U.S. House approves extending Bush-era tax cuts

WASHINGTON (MarketWatch) -- House lawmakers approved a two-year across-the-board extension of Bush-era tax cuts just before midnight on Thursday, capping off weeks of furious debate and ensuring that rates won't rise on virtually all Americans come Jan. 1.

The bill, already passed by the Senate, now goes to President Barack Obama for signature. It also includes a 2% rollback of Social Security payroll taxes; extends unemployment insurance for 13 months; and brings back the estate tax at 35% for two years on estates of more than $5 million. The House vote was 277-148.

This is a repost from: http://www.marketwatch.com/story/us-house-approves-extending-bush-era-tax-cuts-2010-12-17

NY Senator Charged with Embezzling From His Clinic

ALBANY, N.Y. – Pedro Espada Jr. has been at the center of two of the most tumultuous years the two-century-old New York Senate has ever seen.

Now, the bold and charismatic Bronx Democrat who plied his way from freshman to majority leader in six months stands accused of embezzling state grants he directed to his Bronx health clinic in some New York's poorest neighborhoods to pay for a cool car and a hot night life.

The U.S. Attorney's Office in Brooklyn and state Attorney GeneralAndrew Cuomo on Tuesday indicted the 57-year-old state senator and his son, Pedro Gautier Espada, 37, on six charges stemming from the activities involving the Comprehensive Community Development Corp., a federally funded not-for-profit in the Bronx known as Soundview. They are accused of embezzling more than $500,000 from clinic the senator founded for lavish spending, including a down payment on a $125,000 Bentley and $14,000 in tickets for sports and shows.

The indictment says Espada charged $110,000 in posh restaurants, including $20,482 at his favorite sushi place near his home outside his Senate District in Mamaroneck, and pony rides and a petting zoo at a family birthday party.

"In these difficult economic times, the charged crimes are all the more reprehensible," U.S. Attorney Loretta Lynch said.

Cuomo, New York's governor-elect, decried what he called looting and said the "cruel twist" was "they were using funds that were supposed to go to poor people."

"It's one of the more outrageous abuses of public office that I have ever seen," Cuomo said.

Espada is just the latest Albany politician to be indicted in office, and the second Senate majority leader in three years. But like former Republican Majority Leader Joseph Bruno who is appealing a conviction charge for mixing private business with his state power, Espada vows to take his case to court. Espada called the investigation that lingered throughout his two-year term as a political "witch hunt" by Cuomo.

Few doubt Espada will carry out his threat. He rose from impoverished street fighter in Puerto Rico to Fordham University graduate and boldly manipulated Albany's old-boy political power structure in the Senate. Within days of his election in 2008, his second stint in the Senate, the Democrat formed his "three amigos" coalition with two other Democrats to threaten his own Democratic majority. He demanded leadership positions in part for what Espada said was a needed Latino voice, or the three would join Republicans and end the Democrats' first majority in a half-century.

Espada won.

Then in June of 2009, Espada and freshman Sen. Hiram Monserrate of Queens, then under investigation for a domestic violence incident that would later cost him his seat, carried out the threat. They joined the Republicans, with Espada gaining the title Senate president. More than a month of gridlock ensued, with neither side recognizing the others' authority — even holding simultaneous sessions at one point and locking each other out of the chamber without a clear majority.

But when Democratic Gov. David Paterson appointed a lieutenant governor, in a constitutional gamble upheld in the courts, Espada returned to the Democratic fold. He also gained the powerful and lucrative majority leader's post.

With his bold suits of gold pinstripes in the Senate long dominated by white men in dark blue, the Latino had a charismatic manner in English and Spanish with all lawmakers, and possessed a shrewd political sense.

He became "Pete" to senators of both parties, who voted for him and often castigated him later. Hours before his indictment Espada issued a year-end report of the majority leader expounding on the importance of state grants for nonprofit agencies and taking credit for reforms in the Senate to make lawmakers accountable.

"I am proud to have served as the catalyst for this reform," he stated in a press release the Senate's Democratic majority refused to pay for. After the indictment was released, Espada was immediately stripped of his majority leader title and removed as housing committee chairman.

"Thirty years ago Senator Espada founded the Soundview Health Care Center," said his attorney, Susan R. Necheles. "Soundview has provided high quality health care to thousands of families, children and senior citizens in the Bronx. Today is a sad day for Soundview and a sad day for the Espada family. Senator Espada and his son deny any wrongdoing and we intend to fight the charges in court."

Espada lost his seat in the September primary, with most Democrats clamoring to be seen opposing him. Republicans used Espada's image in what appears to be their successful effort to win back the majority in the November election, pending an ongoing appeal of the vote.

Cuomo said taxpayer funds since 2005 were diverted for the Espadas' personal use.

"There was no doubt he and his son were looting Soundview for a lavish lifestyle," Cuomo, a Democrat, told reporters.

Cuomo said the Espadas could face up to 10 years in prison on each of five embezzlement charges, five years for the single conspiracy count and fines of $250,000 on each charge.

In earlier civil suits, which are still pending, Cuomo accused Espada of siphoning $14 million from his government-funded clinic, breaching his fiduciary duty, and seeking to remove him from the board. Authorities said the difference in amounts represents liabilities on the Soundview books not yet spent, including a severance package of at least $9 million.

"There's a culture in Albany that has been too tolerant of legal violations and ethical absences," Cuomo said.

*This is a repost from: http://news.yahoo.com/s/ap/20101215/ap_on_re_us/us_senator_indicted

Scapegoating: The Response to Underperformance

The institutional money management industry has a split personality.  One half is highly concentrated and stable, consisting of large banks and insurance companies offering generic products.  The other half is unstable, consisting of a large number of money managers offering active money management and specialized services.  In many ways this segment is like the market for restaurants and beauty salons, with customers always in search of new favorites and the latest hot spots.

A combination of private interests and behavioral phenomena provide the basis for the existence of this active segment.  Both frame dependence and heuristic-driven bias play major roles.

Frame dependence occurs as the sponsor divides responsibility for it’s portfolio across several active money managers.  These managers are evaluated relative to benchmarks.  The division of the portfolio gives rise to a mental accounting structure with particular reference points.  This leads investors to react more strongly to outcomes that fall below a reference point than to outcomes that lie above it.  Mental accounting also leads to the view that diversification means having variety across styles rather than maximizing expected returns subject to a fixed return variance.

An important aspect of active money management is scapegoating, or shifting regret to, the manager when returns are poor.  Given the fact that active managers underperform strategic asset allocation, the amount of underperformance may serve to measure the value of scapegoating.

Scapegoating is one explanation for why investors select active money managers.  Another is that investors are overconfident, believing the active managers they hire are likely to outperform strategic asset allocation.  

Forbes 2010 Investment Guide Backtest

It’s that time of the year again!  The time when I take out the back issues of Forbes, Fortune, Smart Money and Kiplinger to compare their hot stock, mutual fund, or ETF for the coming year to what actually happened at the end of the year.  This issue comes from Forbes’ Decemeber 14, 2009 so let’s see their hot picks!

Interestingly enough, this is their “Investment Guide” annual issue but it lacks the typical predictions on ETFs, emerging markets and alternative funds found in previous years.  The one thing they did focus on is a select few Healthcare Stocks.

The Buy

Cross Country Healthcare (CCRN):  At press time, the stock traded at $8.96.  It is trading today at $7.65.  Representing a 14% LOSS per share.

Mednax (MD): At press time, the stock traded at $57.20.  It is trading today at $64.17.  Representing a 12% GAIN per share.

Unitedhealth Group (UNH):  At press time, the stock traded at $28.97.  It is trading today at $36.89.  Representing a 27% GAIN per share.

The Sell

Boston Scientific (BSX):  At press time, the stock traded at $8.27.  It is trading today at $6.55.  Representing a 20% Reward* per share.  A reward would be realized when the investor saved money by dumping this stock if they owned it or they made a profit by shorting the stock.

Health Care Select ETF (XLV):  At press time, the ETF traded at $30.16.  It is trading today at $30.88.  Representing a 2% Missed Opportunity.

Johnson & Johnson (JNJ): At press time, the stock traded at $62.17.  Surprisingly, it is still trading at that price though it yields a pretty nice dividend of 3.47% so, technically that is a Missed Opportunity.

This backtest resulted in a below average rate of return on the buy side with +8.33%.  And, a value of +4.87% return on the sell side.  

The S&P 500’s YTD range is 1101.3 to 1223.9 which represents an 11.1% GAIN.

UPS Requires Photo IDs for Shipping

In the wake of the latest terrorist schemes to mail order a bomb, UPS is now requiring photo identification from customers shipping packages at retail locations around the world, a month after explosives made its way on to one of the company's planes.

UPS said Tuesday the move is part of an ongoing review to enhance security. The directive will apply at The UPS Store, Mail Boxes Etc. locations and other authorized shipping outlets. UPS customer centers have required government-issued photo identification since 2005.

In late October, a printer cartridge on a UPS cargo plane bound for Chicago was stopped in London after explosives were discovered. The package was later traced to a retail location in Yemen.

What can Brown do for you?

This is modified news article found at: Finance.yahoo.com

Hard Work is Here Again!

The free ride in the market is over – for those  investors relying on the sage advice of buy-and-hold.  Don’t expect to make money in the future buying just about anything.  What happened two years ago when stock prices fell through the floor was extremely atypical for stocks.  The market will likely be much more discriminating in determining whom it allows to be a “genius.”

Investors will have to know what they’re buying.  They’ll have to know why they’re buying it and best of all, they’ll have to know when to sell it.  They’ll have to make these tough decisions when the free ride comes to an end, as with what we’re seeing now.

Choppy, manipulated markets put a premium on knowledge and information.  And that means reevaluating what you own, upgrading your portfolio if need be, rebalancing to control risk, and restructuring your portfolio to reduce volatility.

An Investor’s View of Risk

In the real world, investors define risk in a variety of ways.  Mention risk, and many will begin to imagine total, irrevocable, gone-forever loss of their principal.  Fluctuation is not loss of principal.  It is just fluctuation.  Here’s an example that should make the difference clear.  Let’s say you decided that your backyard contains oil. After a million dollars spent drilling, it turns out that there is no oil.  No matter what you do, no matter how long you look at the well, no matter what happens to the price of oil, your money is gone. You have had an irrevocable loss of capital.

Let’s say that you took the same million dollars and bought a diversified investment portfolio (stocks, bonds, hedge funds, proactive asset management).  You then have an unusually bad result the first year, and lose 20 percent of your investment.  Well, you have had an interesting fluctuation, but have not had a capital loss if you can refrain from doing the very worst possible thing and pulling your money out of those investments while the values are down. 

Markets have always recovered in the past. Some took longer than originally anticipated, others faster than anyone can expect.  History indicates that all you must do to recover and go on to acceptable profits is to hang tight.  While an individual stock can go certainly to zero (think Enron, Lehman, and countless others), entire markets don’t.  Except for war or revolution, I am unaware of any market that has gone down without recovering.  As long as we expect the world’s economy to continue to move, the value of the securities markets will reflect that movement. 

Less Is More

Good asset management practices are strategic and evolutionary, not stagnant.  You must keep your long-term goals and objectives firmly in mind while allowing yourself the flexibility to evolve as new research provides better solutions to the risk management problem, or as new market opportunities present themselves.  Discipline is the key to success for the long-term investor.  He or she must not fall into the trap of managing holdings by newspaper headline, sound bites, mindless prediction, gut feelings, or last year’s results.

Developing a successful, modern investment strategy is a lot like gardening.  Both activities require patience, discipline, and faith.  Periodic reviews should be viewed as an opportunity for fine-tuning and corrections, not radical revisions and second-guessing.

How to Protect Yourself From Scam Artists

This list can be endless, but here are common ways many investors get sold on a fly-by-night investment scam.

• Never give any investment advisor a general power of attorney over your account.  Use a limited power of attorney to authorize your advisor to make trades within your account for your benefit.  There is never a reason to name an investment advisor as owner, contingent owner, or joint owner of your account.  It shouldn’t be possible for any other person to ever receive a disbursement from your account.  Your brokerage or trust company should only disburse to you at your home address or to your bank account.  Insist on confirmation of all account activity (this may not need to be sent to you by paper), but easy access to all transactions online should suffice.  Never use your investment advisor’s address as your address to receive statements.
• Select strong custodians for safekeeping of your assets.  Use major brokerage houses or trust companies that are properly insured, audited, and regulated.  Don’t let some Jabba The Hut, little financial institution act as custodian of your assets.
• Remember that if it sounds too good to be true, it probably is.  Con artists almost universally appeal to investor’s greed and unrealistic expectations.  They can’t exist without gullible people willing to believe the unbelievable.  By now you should have a good feel for the range of reasonableness in various investment markets.
• Consider carefully whether you need a guide.  Many investors shouldn’t try to go it alone.  Investing professionally is a full-time job.  It takes specialized knowledge and significant resources.  The field is rapidly evolving.  It takes a great deal of time just to keep up with the research.  Evaluate whether you have the skill, judgment, discipline, and experience to do a proper job.  Your investment plan is your future.  It’s too important to leave to amateurs.  Just because you’ve read some book on how to perform surgery does not make you a surgeon.
• Avoid commission sales.  All financial professionals get paid.  And, of course, all of them have an interest in attracting your business.  You can’t expect any of them to send you to the competition.  How they get paid, however, can have a very significant effect on the nature of their recommendations.  In fact, how you pay for advice may be much more important than how much you pay.