Here is a link to Gene Sperling's opening statement:

There are some very interesting quotes that help to frame Treasury's philosophy re: Systematic risk and executive compensation in this statement.

Corporate governance is a topic that many of us tend to ignore, leaving it to the institutions or corporate raiders that are looking to influence the strategic direction, the capital allocation, the corporate structures or the compensation structures of business.

Yet, the way business is run should matter to us all. We need the goods and services it produces, or the employment it provides. As shareholders, whether directly or through our 401-Ks or pension plans, the long term wealth that corporations create is important for our old age dignity and in fact, the national prosperity. Hence, the governance of corporations affects us all whether customer, employee, citizen or shareholder. The effectiveness of corporate governance is indeed a factor in determining whether companies survive and prosper or stumble and fail.

Corporate governance has always been an important part of value investing. Obviously, most of us hate waste when precious company resources are squandered to build executive dreams rather than shareholder capital. Misallocation of capital and failure to optimize returns on capital have led me at times to conduct activist campaigns with some managements. This can lead to stormy verbal exchanges, but occasionally, has led to real change in management strategy, abandonment of some projects, and greater focus.

Though managements can ignore shareholders for a period of time, the annual meeting of shareholders allows investors an opportunity to vent, to express opinions, and to make suggestions.

“By prevailing over all obstacles and distractions, one may unfailingly arrive at his chosen goal or destination.”- Christopher Columbus

Needless to say, it has been an incredibly tumultuous environment. The economic outlook, despite a few specks of light in a dark sky remains quite bleak. Despite this, I have been encouraged by valuations, by the tape action, and by the prevailing sentiment that continues to express doubt in the strength of this rally.

With less than a week to go for 2008, the Financial Accounting Standards Board (FASB) has a proposal, which it has thrown into the arena to address the problem of fair value.

Mark-to-market accounting has stirred up a very ugly debate between its adversaries and its proponents. Mark Sunshine, in a Seeking Alpha post some months ago noted that:

For two days last week, it was my privilege to attend the Commodity Investment World Conference through the courtesy of Seeking Alpha. A broad spectrum of commodities markets, their economics and approaches to these markets were discussed.

Commodities conferences historically have been the denizens of inflation hawks. Theories of Malthusian catastrophes as population and consumption growth outpace agricultural production have always suggested dwindling supplies with the development of shortages and hence, higher prices for commodities.

My sincere apologies to readers I have disappointed in my absence over the last several months. As our business has grown, time has certainly been at a premium and unfortunately, we have neglected our responsibilities to this blog. We hope to mend our ways with more regular postings of commentary regarding markets, economies, analyst upgrades and downgrades, as well as independent analysis of interesting companies.

Some of you may be aware of our regular monthly commentary to Marketthoughts, Henry To's excellent subscription service. Henry, who is currently working on his MBA at the UCLA Anderson School is a CFA charterholder as well as an actuary. Henry's thought provoking analysis and commentary is insightful and ruminative. His productivity in his subscription service despite his full time efforts as an MBA student is a real inspration to me. I hope to aspire to his level of publishing productivity!

Business and investing is all about people. Great ideas are not just about numbers, and are not just about metrics. Developing an insight into how a business is run is easily translated into what creates a business' competitive advantage. Those sorts of insights are best garnered by interviewing and observation of managements, their competitors, and their customers.

Prior to the onset of Sarbanes-Oxley and Regulation FD, most analysts spent considerable time in interviewing of CEOs and CFOs of companies under their coverage. Unfortunately, in today's world where selective disclosure fears abound, far less time is spent in training analysts how to interview, and what sort of questions can be asked.

Exchange traded notes [ETN] are a fairly new investment product that share some characteristics of exchange-traded funds, or ETFs. They are simply direct debt obligations issued by a bank or investment firm rather than an interest in a pool of securities that define an ETF.

A bank simply issues a note and promises to pay the holder whatever the total return of an index is over the maturity of the note, less a management fee. The bank may or may not use the cash to invest in the index...it matters not, what an investor should care about is the return on the note which is the return of the index less fees. So long as the bank is solvent, investors will get the returns that they are promised.

I am a complete sucker for investment books. My wife accuses me of owning several thousand books that have essentially the same title, usually some variant of Value Investing, valuation, or intrinsic value, or securities analysis. Of course, I have every Buffett or Munger book known to man as well as everything about or by Benjamin Graham.

Vahan Janjigian, a fellow CFA, is executive director of Forbes Investment Advisory Institute and publishes a number of newsletters with Forbes. He also has a blog and serves on the investment committee of a large RIA. Dr. Janjigian's book is a gingerly attempt to criticize some of Buffett's mistaken investments, and controversial points of view. I think the book is more successful with the latter than the former.

As one would expect, deterioration in operating margins will occur in economic slowdowns. Marginal competitors frequently will try to clear inventories at ever lower margins in order to generate cash flow. I am particularly interested concerned if a company exhibits not only operating profitability deterioration but also a build up in working capital intensity (i.e. accounts receivable and inventories may be building and cash is not coming in as quickly as one would like.) Finally, if at the same time, the company is building capital expenditures, free cash flow generation can be impeded.

In this screen, I am taking trailing four quarter observations and comparing these to trailing four quarter observations lagged back one year prior. I have confined my screen to non-financial stocks in the S&P 1500.

This post was written by my colleague and friend, John Moran.

In our last post, we discussed the notion of recurring revenues as it pertains to companies in the industrial sector. The genesis of this idea was a reaction to the prevailing wisdom of many investment strategists to find recurring revenue streams in consumer staple or health care stocks. It is my contention that there are recurring revenue themes across many sectors that remain unrecognized in the marketplace.

Economic uncertainty generally steers investors toward steady eddy businesses such as foods, consumer staples, healthcare and utilities. However, what investors should be seeking is recurring revenues, predictable and stable revenues with a high degree of certainty.

Recurring revenues are highly desirable and frequently carry a higher level of margin than capital equipment businesses. Even industrial companies can demonstrate a high level of recurring revenue and a fairly low level of capital intensity, both very desirable qualities for these times.

Asymmetric information gets to the root of Friday's market problem in Bear Stearns (BSC). George Akerlof, Michael Spence, and Joseph Stiglitz won the 2001 Nobel Prize in Economics for their work in this area.

Akerlof, who wrote the earliest paper in this area, "The Market for Lemons: Quality Uncertainty and the Market Mechanism" describes the market for used cars as a market that is distorted by quality uncertainty. Owners of decent used cars are unable to get a "decent" price to make selling these cars worthwhile, therefore they don't place these cars in the market. Because "quality" is not readily ascertainable, the quality of traded automobiles should be sub-average.

Growth has a seductive charm. There is a widespread belief that momentum drives growth and that a succession of knocking down challenges and consequent victories is what characterizes a successful business. But sustained growth is seldom straightforward. Sustained growth frequently occurs as a result of changing course, breaking rules, and changing the rules of the game. I think some of the rules have changed for the semiconductor capital equipment companies.

Years ago, within the semiconductor industry, there was a strategy that merging companies would result in a reduction in the historic overcapacity issue. This trend certainly developed as Texas Instruments (TXN) sold its DRAM capability to Micron and Hyundai and LG merged their operations. Small players would be wiped out or have to find niches to survive.

Many years ago, I was introduced to Alleghany Corp (Y) by a lucky accident. I had previously worked for the Canadian subsidiary of Lincoln National (LNC) which had just sold off its title insurance subsidiary, Chicago Title to Alleghany at what appeared, at least to me, to be a bargain price.

Housing back in the early to mid-80's was reviled as much as it is currently, in fact, in our mortgage department, we were recipients of people's keys that were being mailed in as people were giving up their homes. Title insurance was considered a terrible red-haired step child at the parent company with little chance of earning a return.

There is an interesting dichotomy that exists in capital markets. Not so many months ago, pre-August, there was a widespread perception that we were running out of stocks. Private equity interests were gobbling up anything that had a reasonably steady cash flow. Such companies were easily leveraged by the accommodating banks and investment bankers. Needless to say, the music stopped in the takeover waltz (as all of us can see, Chuck Prince has stopped dancing). In one of the more memorable, and now infamous quotes that have come out of this capital market era, Chuck told the FT:

When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.

One of the tech sectors that makes the most sense to me under most economic scenarios is IT Services. The notion of consultative help - rather than keeping permanent staff - is attractive in any slowdown scenario.

Cognizant (CTSH) was clipped on Thursday on mixed fourth quarter guidance. Cognizant, as well as other Indian IT services providers enjoy an attractive cost advantage that could benefit from additional demand from an economic slowdown. Cognizant is known for its high quality consultative approach. What seems to concern investors about the outlook is commentary from CTSH that it was not seeing a fourth quarter "budget flush." As most of us have experienced, managers have a tendency to spend out whatever remains in their current year budget to ensure that this becomes the base for next year's budget. The flushing through of budgets does not appear to be occurring for CTSH. I believe that one area of particular concern for IT providers is the spending plans of financial services companies.

Interesting goings on in the financials. UBS (UBS) got the ball rolling (and a few heads) with the announcement of a write down of SFr 4 billion resulting in a forthcoming loss for the third quarter. Credit Suisse (CS) also taking its truth serum, announced up to SFr 800 million in write-downs but its third quarter will still be showing black ink.

Citigroup (C) also assesses its credit woes, subprime writeoffs, and consumer linked weakness and announces its $5.9 billion loss but a return to normalcy for the fourth quarter.

It is interesting to see how badly politicians can screw up supply-demand imbalances. As a Canadian who endured Canada's National Energy Policy of the early 1980's, it worries me to see the proposed royalty changes that the Alberta government panel has recommended. Our American friends who endured last year's Hallowe'en surprise are swearing to me (both in an affirmation sense as well as a profane sense) that they have had it with Canadian energy policy. It''s not just individual investors who are incensed.

On Friday, the EnCana Corporation, (ECA) the Calgary-based natural gas and oil sands producer was quoted as saying that if the panel's recommendations for draconian increases in royalties are implemented: