again scarce and it will lower price tag of your home by another 10%-20% by next year. Key currently is to get loans so new buyers will come to market and thus increasing prices/value of homes.


Credit

You may have heard about credit is frozen, tight credit, tough mortgage standards. You can still get a loan of you have at least 660 score, low debt, and 10% down payment. But what if you do not.

Banks are no longer willing to lend people with bad credit. They are afraid you will not repay the loan back. With direct injection from government should allow banks to make more loans even if you have some small bruises on your credit.


Jobs

In this tough financial time, more employers are staying away from hiring employees. Employers would rather save money at this time so they can continue operations.

Make sure you have you savings ready at this time. It is recommended that you should have at least three months of emergency savings. Sure, there are plenty of jobs available, but remember that many people are applying for the same job positions. Nowadays, maybe even more than before if a company is laying people off, you can be certain those employees will start to look for jobs right away.


When will market recover, How will I know?

Pay attention to London Interbank offered rate or LIBOR. The lower it is, the greater the likelihood that banks are willing to lend freely. Historically LIBOR is really close to Fed Funds rate which stand at 2%. Currently LIBOR fluctuated between 3% - 6% which means banks still see a huge risk in the market.

Investment article by Susan Duey
Susan Duey represents RateTake Refinance marketplace. RateTake matches consumers with multiple lenders offering low mortgage rate quotes. RateTake also operates #1 American Mortgage

Value Investment Book (29) - New Era in Value investing

New Era Value Investing: A Disciplined Approach to Buying Value and Growth Stocks
By Nancy Tengler

A unique guide that combines the best of traditional value theory with an innovative approach to assessing value in low or non-dividend paying stocks

In the 1990s, America's focus on productivity and innovation led to huge gains in technology, communication, and healthcare stocks, and contributed to the transformation of the U.S. stock market from a value (dividend-paying orientation) to a growth (nondividend-paying) bias. During this time, forward thinking value managers began to develop analytical tools for valuing nondividend paying stocks. These tools allowed them to evaluate and identify the best investments in both traditional and nontraditional value sectors. At the forefront of this movement was author Nancy Tengler who, along with Noel DeDora, developed "Relative Value Discipline," an approach-which combines two proven methods for valuing growth stocks: Relative Dividend Yield and Relative-to-Price Sales. The combination of these approaches allows individuals to invest across the investment universe regardless of dividend policies. New Era Value Investing introduces the proven method known as Relative Value Discipline by combining the excitement of developing a new investment discipline with the lessons learned through the application of this new methodology in the real world. In addition to providing an insider's look at an investment manager's experience in adopting a new investment approach, this book creates a context for understanding the transformation of the U.S. economy, and offers expert insights beyond those of traditional value theory.

Nancy Tengler (San Francisco, CA) is President and Chief Investment Officer of Fremont Investment Advisors. She is coauthor of Relative Dividend Yield: Common Stock Investing for Income and Appreciation (Wiley: 0-471-53652-0). She has appeared on numerous financial radio and television programs, including CNN/fn and is frequently quoted in financial publications such as The Wall Street Journal.

Value investing books

Value investment books (28) - The Little Book That Beats the Market

Value investment books

The Little Book That Beats the Market - (Little Books. Big Profits)
By Joel Greenblatt

Two years in MBA school won't teach you how to double the market's return. Two hours with The Little Book That Beats the Market will.

In The Little Book, Joel Greenblatt, Founder and Managing Partner at Gotham Capital (with average annualized returns of 400.000000 or over 20 years), does more than simply set out the basic principles for successful stock market investing. He provides a "magic formula" that is easy to use and makes buying good companies at bargain prices automatic. Though the formula has been extensively tested and is a breakthrough in the academic and professional world, Greenblatt explains it using 6th grade math, plain language and humor. From this book, You'll learn how to use this low risk method to beat the market and professional managers by a wide margin. You'll also learn how to view the stock market, why success eludes almost all individual and professional investors, and why the formula will continue to work even after everyone "knows" it.

Value investment books series

Value investment - Buffett - General rules

Value investment books- Buffett - General rules

- Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
- It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
- You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right—and that's the only thing that makes you right. And if your facts and reasoning are right, you don't have to worry about anybody else.
- Our favourite holding period is forever.
(Letter to Berkshire Hathaway shareholders, 1988 )
- When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.
- Risk comes from not knowing what you're doing.
- If you don't know jewellery, know the jeweller.
- If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes.
- There seems to be some perverse human characteristic that likes to make easy things difficult.
- One's objective should be to get it right, get it quick, get it out, and get it over... your problem won't improve with age.
- A public-opinion poll is no substitute for thought.
- In the insurance business, there is no statute of limitation on stupidity.
- If a business does well, the stock eventually follows.
- The most important quality for an investor is temperament, not intellect... You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.
- The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values.
We will only do with your money what we would do with our own.
- Occasionally, a man must rise above principles.
It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
- Of one thing be certain: if a CEO is enthused about a particularly foolish acquisition, both his internal staff and his outside advisors will come up with whatever projections are needed to justify his stance. Only in fairy tales are emperors told that they are naked.
W- hen asked how he became so successful in investing, Buffett answered: we read hundreds and hundreds of annual reports every year.
- "I never buy anything unless I can fill out on a piece of paper my reasons. I may be wrong, but I would know the answer to that. "I'm paying $32 billion today for the Coca Cola Company because..." If you can't answer that question, you shouldn't buy it. If you can answer that question, and you do it a few times, you'll make a lot of money."
- You ought to be able to explain why you're taking the job you're taking, why you're making the investment you're making, or whatever it may be. And if it can't stand applying pencil to paper, you'd better think it through some more. And if you can't write an intelligent answer to those questions, don't do it.
I really like my life. I've arranged my life so that I can do what I want.
If you gave me the choice of being CEO of General Electric or IBM or General Motors, you name it, or delivering papers, I would deliver papers. I would. I enjoyed doing that. I can think about what I want to think. I don't have to do anything I don't want to do.

Value investment news / value investing books

Value investment - Buffett - Intelligent decision

Value investment - Buffett - Intelligent decision

- Charlie and I decided long ago that in an investment lifetime it's too hard to make hundreds of smart decisions. That judgement became ever more compelling as Berkshire's capital mushroomed and the universe of investments that could significantly affect our results shrank dramatically. Therefore, we adopted a strategy that required our being smart - and not too smart at that - only a very few times. Indeed, we'll now settle for one good idea a year. (Charlie says it's my turn.)
- The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable.
(Financial Review, 1985 )
- I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.
Lecturing to a group of students at Columbia U. He was 21 years old.
- We're more comfortable in that kind of business. It means we miss a lot of very big winners. But we wouldn't know how to pick them out anyway. It also means we have very few big losers - and that's quite helpful over time. We're perfectly willing to trade away a big payoff for a certain payoff.
(1999 Berkshire Hathaway Annual Meeting )
- The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.
(July 1999 at Herb Allen's Sun Valley, Idaho Retreat )
- The most common cause of low prices is pessimism - some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer.
( 1990 Chairman's Letter to Shareholders )
- Success in investing doesn't correlate with I.Q. once you're above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.
(BusinessWeek Interview June 25 1999 )
- Our future rates of gain will fall far short of those achieved in the past. Berkshire's capital base is now simply too large to allow us to earn truly outsized returns. If you believe otherwise, you should consider a career in sales but avoid one in mathematics (bearing in mind that there are really only three kinds of people in the world: those who can count and those who can't).
( 1998 Chairman's Letter to Shareholders)
- Time is the enemy of the poor business and the friend of the great business. If you have a business that's earning 20%-25% on equity, time is your friend. But time is your enemy if your money is in a low return business.
(1998 Berkshire Annual Meeting )
- Ben's Mr. Market allegory may seem out-of-date in today's investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising 'Take two aspirins'?
(1987 Chairman's Letter to Shareholders)
- We will reject interesting opportunities rather than over-leverage our balance sheet.
( Berkshire Hathaway Owners Manual )
- "If you expect to be a net saver during the next 5 years, should you hope for a higher or lower stock market during that period?"Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall."This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.
( 1997 Chairman's Letter to Shareholders )

Value investor news/investment books

Value investment - Buffett - Price concious

Value investor- Warren Buffett
Price concious:

- Price is what you pay. Value is what you get.
- For some reason, people take their cues from price action rather than from values. What doesn't work is when you start doing things that you don't understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it's going up.
- Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.
- We have tried occasionally to buy toads at bargain prices with results that have been chronicled in past reports. Clearly our kisses fell flat. We have done well with a couple of princes - but they were princes when purchased. At least our kisses didn't turn them into toads. And, finally, we have occasionally been quite successful in purchasing fractional interests in easily-identifiable princes at toad-like prices.
- 1981 Chairman's Letters to Shareholders
- Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.
- 1974 Letter to Shareholders
- Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.
- Berkshire Hathaway 1998 Annual Meeting
- If you're an investor, you're looking on what the asset is going to do, if you're a speculator, you're commonly focusing on what the price of the object is going to do, and that's not our game.
(1997 Berkshire Hathaway Annual Meeting )
- Despite three years of falling prices, which have significantly improved the attractiveness of common stocks, we still find very few that even mildly interest us. That dismal fact is testimony to the insanity of valuations reached during The Great Bubble. Unfortunately, the hangover may prove to be proportional to the binge.
March 2003
- On acquiring bad companies for cheap prices: "In my early days as a manager I, too, dated a few toads. They were cheap dates - I've never been much of a sport - but my results matched those of acquirers who courted higher-price toads. I kissed and they croaked."
- I like to go for cinches. I like to shoot fish in a barrel. But I like to do it after the water has run out.
(October 2003 talking with Wharton MBA students)
- The important thing is to keep playing, to play against weak opponents and to play for big stakes.
( November 2002 talking with students at Gaston Hall )

Value investment news/book

Value investment - Person of the week (2)

Value investor news

Unlike many Wall Street titans, Buffett conducts his business out of Omaha, Neb. And unlike many Wall Street executives, Buffett has remained revered while they have become reviled.

"Warren has distanced himself from Wall Street," Schroeder said. "He hasn't done hostile takeovers, he hasn't set up a leveraged buyout fund, or done venture capital. And for that reason, he has avoided some of the taint that other people have had."

Over the past two weeks Buffett has made huge bets on America. He has poured $5 billion into struggling investment bank Goldman Sachs, and several billion more into iconic American company General Electric, which is, arguably, in worse shape than Goldman. For these companies, Buffett has saved the day. But, like always, he's placed his bets. And he is planning to make some money when this economy turns around.

"I mean, if I got a chance to take one percent of the deal either way, I would take that bet," he told Rose. "It's the kind of stuff I love to do. I just don't have $700 billion."

Buffett's betting on America. And we're betting on Buffett. After all, he's certainly been right in the past.

Value investors news/ value investment

Value investment - Person of the week

The Iconic Investor Remains Optimistic About American Businesses
Oct 3,2008

You know things aren't going well when Warren Buffett, one of the world's richest men, is worried.

"This really is an economic Pearl Harbor," Buffett told PBS talk show host Charlie Rose. "That sounds melodramatic, but I've never used that phrase before, and this really is one."

Buffett, of course, is referring to the financial crisis that has gripped the country over the past several weeks. But Buffett is not investing like a worried man. Despite the volatile markets and unstable system, he has been pouring billions into American companies and betting on good returns, something he has been famously successful at in the past. "We've got a great system," Buffett told Rose. "And we've got more productive capacity now than we ever have. The American worker is more productive than he's ever been. We've got more people to do it. We've got all the ingredients for a sensational future. It's just that, right now, the athlete's on the floor."
Buffett, 78, is not a make-a-quick-buck kind of investor. He has made billions by investing in companies long term. Buffett's biographer, Alice Schroeder, author of "The Snowball: Warren Buffett and the Business of Life," said that his strategy is to concentrate his investments and make very few bets.

"You could get very, very rich," said Schroeder, "because you would only need to make about one investment a year, but that one you would be absolutely sure that you were right."

Buffett explains that it's all about understanding a business.

"I don't think about the price action of the stock or I don't think about what people are saying they're going to earn next quarter, or anything of the sort, or look at charts. I just try and look at the business," he said. "A lot of businesses I can't understand. I can understand Gillette. I can understand Coca-Cola. I can understand Wrigley's chewing gum. When I say I can understand it, it means I have a pretty good idea of what they're going to look like 10 or 15 years from now. That's understanding a business."

Value investor news / value investment topics

Value investment - A super-investor comes to save world

Value Investor news

A super-investor comes to save world
FORCED to choose between the musings of baby-faced brokers who were probably in creche during the last recession and the actions of the world's most brilliant investor, I'm going to take my bearings from Warren Buffett, the 78-year-old value investment wizard.

Buffett has waded into Wall Street when "all around are losing their heads" and invested $US8 billion ($A10.3 billion). It's one of the most remarkable stories of the year.

Even if you don't follow the markets you've probably heard something of the man they call "the sage of Omaha". He has built the world's most successful investment company Berkshire Hathaway through several decades of impeccably successful value investing.

And crucially, Buffett doesn't bet, he invests. He claims he pays little attention to the daily ructions of the market because the way he sees it he's buying "parts of companies" rather than highly volatile shares.

He's had the same house in Omaha, (Nebraska) since the 1950s, he likes burgers and cherry coke and he comes across as likeable hayseed who's not really that interested in money (in fact he's already promised his billions to the Bill Gates foundation).

Of course, billionaires are rarely so simple. Sure, Buffett has the same house in Omaha all these years, but he spends most of the time in his holiday house in the tycoon enclave of Palm Beach. And yes, he seems a pleasant guy but he's hard as hell when it comes to making money. For example Berkshire Hathaway have had no problems investing in the cigarette industry, which is out of bounds for many.

Now as if out of nowhere Buffett might just emerge as "the man who saved the world". Because he's been investing when everyone else is selling. He kicked off with a $US5 billion in investment bank Goldman Sachs and followed it a few days later with a $US3 billion investment in giant conglomerate General Electric.

In essence, Buffett has become the lender of last resort to both Goldman Sachs and GE - and he's scored a deal where he gets about 10% above the usual lending rates. Southern Cross Equities stockbroker Charlie Aitken says Buffett will be paid "short-term interest rates usually reserved for loan sharks at the casino".

Remarkably, Buffett made both these moves before knowing whether the US Congress would pass the "bail-out" bill. And to top it off Buffett announced he was taking a punt on a shift towards environmental investing in the coming years with a barely reported $US320 million investment in a Hong Kong company, BYD, which produces batteries for electric cars.

I'm not saying Buffett will save the world from recession but his vote of confidence may be just as crucial to any turnaround as the US Congress.

We should get a sharper picture of who Buffett really is in the near future. Next Friday publishers Allen and Unwin release The Snowball - Warren Buffett and the Business of Life , the first official biography of Buffett. There's already shelves of books on the old fox, including one by his equally foxy ex-daughter-in-law Mary - who kept her once married name long enough to grace the best selling title The Tao of Warren Buffett.

If nothing else Buffett's most recent moves suggest investments in the biggest and best companies in the market will always be rewarded.

Value investor news
by James Kirby
October 5, 2008
Business day

Value Investment Book (27) - Value investing with masters

Value Investing With the Masters: Revealing Interviews With 20 Market-Beating Managers Who Have Stood the Test of Time
By Kirk Kazanjian

Kazanjian (Wizards of Wall Street), a former executive and business journalist, offers q&a style interviews with leading value investors, those who specialize in finding undervalued stocks and snapping them up for below-market prices. Readers learn how the interviewees feel about mutual funds, intrinsic value, foreign currency and more.

Value investment books
Value investing books

Value Investment Book (26) - Value investing today

Value investing books

Value Investing Today
By Charles Brandes

Updated data and insights to help value investors address the realities of today's markets

On the heels of recent stock market tumbles and deceptions, value investing--the staple of investing greats from Benjamin Graham to Warren Buffett--has roared back into the spotlight. Value Investing Today returns with a new edition, filled with updated information and advice to give investors the skills and knowledge to become successful value investors.

Broader in scope than previous editions, this third edition offers fresh lessons investors can use to uncover stocks that are, for whatever reason, underpriced in relation to their value. Updates to this edition include:

New chapters on the psychology of investing and corporate governance
Expanded discussions on the importance of margin of safety
Increased correlations among world markets, and how to capitalize on them

Value investment textbooks

Value Investment Book (25) -What Warren Buffett speak

Warren Buffett Speaks: Wit and Wisdom from the World's Greatest Investor
By Janet Lowe

When Warren Buffett Speaks. . . people listen.

"If people want to improve their investing skills, it has to help to study how the Master does it. This short book outlines Buffett's value investment philosophy and techniques."
—Peter S. Lynch, Fidelity Investments

"Common sense with a deft irony . . ."
—John C. Bogle, founder of The Vanguard Group and author, The Little Book of Common Sense Investing

"It was Warren Buffett's thoughts and philosophy that first captivated investors. Janet Lowe has done us all a great service by collecting and arranging Warren Buffett's wit and wisdom in an easy-to-read and enjoyable book."
—Robert G. Hagstrom, Portfolio Manager, Legg Mason Growth Trust mutual fund, and author, The Warren Buffett Way, Second Edition

"A must-read. Buffett's wit and wisdom is a roadmap for anyone looking to succeed in business, investing, and life."
—Steve Halpern, Editor, www.thestockadvisors.com


Value investment books

Value Investment Books (24) -The Buffettology workbook

The Buffettology Workbook: Value Investing The Warren Buffett Way
By Mary Buffett, David Clark

Timeless Investing Strategies for Any Economy
For five decades, Warren Buffett has been making himself one of the wealthiest men in the world, amassing more than 30 billion dollars by investing in the stock market. Remarkably, he did it by spurning popular Wall Street trends, adhering instead to his own unique discipline, one the world has come to know as Buffettology. In The Buffettology Workbook, internationally acclaimed writer and lecturer Mary Buffett has again joined forces with David Clark, the world's leading authority on Warren Buffett's investment methods, to create an in-depth, step-by-step guide to the concepts and equations Warren Buffett uses to create fantastic wealth.

Here you will learn:

The difference between a great company and a great undervalued company
How the short-sightedness of Wall Street pundits can work to your advantage
Where to look for investments with long-term, consistent, and extraordinary growth potential
To perform the same financial calculations Buffett uses, and apply them to stocks you'd like to buy

Value investment books

Value Investment Books (23) -The Winning Habit of Warren Buffett and George Soros

The Winning Investment Habits of Warren Buffett & George Soros
books By Mark Tier


Warren Buffett(Value investment guru) , Carl Icahn, and George Soros all started with nothing---and made billion-dollar fortunes solely by investing. But their investment strategies are so widely divergent, what could they possibly have in common?

As Mark Tier demonstrates in this insightful book, the secrets that made Buffet, Icahn, and Soros the world's three richest investors are the same mental habits and strategies they all practice religiously. However, these are mental habits and strategies that fly in the face of Wall Street's conventional mindset. For example:

-Buffett, Icahn, and Soros do not diversify. When they buy, they buy as much as they can.

-They're not focused on the profits they expect to make. Going in, they're not investing for the money at all.

-They don't believe that big profits involve big risks. In fact, they're far more focused on not losing money than making it.

-Wall Street research reports? They never read them. They're not interested in what other people think. Indeed, Buffett says he only reads analyst reports when he needs a laugh.

In The Winning Investment Habits of Warren Buffett & George Soros you can discover how the mental habits that guided your last investment decision stack up against those of Buffett, Icahn, and Soros. Then learn exactly how you can apply the wealth-building secrets of the world's richest investors to transform your own investment results

Value investment books

Value investment Books (22) - Tao of Warren Buffett

The Tao of Warren Buffett: Warren Buffett's Words of Wisdom: Quotations and Interpretations to Help Guide You to Billionaire Wealth and Enlightened Business Management
By Mary Buffett, David Clark

A collection of pithy and inspiring sayings from America's favorite businessman that reveal his secrets of success


Like the sayings of the ancient Chinese philospher Lao-tzu, Warren Buffett's worldly wisdom is deceptively simple and enormously powerful in application. In The Tao of Warren Buffett, Mary Buffett -- author of three books on Warren Buffett's investment methods -- joins noted Buffettologist and international lecturer David Clark to bring you Warren Buffett's smartest, funniest, and most memorable sayings with an eye toward revealing the life philosophy and the investment strategies that have made Warren Buffett, and the shareholders of Berkshire Hathaway, so enormously wealthy.

Warren Buffett's investment achievements are unparalleled. He owes his success to hard work, integrity, and that most elusive commodity of all, common sense. The quotations in this book exemplify Warren's practical strategies and provide useful illustrations for every investor -- large or small -- and models everyone can follow. The quotes are culled from a variety of sources, including personal conversations, corporate reports, profiles, and interviews. The authors provide short explanations for each quote and use examples from Buffett's own business transactions whenever possible to illustrate his words at work.


As Warren says:


"You should invest in a business that even a fool can run, because someday a fool will."

"With enough inside information and a million dollars, you can go broke in a year."


"No matter how great the talent or effort, some things just take time: You can't produce a baby in one month by getting nine women pregnant."


"Our method is very simple. We just try to buy businesses with good-to-superb underlying economics run by honest and able people and buy them at sensible prices. That's all I'm trying to do."


The Tao of Warren Buffett inspires, amuses, sharpens the mind, and offers priceless investment savvy that anyone can take to the bank. This irresistibly browsable and entertaining book is destined to become a classic.

Value investment books

Value Investment Books (21)- Active Value Investing

Active Value Investing: Making Money in Range-Bound Markets (Wiley Finance)
By Vitaliy N. Katsenelson

A strategy to profit when markets are range bound–which is half of the time

One of the most significant challenges facing today’s active investor is how to make money during the times when markets are going nowhere. Bookshelves are groaning under the weight of titles written on investment strategy in bull markets, but there is little guidance on how to invest in range bound markets. In this book, author and respected investment portfolio manager Vitaliy Katsenelson makes a convincing case for range-bound market conditions and offers readers a practical strategy for proactive investing that improves profits. This guide provides investors with the know-how to modify the traditional, fundamentally driven strategies that they have become so accustomed to using in bull markets, so that they can work in range bound markets. It offers new approaches to margin of safety and presents terrific insights into buy and sell disciplines, international investing, "Quality, Valuation, and Growth" framework, and much more.

Vitaliy Katsenelson, CFA (Denver, CO) has been involved with the investment industry since 1994. He is a portfolio manager with Investment Management Associates where he co-manages institutional and personal assets utilizing fundamental analysis. Katsenelson is a member of the CFA Institute, has served on the board of CFA Society of Colorado, and is also on the board of Retirement Investment Institute. Vitaliy is an adjunct faculty member at the University of Colorado at Denver - Graduate School of Business. He is also a regular contributor to the Financial Times, The Motley Fool, and Minyanville.com.

Recommended Value investment book

Value investment books (20) - Even Buffett Isn't Perfect

Value investing books collection:
What You Can--and Can't--Learn from the World's Greatest Investor
By Vahan Janjigian

A contrarian look at how Warren Buffett thinks about investing and related issues

Warren Buffett is the most successful and revered investor of all time. His ability to consistently find undervalued companies has made him one of the world’s richest men.

Despite many previous books about him, it’s rare to find an objective assessment—one that praises him when appropriate, but also recognizes that even Buffett makes mistakes. For instance, is he right to call for higher taxes and an end to earnings guidance? Should Buffett fans copy his avoidance of technology stocks?

In this penetrating look at how Buffett thinks, Vahan Janjigian shows readers how to learn from the master’s best moves while avoiding strategies that don’t apply to small investors. And he explains Buffett’s favorite valuation methodology, the discounted cash flow model, and how it can significantly reduce the odds of overpaying for a stock

Value investment textbooks
Value investing books

Value investment books (19)- Warren Buffett and the Interpretation of Financial Statements

Warren Buffett and the Interpretation of Financial Statements
The Search for the Company with a Durable Competitive Advantage
By Mary Buffett, David Clark


With an insider's view of the mind of the master, Mary Buffett and David Clark have written a simple guide for reading financial statements from Warren Buffett's succccessful perspective.

Buffett and Clark clearly outline Warren Buffett's strategies in a way that will appeal to newcomers and seasoned Buffettologists alike. Inspired by the seminal work of Buffett's mentor, Benjamin Graham (The Interpretation of Financial Statements, 1937), this book presents Buffett's interpretation of financial statements with anecdotes and quotes from the master investor himself.

Potential investors will discover:

• Buffett's time-tested dos and don'ts for interpreting an income statement and balance sheet
• Why high research and development costs can kill a great business
• How much debt Buffett thinks a company can carry before it becomes too dangerous to touch
• The financial ratios and calculations that Buffett uses to identify the company with a durable competitive advantage -- which he believes makes for the winning long-term investment
• How Buffett uses financial statements to value a company
• What kinds of companies Warren stays away from no matter how cheap their selling price

Once readers complete and master Buffett's simple financial calculations and methods for interpreting a company's financial statement, they'll be well on their way to identifying which companies are going to be tomorrow's winners -- and which will be the losers they should avoid at all costs.

Destined to become a classic in the world of investment books, Warren Buffett and the Interpretation of Financial Statements is the perfect companion volume to The New Buffettology and The Tao of Warren Buffett.


Value investment textbooks

Value Investment Books (18)- Buffett: The Making of an American Capitalist

Since its hardcover publication in August of 1995, Buffett has appeared on the Wall Street Journal, New York Times, San Francisco Chronicle, Los Angeles Times, Seattle Times, Newsday and Business Week bestseller lists. The incredible landmark portrait of Warren Buffett's uniquely American life is now available in paperback, revised and updated by the author.

Starting from scratch, simply by picking stocks and companies for investment, Warren Buffett amassed one of the epochal fortunes of the twentieth century--an astounding net worth of $10 billion, and counting. His awesome investment record has made him a cult figure popularly known for his seeming contradictions: a billionaire who has a modest lifestyle, a phenomenally successful investor who eschews the revolving-door trading of modern Wall Street, a brilliant dealmaker who cultivates a homespun aura.

Journalist Roger Lowenstein draws on three years of unprecedented access to Buffett's family, friends, and colleagues to provide the first definitive, inside account of the life and career of this American original. Buffett explains Buffett's' investment strategy--a long-term philosophy grounded in buying stock in companies that are undervalued on the market and hanging on until their worth invariably surfaces--and shows how it is a reflection of his inner self.

Value investment textbooks
By Roger Lowenstein

Time value of money

Time value of money is the concept of measuring the value of money over time. The concept derived from the fact that money does not remain static and over time does change value.

The money in your wallet, for example, is more likely to buy you more gasoline today than it will next year (perhaps even more than it will tomorrow based on surging oil and gas prices). In other words, due to inflation alone, chances are that you will not enjoy the same purchasing power next year as you would today because over time the value of your money will likely decrease.

Conversely, let's say you purchase a rental property today for $300,000 that's worth $350,000 next year. In this case, the effect of time value of money has upon your investment is a good thing because it grew your investment.

Understanding time value of money, therefore, is crucial to real estate investing, and explains why we try so desperately to measure and solve for those changes with such elements as internal rate of return (IRR) and net present value (NPV). We need to measure an investor's rate of return with consideration for time value money.

Two components are intrinsic to time value: present value and future value.

Present value defines what a dollar is worth today and future value defines the worth of a dollar at some future time. It's straightforward, simply think about it in terms of purchasing power. In our rental property example, for instance, the present value of our $300,000 could purchase that rental property today but not next year. Why, because next year, based on a future value of $350,000, our purchasing power has diminished.

This relationship between present and future value is why some very bright people concluded that real estate investors must consider the timing of receipts from their real estate investments as important (if not more important) than the amount received. That is, due to time value of money, given the opportunity to collect some money within a shorter time could be wiser than collecting a larger sum of money in the distant future.

Let's look at a scenario. Suppose we're given the choice to invest $300,000 in one of two investment opportunities knowing we can collect either (1) $350,000 in one year, or (2) $400,000 in two years. Which yields us the better return on our investment? The answer may surprise you.


$350,000 in one year yields us 16.7%
$400,000 in two years yields us 15.5%

Without consideration for time value of money, a real estate investor might have opted for the larger sum and lost money. This is why the analysis of a real estate investment requires an understanding of the time value of money. Remember the concept. Inflation erodes purchasing power over time and therefore makes having $10 today preferable to having that same amount one year or five years from now. With time value of money computations, you can measure the present value of each and make wiser real estate investment choices.

by James R Kobzeff ,the developer of ProAPOD Real Estate Investment Software

How Does The Stock Market Work?

Many people who are beginning to invest or even thinking of investing are wondering how the stock market works. There is a large learning curve when it comes to learning how the stock market works especially when you take into account things like the Dow Jones Industrial Averages and the like. The stock market itself plays a largely important role in the overall economy in our country and while it may not personally affect you in a visible sense, it does affect the economy around you.
Let's pretend for a moment that you wanted to start your own business. You of course will need a bit of capital in order to do this and in an attempt to do this you have a number of options to choose from. You can opt to go to the bank for a loan, but chances are, that unless you have perfect credit this is not a viable option. You can also attempt to attract venture capitalists, but this is an extremely difficult task for almost anyone. As a result, the most viable option to start your business is by selling portions of ownership in the business. So you take your business, figure out the value of the business and then split it up into "shares" of the business. You as the main owner still get to run the business and get paid for it, the other owners that now own shares in the business also want to get paid. They are paid for their business in dividends.

This allows in investor in exchange for dividends to become a partial owner in the business without all the hassles with running it. This is what a share of stock is; it is a partial ownership in a company in which you do not have to do anything for it on a day today basis.

While you can sell these stocks to your friends, selling them to strangers is a difficult task. Well, not actually a difficult task, because that what a stock exchange is; a stock exchanges is a place for different investors to get together in order to buy and sell shares of someone else's company.

The biggest factor which affects a stock's value is its demand. If a stock is popular because a company regularly pays out dividends or even if they are going to be bought out, then the demand for the stocks increase and with that demand so does the stock's value. Furthermore, the lower amount of stock available in a particular company, the more that demand will affect its value.

Likewise, when people are trying to unload or sell their stocks in a particular company, the price goes down. The goal of any true investor is knowing when to purchase a certain company's stocks and knowing when to sell them before the price goes back down. As time goes by, you will develop more experience in dealing with this and will also develop your own investment strategies to ensure you are making the most profit you can in a given period.

Investment article
by Ray Baker
The Author's website Stock Market Investing For Dummies features articles, tips and advice about investing in the stock market

Criteria investors should follow for better stock performance

Many a time stock market investors do not know what is the criterion behind choosing stocks of a particular company. Stock performance depends upon a number of factors. Following are a few points which should be kept in mind before deciding to buy stocks of any company.
Earnings-Earnings reflect a company's profit. It is advisable to select companies which have substantial earnings that too not only at present but had been consistently earning for a long period of time. Also, source of company's earning is important. Companies receiving their earning from regular operations are better than companies displaying earnings from one-time occurrence. Firms having low dividend payout ratio indicates that it is re-investing a major part of its earning, thus investors should give more weightage to such organisations, while selecting stocks.

Price-earnings (P/E) ratio- It is advisable to identify those companies which have a lower P/E ratio than other companies in its industry. This is because such discounted stocks of companies are not generally affected by slowdown in the business cycles and pick up fast during favourable times.

Book value- It is advisable to select stocks trading at atmost 1.3 times book value. This is because the lower the stock price in comparison to the book value per share, the better would be the value.

Return on equity- Return on equity indicates the well-being of any company. It is advisable to choose companies which posses higher return on equity as compare to other companies in the industry. Generally, a value of 15 percent or higher is considered good.

Debt-equity ratio- While buying stocks of a particular company, it is advisable to choose companies which have low debt-equity ratios. Below 35 percent is believed to be fine.

Price volatility- It is advisable not to buy stocks which are volatile in nature. Volatility is often related to risk. It is better that stocks move in consistency to the overall sense.

Investment article
by Nisha Acharya

Calculating Your Net Worth

Have you ever heard of wealthy people being described as 'worth X (amount of dollars)'? Maybe, this celebrity is worth 5 million dollars, or that heir is worth 35 million dollars. This is called their net worth, and believe it or not, we all have one. Some people have a 0 net worth or a negative net worth, but it's still their net worth. Knowing your net worth may be useful from time to time when filling out some financial forms or when planning your finances.
Your net worth is equal to your total assets minus your total liabilities. To begin, add up all of your assets. You might be surprised at how many assets you have. The obvious are your house and investments including any retirement accounts such as a 401K or IRA, stocks, bonds, mutual funds, commodities, and real estate. Your vehicles are also assets, but make sure you only include their fair market value. In other words, if you were to sell them today, how much would you get? Some other assets include high valuables such as antiques, collectibles, and valuable art.

Next, you will need to calculate all your liabilities, or simple debt, money you owe. This includes the amount you owe on your mortgage and vehicles, whatever you owe on items you financed such as computers and other high price items, credit card debt, student loans, and absolutely any other debt you owe. A liability means you are held liable to whoever you borrowed the money from. This money is not yours which is why it's subtracted from your assets.

Finally, subtract. Assets minus liabilities equals equity. In other words, subtract what you owe from what you have and you get what your worth, your net worth. Figuring out your net worth is a good way to see where you are in your life financially so you can set goals and make a plan of action. If your net worth is a negative number, this means you are in bad debt. Even if you get a number close to zero, you are still nowhere near where you should be for retirement. You can't live off of social security alone unless you don't mind downgrading how you are living now considerably.

Take your net worth as a starting point. If you have a net worth of $100,000 or more and you are under 30, you have a good start. Keep saving and investing your money so that you are at least able to maintain your standard of living when you retire. If you have an equal net worth and you are much older, you may need to be a little more aggressive in your savings, but not so aggressive in your investments to avoid losing money. Let your net worth now be a starting point for the large nest egg in your future.

by David Tang

What is the winning stock portfolio for investors?

Yes, it is very crucial for stock market investors to know what the winning stock portfolio is. Generally there are two investments strategy followed by the stock market investors. One is growth and another is value investing.

Growth stocks are the stocks that usually have above-average prospects for long term growth based on measures like dividends, earnings and book value. Growth stocks are high priced but their prices appreciate in the future ensuring the investors that they get their reward. However, growth stocks yield lesser dividends.

On the other hand value stocks are low priced in relation to their earnings, dividends and book value, but they yield above-average dividend income.

Let us assume that Mr. X belongs to the group of growth investors who look for stocks that outperformed the growth rate of the overall market. Growth stocks are more volatile in nature and focus on capital appreciation. Stock market investors like Mr. X consider that a company's present earnings are not as important as the expected growth of those earnings.

Another group of investors like Mr. Y are value investors who seek to buy valuable assets at sale prices. Value stocks have the tendency to lag the overall stock market during market upswings and to outperform it during market declines. Value stocks are more stable in nature as they give more dividend income because many companies pay dividends even when stock prices are declining. Value investors like Mr. Y are concerned to identify stocks that are trading at lower prices than their actual prices and do not bother about the expected future growth of the company.

It is advisable to achieve the right mix of growth and value stocks either by combining growth and value oriented mutual funds or by identifying a fund that already includes the two types of investments. Growth stocks yield capital gains, which receive preferred tax treatment whereas value stocks give the investors more downside protection.

by Nisha Acharya ,a blogger who frequently writes on various topics.

Several Important, Common Stock Ratios for Stock Investing

There are several important, common ratios stock investors can use when evaluating stocks including small cap stocks, value stocks, penny stocks and growth stocks. Ratios are tools for investors based on a company's financial or other information. There is no one magic number, but as a whole ratios can be powerful when used in combination.

One of the most well known, if not the most well known stock ratio is the P/E ratio, known as just the PE ratio or Price to Earnings ratio or even known as the earnings multiple/ multipler. The P/E ratio of a stock is a measure of the price paid for a share relative to the annual income or profit earned by the firm per share. A higher P/E ratio means that investors are paying more for each unit of income. Quite simply, the P/E ratio is calculated by dividing the stock price of a share by the annual earnings per share. Annual earnings per share is known as EPS. Generally, stocks with higher earnings growth will have a higher P/E and those with lower earnings growth will have a lower P/E.

Another famous stock ratio is the Price / Sales ratio or the P/S ratio, or price-to-sales ratio. It is another valuation metric for stocks. It is calculated by dividing the company's market cap by the company's revenue in the most recent fiscal year, or the most recent four fiscal quarters. Another way to calculate the P/S of a stock would be to divide the per-share stock price by the per-share revenue. The P/S ratio can be used to determine the value of a stock relative to its past performance. It can also be used to determine the relative valuation of a sector or the market as a whole.

The price-to-book ratio, or P/B ratio, is another common ratio used when evaluating stocks. It is a financial ratio to compare a company's book value to its current market price. Book value describes the amount of the company held by the shareholders. To calculate the P/B ratio, stock market investors should divide the company's market capitalization (market cap) by the company's total book value from its balance sheet. This is another way to find the best stocks out of the large group of value stocks out there.

Another common stock investing ratio is the PEG ratio. The PEG ratio is also known as the Price/Earnings to Growth ratio. It is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the company's expected growth.

In general, the P/E ratio is higher for a company with a higher growth rate. Thus using just the P/E ratio would make high-growth companies overvalued relative to others. It is assumed that by dividing the P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rates.

by Gusher Stocks

Types of Stocks: Penny Stocks, Value Stocks, Growth Stocks, Technology Stocks, Small Cap Stocks

Types of Stocks: Penny Stocks, Value Stocks, Growth Stocks, Technology Stocks, Small Cap Stocks by Gusher Stocks

There are several types of stocks in the stock market. We can not address all of them in this article, but we will address a few including penny stocks, value stocks, growth stocks and technology stocks.

A penny stock is a common stock that trades for less than $5 a share and are traded over the counter (OTC) through quotation services such as the OTCBB or the Pink Sheets. There are several stocks that trade on the NASDAQ and AMEX that trade under the $5 level as well. Penny stocks generally have market caps under $500M, trade under $5.00 per share and are considered speculative, particularly those that trade on low volumes over the counter. Other terms used to describe a penny stock include microcap stocks, nano caps and small caps. Many consider penny stocks risky and speculative. Investors considering penny stocks have to evaluate their risk tolerance.

Value Stocks are those stocks that trade at a low price relative to its fundamentals and considered undervalued by a value investor. Fundamentals include dividends, earnings, revenue, balance sheet items and other. Some characteristics of a value stock include a high dividend yield, low price-to-book ratio and/or low price-to-earnings ratio. Value stocks are created out of a market inefficiency creating a company that is trading for less than they are worth and thus creating value. Value investing was established by Benjamin Graham and David Dodd.

Growth stocks are stocks that appreciate in value and yield a high return on equity, known as ROE. To calculate ROE, divide the company's net income by the company's equity. As a rule of thumb, for a stock to be in the growth stock class, analysts expect to see at least 15 percent return on equity. During some years growth stocks do well, in other years value stocks perform better.
Several technology stocks are traded on the NASDAQ. Technology stocks are some of the more popular stocks in the market as investors see them as exciting investments. There are several technology stock sectors including the Internet, Cable & Satellite, Computers & Chips and others. Technology stocks were very popular in the late 1990's. Today, technology stocks are still a highly covered segment of the stock market.
Small cap stocks, also known as small caps are a popular stock market segment for stock research by investors. Small cap stocks are stocks of companies with a market capitalization of less than one billion dollars.

Microcap stocks are stock of companies with a market capitalization of less than $250 million. Both generally, have more risk than Blue Chip stocks represented by the Dow Jones Industrial Average. It is important to understand market capitalization. Market cap is a measurement of corporate or economic size. It is calculated by multiplying the number of shares outstanding times the share price of a public company.