The Stingy News Weekly (01/25/02)
The Markets This Week
DOW 30: 9,840.08 +0.70% to a P/E of 28.7
TSE 300: 7,659.29 +0.72% with a negative P/E
The Value View
Dow at a P/E of 20: 6,857 (-30.3%) Poor Value
Dow at a P/E of 15: 5,143 (-47.7%) Fair Value
Dow at a P/E of 10: 3,429 (-65.2%) Good Value
Don't get burned by PIPEs
"Private investments in public equities are a way for cash-starved public companies to raise money. But shareholders should beware."
The great eight
"The goal was to find companies with sound fundamentals - and not necessarily rapid earnings growth - for investors with long time horizons. According to a study by the Leuthold Group, a Minneapolis research firm, a $10,000 investment in large-company growth stocks in 1974 would be worth $405,500 today. That's impressive, but consider this: If you had put the same amount in large-cap value stocks, you'd have $639,200."
Active fund trading costs remain high
"Many individual investors believe that professionally managed funds have a trading cost advantage over them, but this is not the case. A recent study suggests that smaller volume traders have gained the most from recently shrinking commissions and smaller bid-ask spreads from regulatory changes."
"Buoyed by hefty pensions and irked by the tax hit awaiting their heirs on their undepleted RRIFs, a growing number of RRSP holders are drawing down their registered accounts, paying some tax and putting the balance - or, rather, its borrowed equivalent - into growth stocks. But how much risk is it worth to outsmart the taxman?"
NASD Regulation charges Credit Suisse First Boston
"NASD Regulation, Inc., announced today that it censured Credit Suisse First Boston Corporation (CSFB) and directed it to pay $50 million in monetary sanctions for taking millions of dollars from customers in inflated commissions in exchange for allocations of "hot" Initial Public Offerings (IPOs)."
Beyond the pale
"No fewer than 38 actively managed diversified funds lost 75% or more during the bear market from March 24, 2000, through September 21, 2001. These results go beyond disappointing. They're catastrophic. Sure, the tech-heavy Nasdaq Composite index rebounded 37% from the market's bottom to December 17. But that's cold comfort for anyone who invested in these funds near the peak."
AOL Time Warner's new math
"Instead of adding up to the world's most valuable company, this merger has subtracted $155 billion of market cap. CEO-designate Richard Parsons promises to do the numbers a different way."
Rosen the gadfly of accountancy
"Among the CICA's beefs with Mr. Rosen is his persistent public denunciation of Canadian accounting standards. He describes them as a 'massive Ponzi scheme,' and says they attract fraudsters to this country. He's equally critical of the major accounting firms for 'protecting one another with an unspoken secret pact,' as well as the 'bozos' they employ to perform financial audits for public companies."
The trivia questions this week are:
Q1. Who said "An investor who has all the answers doesn't even understand the questions."?
Q2. Who said "I'd be a bum on the street with a tin cup if the markets were always efficient."?
Q3. Who said "Success is getting what you want. Happiness is wanting what you get."?
The answers for last week's trivia questions are:
Q1. Who said "We all know that active management fees are high. Poor performance does not come cheap. You have to pay dearly for it."?
A1. Rex Sinquefield
Q2. Who said "The hardest thing in the world to understand is the income tax."?
A2. Albert Einstein
Q3. Who said "For those properly prepared in advance, a bear market in stocks is not a calamity but an opportunity"?
A3. John Templeton
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