Bernie Madoff was sentenced to 150 years in prison. To send him off, here are a few tips for Madoff on going to prison; bullet points are borrowed from a prison blog Top 10 prison survival:

1. Keep your mouth shut. Shouldn't be a problem. Madoff ran his scam for years before he was eventually caught. In fact, the folklore around Madoff was that if an investor cornered him at a public function and pushed him to talk about their investment, he would pick up the phone and have their investment canceled.
2. Don't get involved with gambling. Running a ponzi scheme is a lot like gambling - you never know when the house is going to call in your chips. For Madoff, that day came on December 11th 2008 when FBI officers took Madoff into custody. Hopefully he has had his fill of gambling.
3. Don't borrow unless you can pay back. Not so good with this one. If you borrow in prison, the interest rate is phenomenal and payment means are, well, lets say nontraditional. Madoff has left investors with a whopping 65 Billion dollars in unpaid debt, likely much of it will never be fully recovered.
4. Develop a skill that is useful to other inmates. I'd recommend teaching United States Fraud laws as I am sure he is well versed with it... now.
5. Don't be a loner find a group. Bernie has the gift of the gab; the first group he targeted when starting out his scam were people from the New York Jewish community. He probably won't find a huge population of older Jewish men in prison, or really want them to have his back though.

To read other post from buyingvalue click here.

I have had a bit of a chance to catch up on some reading recently, and one of the books I read through was Garrett Gunderson’s Killing Sacred Cows: Overcoming the Financial Myths That Are Destroying Your Prosperity. In Gunderson’s book he suggests individuals look at investing in the same way banks do. As Gunderson puts it, banks mitigate investment risk in personal loans by doing the following:

• Check your credit
• Secure their investments with collateral
• Require a down payment
• Determine the interest rate
• Determine the payment
• Determine the time period for each investment
• Verify your work history and income
• Have an exit strategy that allows them to be profitable, or to at least return their initial capital, in almost any scenario imaginable
• Transfer their risks to the borrower in any way possible

The goal then from the bank is to remove risk, and securing the loan all by investing in the individual, knowing that individual, and creating firewalls to secure the investment.

Much has been written about the success of Warren Buffett and Berkshire Hathaway (BRK.A), but little on his failures. I think a great deal can be learned by analyzing the failures of successful people. By studying these failures hopefully we can avoid them ourselves. To read more about Buffett's investment strategy read my other post.

The Deal

On Friday, February 6, Puget Power (PSD) announced the closing of the sale of its core business at $30 per share. Regular readers of my blog will recall that I recommended a purchase of PSD in November of last year at $18. If one includes the $.25 dividend payment from Jan 16, and the pro rata dividend of $.04, this transaction returns $30.29, or a profit of an impressive 68%.

While I am very happy to have a 68% win on a 3 month investment (and hope several of you are also counting your fortunes this weekend), I think this is a good time to turn around and look at the trade again to see if it was a wise trade or a bit of wisdom and a bit of luck.

After much searching I found a stock screener for Canadian stocks (more on this in another post). I was able to assemble a Graham style screener with the following criteria:

• Exchange TSX
• P/E less than 15
• Dividend Yield > 3.5
• Average EPS > 33%
• Revenue > $550M
• Current Ratio > 2
• Price/Book Ratio less than 1.5

Up popped two companies, one of which is Methanex (MEOH). Showing up on the screener is not sufficient to merit my investment. So here is the abridged version of my analysis. Before diving in though, I am compelled to say that I never analyze a company with the intent of buying and selling it within a few months. Also please, please this is my analysis, any investment you make should supplement what I present here and possibly involve consulting your own investment consultant.

Some years ago I was struck by how many false things I had believed, and by how doubtful was the structure of beliefs that I had based on them. I realized that if I wanted to establish anything in the sciences that was stable and likely to last, I needed - just once in my life - to demolish everything completely and start again from the foundations.

-P. 1, Rene Descartes, Meditations on First Philosophy

I borrowed the idea for this post from something similar that I saw in the Investor's Almanac. (Thanks, Investor's Almanac!)

With President-elect Obama's swearing in ceremony coming up in about 25 days, it is somewhat interesting to have a look at what the first year in office typically looks like for new U.S. presidents (click to enlarge images).

We made it to the final installment of our Graham vs. Greenblatt series (see the first four installments here). Throughout the series, we examined each of the ratios that Joel Greenblatt recommended in his book, The Little Book that Beats the Market. The final posting will look at how Greenblatt draws the ratios together and bring this all back around, so lets get into it.

What Is It?

Greenblatt says (from p. 53-54, The Little Book that Beats the Market):

In our last post, we looked at Joel Greenblatt's use of Return on Capital as a means of identifying quality companies that know how to turn a small investment into a substantial return. In this posting, we will look at his next criteria: Earnings Yield.

What Is It?

EBIT
Enterprise Value

In his book, The Little Book that Beats the Market, Joe Greenblatt advocated a simple method for attaining substantial stock returns. In this series, we are looking at the particulars of this investing theory to both understand why he advocated the elements of this theory and what Benjamin Graham would have thought of the approach that Greenblatt was advocating. The next part in this series looks at Return on Capital or ROC.

What Is It?

Earnings Before Interest and Tax ((EBIT))
Net Worth Capital + Net Fixed Assets

Joel Greenblatt is a modern value investor. His approach, like Graham's (as we outlined in our previous post) is to find value companies, but he also wants companies that show potential for the future. The first set of criteria looks very similar to Graham's.

What Is It?

1. Establish a minimum market capitalization (greater than $50 million is recommended).
2. Exclude utility and financial stocks and any foreign companies (non US).

What Does It Tell Us?

Market capitalization = Number of outstanding stock * Current price of stock

Benjamin Graham, Warren Buffett Joel Greenblatt and David Dreman are among of the most popular contrarian value investors in the world. In my blog, I endeavor to talk about investments I make, or don't make, on stocks and bonds using the principals of value investing. The following series describes these principals.

Benjamin Graham passed away in September 21, 1976, well before Joel Greenblatt graduated from Wharton in 1979, but a linkage between the two men's investment theories is not difficult to find. Greenblatt, during his time at Wharton, went to great lengths to study the value approach that Graham had devised (there are stories that Greenblatt entered vast amounts of stock data by hand into a mainframe and then ran tests on it using Graham's system). He saw the benefit that could be returned from purchasing companies that were inexpensive.