Will changing the structure of executive compensation change Wall Street? Risky deals drove Wall Street to the bank with record profits and then to the brink with astounding losses. Even still, it is hard to curb risky behavior. Risky deals have the highest potential payoffs. The flip side is they also have the highest potential losses. Photo by epicharmus, courtesy of flickr According to the Associated Press, today the Federal Reserve released details of its plan to monitor bank pay. The plan would not involve setting executive compensation. The Fed would instead review pay policies and exercise its power to veto policies that ”encourage excessive risk-taking.” The logic is that executives, loan officers and traders will be... [Read more]

In times of economic uncertainty, many investors run to gold in search of refuge. According to Forbes Magazine, investors have poured $12 billion into the SPDR Gold Trust ETF (GLD). The ETF closed at 103.92 today. Gold may be thought of as safe, however, gold values have been on a rollercoaster ride for the past couple of years. In March 2008, gold moved above $1,000 per ounce for the first time ever. In the following months, gold entered a steady decline toward $700 per ounce in November. Since then, it has steadily risen to its current level of approximately $1,060 per ounce. So, after a 50+ percent return inside of twelve months, has gold maxed out or is there more room for growth? On the supply side, gold mining is on the rise and some... [Read more]

Yesterday, after reading Yahoo’s earnings release, I wrote about the income statement and which line, top or bottom, means the most. Today, eBay (EBAY) reported third quarter results which beg the question once more, but with an earnings scenario that is the exact opposite of what Yahoo reported. Perfect timing! Photo by rightonbro, courtesy of flickr EBay reported net income of $350 million on revenue of $2.24 billion. Net income fell 29 percent versus the same period last year, but revenue rose 6 percent. I am a fan of eBay because it has changed the marketplace forever. Unfortunately, eBay’s net income and revenues moved in opposing directions. According to Yahoo! Finance, the decrease in net income is partially due to currency... [Read more]

Yahoo! (YHOO) surprised Wall Street when it reported its third quarter earnings. The Internet company’s profits tripled versus the same quarter last year, however revenue fell 12 percent. The stock lost about a nickel during the regular trading session prior to releasing the news. In after-hours trading, shares have risen 5 percent so far. Photo by gaku., courtesy of flickr Looking at Yahoo’s figures is interesting because of the conflicting movements of the top and bottom line. Yahoo’s top line has fallen for the third straight quarter, so that means revenue has been shrinking, but profits rose dramatically. Which line matters most: top or bottom? The top line shows revenues and the bottom line shows what is left after all... [Read more]

In yesterday’s post, I mentioned evaluating a fund’s performance with risk in mind. Style is another factor to consider and here’s why. Suppose you invest in a fund that specializes in European stocks or long-term government bonds. Would the Dow be the most appropriate benchmark to use for evaluating either of these funds? Probably not. Photo by The Busy Brain, courtesy of flickr Both portfolios would offer a completely different set of assets versus the Dow, and as such, a different benchmark should be used to evaluate their performance. Style analysis involves examining the assets held in your fund to find the most appropriate benchmark. William Sharpe (Nobel Prize winner, of the Sharpe ratio and the Sharpe optimal risky... [Read more]