Altria: MO
Annaly Capital Management: NLY
Dell
Devon Energy: DVN
Diamond Offshore: DO
Fluor: FLR
Johnson & Johnson: JNJ
Medco Health Solutions: MHS
Pfizer: PFE
Potash Corp. of Saskatchewan: POT

-Craig

By David Goldman, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) — GMAC LLC is still counting a crucial vote Monday that could determine if the auto finance company turned bank can stay afloat.

GMAC bondholders had until midnight last Friday to accept a bond exchange for corporate equity that would provide GMAC with necessary capital.

The company, which provides auto loans to General Motors’ customers and dealers, has been trying to convert 75% of its $38 billion of issued debt into preferred stock holdings to raise $30 billion in capital necessary to become a bank.

But bond holders have been reluctant to make the exchange. Earlier last week, GMAC said only about 58% of its bond investors were committed, so it extended the deadline to Friday – the fourth such extension.

“The offer did expire on December 26, at 11:59 p.m., as planned,” said GMAC spokeswoman Gina Proia. “We have not yet finalized results. We intend to make them public in the near term.”

The company is currently 51% owned by Chrysler’s parent company Cerberus Capital Management and 49% by GM. General Motors (GM, Fortune 500) and Chrysler were set to receive $4 billion each in emergency aid from the Treasury Department’s Troubled Asset Relief Program.

GM said Monday it was hammering out the details of its federal loan. “GM continues to work with the federal government on the final stages of the loan agreement and we remain confident a timely signing of the federal loan agreement will occur prior to our needs,” a GM spokesman said Monday afternoon.

GM has previously stated that GMAC’s viability is critical to the automaker’s recovery. GMAC has lost $7.9 billion over the past five quarters, mostly from risky subprime mortgage bets made by its Residential Capital division. The holdings plummeted in value when the housing market began to decline in 2007.

Despite lacking sufficient capital, GMAC won approval from the Federal Reserve last Wednesday to become a bank holding company. The Fed cited “emergency conditions” for its approval, saying the company was important to the future success of GM.

As part of the conditions outlined by the Fed, Cerberus must reduce its stake in GMAC to 33% and GM’s share must drop to less than 10%. Cerberus will distribute the remainder of its stake to its investors and GM’s share will go into an independent trust to be sold off within three years.

The status change would give GMAC access to much-needed funds from TARP and other government bailout programs.

According to a recent note from CreditSights analyst Richard Hofmann, GMAC requested a TARP capital investment and may get as much as $6.3 billion. The analyst also said the company could issue up to $17.5 billion in government-backed debt through the FDIC Temporary Liquidity Guarantee Program to shore up its capital position.

And even if it cannot raise the $30 billion that the Fed mandates for bank holding company status, analysts think the Fed will be satisfied with the effort.

“The Fed pointed to GMAC’s successful efforts to raise additional capital in approving the company’s bank holding company application,” said Hofmann. “With the primary regulator on board, the capital raise machinations seem almost a moot point.”

What investors should do now

What does this mean for Wells Fargo and Wachovia share holders?

Wachovia shareholders get 0.1991 shares of Wells Fargo common stock for each share they own. Wells Fargo expects charges related to the acquisition of about $10 billion, and the company said it will issue as much as $20 billion of new securities, mostly common stock.

What happens to a company’s stock if they are bought out?

This deal values Wachovia at $7 a share. You can expect that the price of Wachovia stock to jump to at least that. My guess is that Wachovia, and Wells Fargo shares will go up in value with Wachovia’s in a steeper climb.

What do you think?

Source: bloomberg – Wells Fargo Agrees to Buy Wachovia for $15.1 Billion

The Wall Street Journal – April 10, 2008
(Copyright (c) 2008, Dow Jones & Company, Inc.)

If you thought getting into a hedge fund was tough, try getting out of one.

With the markets sputtering, some high-profile hedge funds are rejecting withdrawal requests, with some telling investors that it could be years before they will see all their cash again. And it isn’t just big institutions and the wealthy that are getting rebuffed. Some smaller investors who took advantage of lower minimum investments by putting their cash into so-called funds of funds, which invest in numerous hedge funds, are also getting blocked.

The funds justify the moves by saying that if they sold positions to return the money to some investors, it would cause deep losses for all. Some funds putting up “gates” — or measures that prevent their investors from withdrawing all their money at once — haven’t lost very much this year, yet worry that if some investors pull out, the rest will, too.

To be sure, so-called lockup policies are standard fare among hedge funds, with many firms reserving the right to restrict redemptions for periods of one year or longer. But there is concern in the industry that some funds could be dragging their feet on returning money to keep their businesses going, enabling them to continue to charge often-hefty fees. Many hedge funds charge management fees of about 2% and take 20% or more of any gains.

“It’s a double-edged sword: You have to be able to ride out difficult markets, and a gate helps a fund do that,” says Brad Alford, founder of Alpha Capital Management, an investment-advisory firm in Atlanta that invests in hedge funds. “But they’re also protecting their franchises, their businesses and livelihoods.”

In the last month or so, billion-dollar hedge funds managed by D.B. Zwirn & Co., Pardus Capital Management LP, Drake Capital Management LLC and Tisbury Capital Management have told investors that they can’t have all of their money back just yet.

Meanwhile, Russell Investments has told investors in two of its funds of funds that they can have only 10% of their money back right now, with the rest available down the road, after losses and investor withdrawals forced the huge investment firm to close the funds.

The moves by the funds are legal. When investors sign up, they usually give a hedge fund the right to bar the exits, or limit the amount that can be withdrawn. But the gates are still catching some people by surprise.

Investors who signed those papers “never for a moment” thought they wouldn’t be able to get out, says Daniel Alpert, managing director of Westwood Capital LLC, a New York investment bank. But when a number of hedge funds were hit hard in the market turmoil of recent months, they quickly learned otherwise.

It is a painful reminder of the dangers of investing in hedge funds, which are more lightly regulated than mutual funds and other investments.

More individuals have turned to hedge funds in recent years as their wealth grew and they became eligible to invest in these vehicles. Under Securities and Exchange Commission rules, investors are judged able to make riskier investments, such as place money in a hedge fund, if they have assets of at least $1 million or income of more than $200,000 in each of the two most recent years. Those with joint income with a spouse exceeding $300,000 also are eligible to invest. In recent years, more firms have set up funds of funds, giving individuals more options in this area.

Hedge funds are hanging on to money as more have suffered problems. The average fund has lost 2.8% this year through the end of March, according to Chicago data tracker Hedge Fund Research Inc. That is much better than the Standard & Poor’s 500′s loss of 9.4% in that same period, but worse than the 2.2% gain in Lehman Brothers’ main bond index.

Yet many hedge funds have moved into real estate, private equity, hard-to-trade debt and other investments that are difficult to sell on a dime at a reasonable price, particularly in a jittery market. So when investors ask for their money back, it can create difficulties.

Some investors have moved to withdraw money even from secure funds as fears grow about all kinds of financial firms. Some funds are trying to slow the redemptions to avoid the type of situation that felled brokerage firm Bear Stearns Cos., which ran into deep problems after nervous clients bolted.

Polygon Investment Partners, for example, has seen an increase in exit notices in the past month at its $8 billion Polygon Global Opportunities Fund, even though it was down only 4% through the end of March, hurt by losses on investments tied to merger deals.

The Anglo-U.S. firm is looking to move investors into a new share class that would have more-favorable rules on redemptions, rather than the first-come, first-served system that currently limits withdrawals. This could reassure investors that they can get their money back down the line, rather than feel pressure to place a withdrawal request to beat other investors to the exits.

As more funds block the door to investors, there seems to be less of a stigma attached to it, some say, potentially encouraging others to do the same.

Some view this as plain wrong. “Once you invoke a gate, you should become a pariah,” Westwood’s Mr. Alpert says.

The question that was posed to the author is:
I’m 23 and make $50,000 a year. I put 8% into a 401(k) with a 4% match and $1,800 a year into a Roth IRA, but I would like to start saving to buy a house. I currently have $10,000 in an online savings account that earns 5% interest. Are stocks too risky for money I want to spend in the next couple years? Will bonds make more than 5% a year?

I will post the author’s answer bellow. I personally would stick to the less risky products such as index funds or even enhanced index funds that provide with some risk but have a nice upside. There no way you can consistently pick stocks and beat the market as an amateur investor. I really want to know other people think is the best option.

Here is the Article as promised.

http://money.cnn.com/2008/02/06/pf/ask_the_mole.moneymag/index.htm?postversion=2008020708
The Mole’s Answer:
Conventional wisdom says that a 23-year-old investor should be mostly in equities. As a general rule, I happen to agree but there is something much more important than your age – it’s the fact that you want to spend the money in the next couple of years. I’m going to try to convince you that the stock market is far too risky for you or anyone needing to spend their investment in the next few years.

Stocks vs. savings

Now, clearly the stock market in the long-run is far more likely to outpace savings accounts, bond funds and other fixed income instruments. Let’s say the stock market earns an average of 9% annually and your bond funds only get 5%. That means that in two years, the expected value of your $10K would be $11,881 in stocks vs. only $11,025 if you stick to your current online savings account. Thus, it’s admittedly tempting to go with stocks and get that $856 in extra return.The problem is that the savings account is relatively certain, while investing in stocks is very uncertain in the short-run, and two years easily qualifies as a short-run. Let’s look at some history. The chart on the right shows the worst performance of the stock market over the past couple hundred years, adjusted for inflation. The worst the stock market has ever done over a thirty-year period is to beat inflation by 2.6% annually. That’s relatively little risk if you can keep costs low and stay in the market. And I’d recommend you put nearly all of your 401(k) savings in low cost, diversified equity funds. If you need the money in two years, however, note how risky the market can be over such a short period. Over that period of time, the market has lost nearly 32% per year, which translates to your $10K being worth less than half that amount in two years. Considering such a loss could result in you no longer being able to afford to buy that house, the extra return is probably not worth the risk. Now there are planners who will tell you that they are bullish on energy stocks, emerging markets, precious metals and the like. I would steer clear of these sectors, as all you do here is place an even bigger bet on a small part of the market. These planners apparently don’t know that they don’t know what the next big winner is, and all they seem to consistently do is recommend a sector after it has already gone up. By then, it’s probably too late.

My advice: As long as you think you are on track to save enough over two years, I don’t think the extra risk is worth the extra boost in return. At least, don’t take the extra risk if that goal of buying the house in two years is important to you. For any funds you need in the next five years or so, stay in relatively conservative, fixed-income instruments. You can go with a high-paying money market – you would now do well to get 4% – or a short-term CD or high-quality short or intermediate bond fund paying 5%. Don’t get greedy and chase an extra 1% yield by buying junk bond funds of companies that could default en masse with a major recession. Keep doing what you’re doing. Put your long-term 401(k) and Roth IRA money in low-cost equity funds, but keep any money you’ll need in the next few years in safety.

The writer of this article analyzed 600 finance professors at major U.S. universities to find out how they invest their money. We all had professors who preached market efficiency theories as well as risk and reward analysis. What the author has found is that most professors do minimal stock picking and avoid alternative investments. Seventy five percent of professors hold low cost index funds that account for a major portion of their investments. Essentially they diversify and do not believe that they can beat the market.

To me that is amazing and in most cases contradicts what we learned in our finance classes.

Read the rest of the article and let me know you guys think.
http://money.cnn.com/2008/01/28/pf/dont_expert.moneymag/index.htm?postversion=2008020311

According to the latest report by Nielsen Online, Yahoo and Microsoft combining forces will have a 31.5% market share. This puts them much closer to the internet search giant Google, at 56.3%, Nielsen said.

What does this mean for Microsoft’s network? Part of the deal with Yahoo, comes a partnership with Ebay, Inc. A combined Microsoft and Yahoo would also present a stronger competitor to Google and their networks that extend beyond the companies’ own Web sites. Google disclosed recent difficulty with partner MySpace.com, saying that it has struggled to present advertisements that attract active user interest, according to MarketWatch.

Microsoft already being partners with Facebook, bringing Yahoo to the table would mean even more advertising revenue for Microsoft.

Yahoo’s stock reacted instantly gaining over 45% on open today, while Microsoft and Google’s stock are down today.

Now let’s look at the fundamentals, both Nokia and Apple have done very well recently while Motorola has been beat down. Most people would think that due to the recent pull back that Motorola would be a good buy; however that is not the case. Just looking at the most recent FWD P/Es you can see that MOT is trading at 27.5 times earning and is having a terrible year in terms of free cash flow generation and earnings. AAPL on the other hand is having a phenomenal year with significant increases in cash flow and earnings. The only drawback is the fact that AAPL is trading at 33 times forward earnings and the product is disliked internationally.

Now let’s look at NOK, the stock had a terrific year and returned around 80%. This is not as good as AAPL but still fantastic. Nokia has a solid balance sheet and a phenomenal management team as well as huge international exposure. It’s currently trading at 15 time forward earnings and has generated over 10 billion dollars of operating cash flow over the last 12 months.

To me NOK looks like a screaming buy and a stock that will outperform in 2008. The international exposure should help and lack of quality products from MOT and AAPL will boost sales for NOK.

Anyone else have an opinion?

What are REITs?

A Real Estate Investment Trust, or REIT, is a company that owns, and in most cases, operates income-producing real estate. Some REITs finance real estate. To be a REIT, a company must distribute at least 90% of its taxable income to shareholders annually in the form of dividends.

New regulations allow firms that qualify as REITs avoid paying corporate income taxes. REIT tax rate is much lower. Recently a number of firms have chosen to become REITs in order to unlock shareholder value. It has become a very profitable venture to identify firms that will become REITs.

More information on REITs:
http://www.investinreits.com/