Financial Acumen

In Praise of Suze Orman

From my experience, Suze Orman is excellent at most of the basic issues of personal finance - debt management, cutting up credit cards, asking banks to reduce or eliminate unwanted fees.

However, when she dabbles in other fields, it becomes clear that her knowledge has its limits. While the basics of personal finance are key to any successful investor, they are not synonymous with developing an investor's acumen. I would advise any of my friends that have yet to save a dime for retirement, or would like to know if they should open up what type of account, or ask what the difference between a 401K and a Roth IRA, to pick up a book by Suze Orman to get the lingo down.

When it comes to stock picking, macro-economic trends, Fed policy, and other investment affairs, there are much more credible authors than Orman. The learning curve also becomes much steeper at this point.

15 Deep Value Plays

Wow, thanks Cam! I didn't know Yahoo Finance had such an outstanding stock screener. SKX looks excellent, thanks again!

Morningstar's Biggest Error: The Perils of Youth

Marc,

Thanks for the fascinating read. I think anyone in this business should rely on their own analysis for the bulk of their decision-making, and have the analysts such as Morningstar corroborate at most. Sometimes, they may spot a gap in logic that you may have overlooked...but in no way would I ever make more than a minuscule side-bet solely based on what any analyst said, even Buffett.

Is Economic Expansion Dependent upon a Healthy Banking Sector?

This is not a bad article, but the mention of Circuit City weakens it:

"Now, we can move on to Circuit City. The rumor was that Circuit City had three parties that were potentially interested in acquiring the company. Apparently, none of them was willing to pay a price sufficiently high that would exceed what Circuit City thought it could gain by selling off inventories and closing its doors. Again, here is a bet the potential acquirers were not willing to make - a bet on the value of the assets of Circuit City. This seems to be the other side of the Bank of America / Merrill Lynch transaction: How can a company buy someone else when they don’t have a good feel for what the underlying assets are really worth?"

I can name at least two reasons off the top of my head why Circuit City was forced to liquidate:

1) Business conditions going forward are not at all friendly to consumer discretionaries - this could result in unforeseen inventory write-offs completely unrelated to the credit crisis, but very much related to the ongoing recession

2) Best Buy has a stranglehold in this segment of retailing, nearly reaching saturation on its own, to say nothing of Walmart, Kmart, etc.

Besides this, I completely agree with CautiousInvestor.

Using Sector Weight Analysis to Identify the Next Bubble

Good article. It's nice to see ideas about opportunity during these gloomy times.

I must say, I find it hard to believe that basic materials have fallen throughout these past 5 years. That would seem ripe for a pullback, if not an outright boom, after the economy rights itself. Well done.

Want to Reform Wall St.? Bring Back Partnership Investment Banks

Agreed with most of the comments. Ownership is the key to our problems today, and there are precious few individuals who actually have a stake in how things turn out for their company, or for the public.

Why It's Wise to Sell on Dividend Cuts

@Bob Lunn,

"What is your way of determining if a stocks dividend is going to be cut?"

I'd check out the payout ratio. The logic is very similar, in that if the payout ratio increased by a significant amount, like say, from 20% of earnings to 85%, or even over 100%, then you have a key indicator of an unsustainable dividend. Such numbers are published in the S&P STARS reports that are generally free for anyone with a brokerage account.

Why It's Wise to Sell on Dividend Cuts

Exactly what I was thinking when I read the title.


On Jan 11 01:00 PM Paul Price wrote:

> Even better than selling after a dividend cut would be realizing
> the payout was likely unsustainable and selling BEFORE the big drop
> that accompanies the dividend reduction announcement.

Housing: Where Is the Bottom?

Great article, excellent comments (from the author too!), and a prescription for some soul searching in America.

I especially liked PrudentInvestor's article - seems the Economist saw this coming 5 years ago...thanks again.