Table On-Topic Summary - 18-Aug-2002
A compilation of this board's financial/economic posts From 40621 to 40642

Post  40621  by  Decomposed       OT: Table ON TOPIC SUMMARY Aug
Post  40622  by  Decomposed       ot: A bug story programmers mi
Post  40623  by  maldinero       OT: Decomp – Wouldn't setting
Post  40624  by  Culmus       OT: maniati
Post  40625  by  optimistic4dollars       OT: Windows doesn't allow you

Post  40626  by  Arkural       Reply
Mkt madness...?

One word~~~V O L A T I L I T Y~~~

Two words~~~R E V E R S A L S~~~

Three Words~~~V O L U M E~~~

One comment:

Dog days of August? Nothin' doogin about this August. Japan may need some sand bags too, but not for water....

Post  40627  by  Decomposed       ot: maldinero, summary bug
Post  40628  by  Decomposed       ot: Unix

Post  40629  by  pmcw       Reply
Culmus, We certainly tend to agree on this point. I also feel CAPM is a poor way to guide investment decisions. It is not totally without merit, but is very low on the ladder of what I consider important considerations.

I feel the first flaw is patently considering Beta as "risk". It is a measurement of risk from one perspective, but I feel it is a more accurately used as a measure of overall volatility than just risk.

For those unfamiliar with CAPM, the following explains the formula:

Ks = The Required Rate of Return one must achieve to compensate for the implied risk
Krf = The Risk Free Rate (U.S. Government Treasury Bonds)
B = Beta of the particular stock
Km = The expected return for the total stock market (Wilshire 5000)

As it is clear to see, this equation not only considers Beta as only a risk factor, it is also loaded with assumptions that can radically alter the outcome.

Using XICO as an example, the equation looks something like this:


This assumes that the total market will go up by 10% during the "X" time frame and the the risk free rate of return is 5% and implies that one would need to assume that XICO will produce a 14.75% rate of return to make it worth the risk. Clearly, no one who felt that XICO had a real risk factor of nearly twice the market (Beta = 1.95) would invest in XICO if they felt the return for the next year was only 14.75%. However, if we were to look at some considerably longer term numbers this might be a more rational perspective.

5% is an appropriate risk free rate of return for anything above five years in today's market (a five year CD will yield roughly 5%). Therefore, let's assume that five years is our minimum time frame for XICO to provide an annual yield nearly 50% greater than the market.

The result implies that one must consider XICO as a two bagger candidate to offset it's greater than market risk. During the same time frame, the market's assumed total return will be 60%. The net result is that they suggest that a stock with a Beta nearly twice the market (and the assume Beta is risk) would only have to earn 40% greater return than the market to offset the implied risk of twice the market. IMO, this is not an equitable risk/reward equation.

Bottom Line: IMO, about the only time CAPM produces a demanded return (Ks) that implies an appropriate risk/reward equation is if it is used to calculate returns of ten years or more. Even in these cases, I feel looking at risk from a pure Beta perspective in invalid. Therefore, I see CAPM as having minimal value.

Regards, pmcw

Post  40630  by  jeffbas       Reply
pmcw, on derivatives, I agree with you. In fact, I can't even be bothered to read such stories any more, once I see the writer is not a neutral observer - perhaps a mistake.

Post  40631  by  clo       OT: Decomposed thank you for t
Post  40632  by  ljpit       ot: decomposed, the font probl
Post  40633  by  pmcw       OT: clo
Post  40634  by  clo       OT: pmcw: Iraq poll:
Post  40635  by  united_division       OT: Ex-aide accuses Arafat of
Post  40636  by  optimistic4dollars       OT: Decomposed Then check it o
Post  40637  by  pmcw       OT: clo,
Post  40638  by  maniati       OT: Decomp: Please don't condu

Post  40639  by  Arkural       Reply
Hal-(dated)~~Embattled Halliburton Unit Gets Bid

Associated Press Writer
Posted on Sun, Aug. 04, 2002

WASHINGTON (AP) - Since Dick Cheney became vice president, a subsidiary of his former company was chosen the exclusive contractor for overseas Army troop support and Navy construction despite being under federal investigation for fraud.

The Navy contract went to the Halliburton Co. subsidiary, Brown & Root Services, despite a recommendation from the auditing arm of Congress that new bids be solicited for the construction contract. That recommendation was ignored.

The Army deal is unusual because its stretches 10 years and has a payment structure that critics say encourages Brown & Root to spend whatever it takes to keep the troops happy.

Halliburton officials say Cheney played no role in the selection of Houston-based Brown & Root for the two contracts, potentially worth billions of dollars over the next decade.

Cheney, a former secretary of defense with experience in Congress and at the White House, headed Halliburton from 1995 until George W. Bush picked him as his running mate in July 2000.

"Cheney steadfastly refused to engage in any activities to sell Halliburton's or its subsidiaries' services to the government during his tenure with the company," Halliburton spokeswoman Zelma Branch said.

"Halliburton has made no attempt to ask for his assistance in obtaining federal contracts since he left the company."

Both Army and Navy contracting officials say they were unaware, when the contracts were awarded, that federal officials in California were investigating allegations that Brown & Root had defrauded the government on another defense contract.

The investigation ended in February when Brown & Root agreed to pay the government $2 million to settle charges it inflated contract prices for maintenance and repairs at Fort Ord, a now-closed military installation near Monterey, Calif.

Even had the Army known about the investigation, officials said, it would not have affected the decision to award the troop support contract to Brown & Root.

"They did not admit to any wrongdoing, and the government did not find them guilty of any wrongdoing, so legally we could not use that," said Gale Smith, spokeswoman for the Army Operations and Support Command.

The contract makes Brown & Root the Army's only private supplier of troop support services over the next decade.

There is no ceiling on spending, because the contract is designed to provide rapid troop support wherever and whenever U.S. forces move into action overseas.

Under similar contracts, the Army paid Brown & Root $1.2 billion from 1992 through 1999 to support U.S. troops, mainly in the Balkans. An extension of that contract from 1999 through 2004 is projected to cost $1.8 billion.

"It is close to unprecedented for the government to have given so much of the solution to one contractor," said Steven Spooner, a George Washington University professor who specializes in federal contracting.

Spooner said government contracts for services almost never exceed five years, while the Army's deal with Brown & Root is renewable for a decade. He said the contract also is structured so that the more the company spends to support the troops, the more it earns.

"But it's hard to criticize it, because they've convinced the Army from the bottom up that they're taking care of the troops," he said. "To the extent that they are making money hand over fist, they're taking care of the people who have the crappiest job on the planet."

The Army has paid Brown & Root $13.7 million since the contract began Feb. 1 to provide food, laundry and other support services to U.S. troops in the former Soviet republics of Georgia and Uzbekistan. The Army will not disclose other locations where the contract has been used.

The $300 million, five-year Navy contract was awarded to Brown & Root in April 2001, three months after Cheney became vice president. It followed a November 2000 recommendation from the General Accounting Office that upheld a protest of the original Navy decision in June 2000 to give the Halliburton subsidiary the contract.

The GAO arbitrator questioned the criteria used by the Navy in evaluating the bidders, as well as the Navy's cost analysis, and recommended that new bids be solicited.

Instead, the Navy decided to re-evaluate the original bids "with requested changes in criteria and the result was the same," Navy spokesman John Peters said.

The Navy has given Brown & Root $53 million in work orders in the past 15 months, including $37.3 million to build 816 detention cells at Guantanamo Bay, Cuba, where terrorist suspects captured in Afghanistan are held.

Both contracts enable the Army and Navy to use Brown & Root for their troop support or construction services, without having to seek out competitive bids from other companies.

Post  40640  by  jcl22192       Reply
PMCW: Re: Naked shorts
--on derivatives-I still intend to keep an eye on JPM.
Sting Operation Could Be Tip of Iceberg

By Toni Clarke

A two-year federal sting operation led to a mass indictment this week of 58 stockbrokers and corporate executives on charges of stock fraud and money-laundering. It's just the tip of the iceberg, lawyers say. One of the most prominent figures caught in what investigators call the "Bermuda Short" operation was Mark Valentine, the suspended chairman of Canadian brokerage Thomson Kernaghan & Co. Ltd., according to FBI officials. The arrest of Valentine, who was detained in Frankfurt on Wednesday, could help unravel other stock manipulation schemes, say lawyers for companies that claim to have been victimized. Valentine's lawyer, Joe Groia, was not immediately available for comment on Friday.

In federal indictments unsealed on Thursday, investigators claim that Valentine and a Bermuda-based financial firm conspired to manipulate the shares of three companies -- JagNotes.Com, Softsquad Software Ltd. and C Me Run Corp. Kernaghan was not immediately available for comment. Valentine's company is one of dozens of brokerages many based offshore that have stripped or ruined small U.S. companies in fraudulent funding schemes, possibly helped by venerable Wall Street firms, according to lawyers of the affected companies.

"Our mission is to find the real beneficial owners behind these offshore companies, to find the banks behind them and the brokers through which they trade," said James W. Christian, a Houston lawyer representing a growing number of companies that claim to have been hurt in the schemes. Christian is partnering with John O'Quinn, the Houston attorney who won billions of dollars for clients in breast implant and tobacco suits. The frauds allegedly center around a funding mechanism known as "death spiral financing" in which an investor or group of investors approach a company with limited access to cash and offer to invest in return for convertible preferred debt. Unlike typical convertibles, which convert into a specific number of common shares, the death spiral preferred debt converts into a set dollar amount of common stock. If the price of the common stock declines, the convertible holder is entitled to more shares.

The victimized companies see their stock plummet right after the investment, as the convertible holders begin short-selling the common stock, the plaintiffs say. Short sellers sell borrowed stock on the bet the price will fall. If it does, they buy back the stock at the cheaper price and pocket the difference. As the stock of the target company plummets, the unscrupulous investors convert their preferred debt into common shares, diluting the value of existing shareholders almost out of existence, the plaintiffs' lawyers say.

A wide range of Wall Street firms sold shares they could not deliver on behalf of such investors, the plaintiffs' lawyers say. Short-selling in itself isn't illegal. But it is illegal if the certificates are never delivered, or if there is no intention to cover the sales -- something known as "naked" short selling. That, plaintiffs say, is exactly what happened. "In our opinion, the brokers are going to get slaughtered," said Christian. "We've identified 50 that make sizable money from it. The same guys are doing this every day." Thomson Kernaghan is one of dozens of brokerages that are named in civil suits filed by O'Quinn's group. The group has filed lawsuits on behalf of five companies, most of which trade on the over-the-counter Bulletin board, and it's preparing to file another seven, Christian said. JagNotes, subsequently renamed Jag Media Holdings Inc., is one of the companies O'Quinn's group is representing in a civil suit. Among the defendants named in the Jag suit are well-known Wall Street firms like Banc of America Securities, Bear Stearns Cos. and CIBC World Markets Inc, as well as dozens of others. Representatives from Bear Stearns, CIBC and Banc of America Securities were not available for comment. The practice of naked short selling became evident when Jag began issuing a new class of shares to stockholders in return for their old certificates, plaintiffs lawyers say. More shares had been sold than could be accounted for by the number of certificates held.

"Many brokerage houses have large gaps in their beneficial holder lists," the Jag complaint alleges. "In many instances there is no certificate to match many trades held by brokerage firms and back office people who are settling the trades." John Finnerty, principal at Analysis Group Economics, a consulting firm that has been analyzing the trading into some of the victimized companies, said it is clear that short selling accounted for a large part of the decline in the targeted companies' shares, though it is unclear who was behind the selling.

"We could not identify any fundamental or market related reasons that would account for the stocks being driven down as much and as fast as they were," Finnerty said. A lawsuit filed by O'Quinn on behalf of Internet Law Library, now called ITIS, lists numerous companies whose shares declined precipitously after being touched by Kernaghan and others. According to Christian, hundreds of companies have been hurt by groups with very similar modus operandi. An examination of filings made with the Securities and Exchange Commission indicate that the same group of names -- often investment entities based offshore -- come up time and again in connection with companies that, having accepted money from these groups, see their stock plunge to near-zero.

Desperate start-up companies, often without much business savvy, are eager to believe the groups' pitch. The investors often request warrants to buy shares at a higher price, implying they have an interest in seeing the company succeed. But the warrants are almost never exercised because the stock price heads south after the ink is dry on the financing. "The most compelling fact in all these cases is the repetitive pattern of abuse by these companies," Christian said. "Everyone who goes into operating room No. 1 dies. That's what will get us punitive damages."

Post  40641  by  Warstud       Reply
Stocks To Watch..(Long)

Post  40642  by  tinljhtkh       Reply
Pmcw, Clo, and all who reside here!

I went to church this morning and the pastor's sermon had a little humor in it! He described children and the tantrums that they throw in places where they shouldn't--like the super market and church! He told of a child heading for the back door of the church house who suddenly realized what was going to happen beyond that door! As he was taken out the back door, the child reportedly said "I hope you all will pray for me!"

Now read on please!

"clo, maybe you need to take a mood check. Rather than assume my intent is to be condescending or sarcastic, you could have just as easily taken my post as it was intended; to provoke thought as to the real meaning and significance of such polls. Please remember, just as you have the right to bring forth any subject that you like, I have an equal right to state my opinion in response.”

“Once again you prove asking a question that is not to your liking brings out your sarcastic & condescending side. “

“However, on the other hand, if a uninformed and unqualified mood check trips your trigger, by all means, poll away.”

We all have a way with words!

My local newspaper is asking its readers to write in describing their feelings about September 11th. They want to publish this information in a special edition to run on the first anniversary of the tower bombings. They put a word count on what could be submitted!

Here was my reply!

I remember Dallas, Abraham Martin and John, and our old friend Bobby! And I also remember Challenger, Oklahoma City and Waco! I remember the wall and 55,000 names that I will never know! I remember the horrors of Desert Storm, Palestine, and Afghanistan just as well!

I’m tired of remembering, but I know that I must!
My prayer of remembrance to the maker on this September 11th, made special by the horror it represents, is this: give me the strength to go on and continue to comprehend, and please keep the horrific changes describable at a hundred words or less!

End of reply!

There is likely to be real fighting soon, and real body bags! And there are going to be more trips up those slopes at Arlington!

Let there be peace here at Table, at least for awhile! Our children may be going into battle, in harms way! Lets pray for them on this august sunday night!