Fee-Only Financial Planning in North Carolina

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Monthly Archives: April 2009

US Foreclosures

This is a short update on residential foreclosures in the US. It is relevant because no recovery will be for real until the backlog of foreclosures is down to normal levels. Plus bank toxic waste will become more toxic as more people lose their jobs and are foreclosed upon. This becomes something much larger than a sub-prime issue… Normally, the US sees 160,000 foreclosures […] Read the rest of this entry »

Personal finance example of toxic waste

First let’s understand via an example in personal finance why banks are stressed and need to be tested for situations worse then what we’re experiencing today. Let’s say you own a home worth $500,000. If you have the same amount of equity as Goldman Sachs does in their business, you own 6% tangible common equity (a.k.a. tier one capital). Home equity in your case […] Read the rest of this entry »

Analysts are usually wrong.

Because so much weight is placed on earnings estimates, we should pay attention to analyst abilities to forecast earnings.  Herein is a short note on how analysts faired at anticipating earnings on the S&P500.  This goes a long way to explaining why the S&P500 stock market index has declined so much… Consensus on analyst estimates for earnings on the S&P500 index for 2008 were […] Read the rest of this entry »

Real Earnings

This is a primer on understanding earnings announcements and how they impact bank stock prices we’re seeing in the news these days. There are two types of earnings: those that matter and those that don’t. Earnings that matter are those that take everything into consideration that impacts a business. This is the earnings reported to the IRS and takes into account so-called 1-time events, […] Read the rest of this entry »

Goldman Sachs and Citigroup play with numbers

In last month’s client newsletter I addressed the lack of common sense by the board of directors in their “pay for performance” for Goldman’s CEO.  Well Goldman Sachs delivered their 1Q 2009 earnings and they are up to more tricks.  Citigroup’s CFO has been busy too, as we’ll see.                    On April 13th, Goldman announced they earned $3.39/share. This is more than double the earnings […] Read the rest of this entry »

Toxic Yard Sale

In the interest of brevity, I’ll compress this article into just the main points, because it can get overwhelming… The US Federal government has tried several schemes to solve the core problem with the US financial system: bad assets on bank balance sheets cause banks to be insolvent or near insolvent. This in turn is causing banks to reduce their leverage and improve the […] Read the rest of this entry »

Hysteresis, Executive Pay, and Oldsmobiles

The portion of our client-base that is represented by engineers is now considerable (no one else wants us as clients because we like to know how stuff works). This article will make reference to a scientific term (hysteresis) that is known to pure scientists & applied scientists a.k.a. engineers. This includes yours truly.  To the rest of our client base (still the majority) that are neither […] Read the rest of this entry »