This is a follow up to my post on April 23^rd and highlights just how bad things have actually become. Below are the latest S&P 500 reported earnings as of the close of business on 5/06/09:

Below are the latest S&P 500 reported earnings as of the close of business on 4/21/09. Click here to access:

STANDARD & POOR'S INDEX SERVICES

In my article published in December, I took a simplistic approach of predicting a reasonable level for the Dow Jones Industrial Average (DJIA). I looked at the DJIA before the impact of the housing boom, took the DJIA low of 7,286 on October 9th, 2002 as a starting point, and then predicted that a further correction downwards would occur to reflect a negative trend in earnings, especially given the lack of any stimulants this time round to prop up earnings.

So am I please to see that the DJIA is hovering around my predicted level? I would say yes because I now believe that stock prices are approaching reasonable levels. Is there a chance the market will sink lower – sure! But as we all know, no one can predict the market bottom with certainty. What I do know is that if you buy value stocks now, long term returns are most certainly for the taking. So with that, here are some value stocks I would suggest considering:

See part 1 and part 2.

This is the third and final article regarding Off-Balance-Sheet Items (OBSIs). As mentioned in part 2, the National Association of Insurance Commissioners (NAIC) is currently considering a proposal that would empower individual states to decided whether or not reinsurers not-authorized or accredited to do business in their state, will need to post collateral in respect of their share of reported claims and reserves. I believe the proposed changes raise some interesting questions.

Back in the day, when I was studying to become a South African Chartered Accountant (CA), one of the areas that received a lot of attention was the Code of Professional Conduct (COPC). I remember the emphasis placed on being objective and the need for integrity, and how these required values would distinguish us from the rest of the pack. With these values in place, the public could effectively place complete trust in us, knowing that we would do our best to identify activities that were not in compliance with relevant accounting standards.

The American Institute of Certified Public Accountants (CPA) has a similar COPC. In light of the recent financial crisis in the banking sector and the Bernie Madoff scandal, I think there is a need for us as a profession to revisit these two values.

See part 1 here.

There has been much debate over whether or not the repeal of the Glass-Steagall Act contributed to the current financial crisis. This Act was originally put in place to separate commercial and investment banks because of reckless actions taken by commercial banks in the 1920s. As a result of these reckless actions, when the stock market bubble burst in 1929, commercial banks’ exposure to Wall Street, together with a lack of deposit insurance and other backstops, brought the banking industry to its knees. And thus it’s easy to see how the repeal of this Act in 1999 is linked to the current financial crisis.

In pitching his bailout plan to congress, Paulson promised greater transparency regarding the use of those funds. “We need oversight,” Paulson told lawmakers. “We need protection. We need transparency. I want it. We all want it.'' Then he reneged on that promise, forcing Bloomberg to file a lawsuit in order to gain access to information so as to determine where taxpayers’ money was being utilized and what securities were bring pledged in return. This led me to thinking about the murky world of Off-Balance-Sheet Items (OBSIs).

When one invests in a company, one ideally does due diligence of some sort to assess the risks faced and the returns you likely to be realized. However, it is clear from recent events that shareholders are not being provided with all the relevant information needed to make informed decisions. If there was ever a time for greater transparency when it comes to Financial Statements, now would be that time given that the public’s confidence in financial institutions has all but been eroded.

Obama promised change. The majority of the U.S. wanted change. And so it came to be that Obama was elected the next President of the U.S. Yet even before he assumes office, Obama’s ‘change’ seems to be more a case of staying with known individuals versus making full-scale personnel changes. For one, Obama has nominated Tim Geithner as Treasury Secretary. This is the same person who took part in the ‘rescue’ of Bear Sterns and AIG, and was involved in the decision to allow Lehman to collapse. All of these actions have been a disaster for us as taxpayers, never mind the financial markets or the Federal Reserve as an organization. It also appears that Obama is set to announce on Monday that Robert Gates will stay on as Defense Secretary. We all know what a clear winner our efforts in Iraq and Afghanistan have been to date.

The same hesitation to changing investment strategies seems to be in play in the stock market lately. Many people were burnt by the recent crash in the market, selling far too late in the downward spiral after becoming tired of seeing their portfolios diminishing day in and day out. I’m sure many decided that they would be more cautious this time, promising to change the way they invested by doing due diligence before investing again.

Last year I decided to take the plunge and became a US citizen. What a moment it was knowing that I was now a part of the greatest democracy in the world, or so I thought. My joy of being part of a democratic election process this year has been offset by the undemocratic actions that took place in the stock market. But I am getting ahead of myself. Let me take you back to the beginning of my stock market experience.

In 2006, I saw opportunity in the stock market and purchased Playtex and Mastercard (MA) shares, going along with the philosophy that you should only buy stocks of companies that you are familiar with. My timing was great and I realized good returns, but those returns would have been even better if I had known about charting and identifying trends. However, it seemed like there was no end to making money in the stock market so towards the end of 2007, I purchased shares in Citigroup (C). I was a cardholder and thus thought I had insight into their business model. Unfortunately, this is where my undemocratic experiences began.