AIG stock up 264% in August

Shares soar nearly 27% Thursday on reports that salary for new CEO Robert Benmosche has been approved by Obama's pay czar.

NEW YORK (CNNMoney.com) -- AIG's stock closed at $47.84 on Thursday. At the start of the month, shares were trading at a mere $13.14.

What's going on here?

AIG's stock has nearly quadrupled in August, but the company is no closer to paying back the $80 billion it owes taxpayers.

Investors got all wound up after the company announced in the past few weeks that it had appointed a new CEO and returned to profitability.

Shares gained another 27% Thursday after The Wall Street Journal reported that new Chief Executive Robert Benmosche's $10.5 million pay package has been fast-tracked for approval by Obama administration "pay czar" Kenneth Feinberg.

AIG pressed for a quick decision on Benmosche's compensation, over concerns he might leave the company if it wasn't immediately approved, according to the report.

The news actually came as little surprise, since AIG had previously announced that Feinberg gave the pay package a preliminary nod of approval.

A spokeswoman for AIG said the company would not comment on the status of Benmosche's pay package or on the stock price.

Investors' excitement about AIG began to build on Aug. 3, when the company announced it would replace retiring Chief Executive Ed Liddy with Benmosche, the former MetLife (MET, Fortune 500) CEO. Shares gained a modest 3.5%.

The stock skyrocketed on Aug. 5, with shares soaring 63% on hints that the company would post its first quarterly profit since October 2007. On Aug. 7, when AIG announced it earned $1.8 billion in the second quarter, shares gained another 20.5%.

On Aug. 20, Benmosche said that he was optimistic the company would be able to pay back the more than $80 billion it owes the U.S. taxpayers and return to the company's former glory. Shares rocketed 21% higher that day.

"People really like this guy Robert Benmosche, because he's really a salt-of-the-earth New York financial guy," said Damon Vickers, managing director of Nine Points Management & Research fund, which has bought up AIG's stock in recent days. "He looks like he's got the spirit to take on this situation and make the best of it."

Since the beginning of the month, shares of AIG (AIG, Fortune 500) are up 264%. The company held a 20-1 reverse stock split on June 30, when shares closed at $1.16.

Vickers said AIG's stock has a chance to hit $60 in the near term and $100 in the coming months. He noted that after the stock split, AIG's all-time high stands at $1,400, so the stock has plenty of room to grow.

No help for taxpayers

Since the government holds its 79.9% interest in AIG in preferred shares, taxpayers don't stand to gain from a steep rise in the company's common stock price.

Instead, the preferred shares pay a dividend. But the dividends on the TARP part of the bailout -- $41.6 billion, or about half of its overall loan -- are "noncumulative." That means that the company can skip dividend payments without the obligation to make up the difference later.

And that's just what AIG did on Aug. 3, failing to declare its dividend payment to Treasury. Should AIG miss three more dividends, the government will have the right to nominate two more directors to the insurer's board.

Despite Benmosche and investors' enthusiasm, AIG is still a very troubled company with a sizeable debt to repay to the government.

The insurer has said it did not make enough profit to repay the taxpayers, and AIG said it won't likely be able to sustain a string of profitable quarters anyway, as it will take hefty restructuring charges for its looming core asset sales.

AIG plans on paying back the government by selling off pieces of the company. But those asset sales have been slow-going and sold at depressed values thus far, as credit remains tight. AIG has made just over $9 billion on those deals to date. As a result, AIG has agreed to spin off three huge chunks of its business, selling stakes in two of them to the Federal Reserve to reduce its loan by $25 billion.

Before his retirement on Aug. 10, Liddy reiterated that the company would likely be able to repay the government in full in three to five years, which Benmosche echoed last week.

The company also has to deal with the ongoing distraction of hundreds of millions of dollars in bonuses that have still yet to be paid to employees of its troubled Financial Products unit. The company became the subject of a public uproar after the revelation in March that AIG paid $165 million in bonuses to employees of the division that nearly brought the company to its collapse.

Still, traders like Vickers are undeterred.

"As risky as AIG seems, it has the full backing of the U.S. government," he said. "Apparently you can take that to the bank. I'm comparing AIG to a U.S. Treasury, and I know it's insane, but it's nonetheless true."

Investors welcome a better-than-expected rise in new home sales. But Wall Street struggles after the Dow rose for 6 straight sessions.

Housing: July new home sales rose to a 433,000 unit annualized rate from a revised 395,000 unit rate in June. Economists surveyed by Briefing.com forecast sales at a 390,000 unit annual rate.

On Tuesday, an S&P/Case Shiller report showed that home prices rose 2.9% in the second quarter versus the first, the first quarterly rise in three years.

Durable goods orders: Orders for goods meant to last three years or longer rose more than expected in July. According to a Commerce Department report released Wednesday morning, durables rose 4.9% after falling a revised 1.3% in June. Economists thought orders would rise 3.2%.

Oil prices: Crude prices slipped by $1.01 a barrel to $71.04 on the New York Mercantile Exchange, after a government report showed crude supplies rose less than expected last week, while gas and distillates - used in heating oil - rose more than expected.

World markets: European markets tumbled in afternoon trading, while Asian markets mostly ended higher, with the Japanese Nikkei rising 1.4%.

Bonds: Treasury prices slipped, boosting the yield on the benchmark 10-year note to 3.44% from 3.43% Tuesday. Treasury prices and yields move in opposite directions.

Treasury sold $42 billion of 2-year notes Tuesday and is planning to sell $39 billion of five-year notes Wednesday and $28 billion of 7-year notes Thursday.

Other markets: COMEX gold for December delivery fell 70 cents to $945.30 an ounce.

In currency trading, the dollar rose versus the euro and the Japanese yen.

Lost Citi Begins to Find Its Way Back Home

Citigroup shares are up more than 70% in the past four weeks. That isn't a typo. More to the point, the market isn't making a mistake.

For months, Citi lagged behind as shares in other troubled banks took off. The wariness made sense. Throughout the credit crunch, Citi's balance sheet has had a habit of springing nasty surprises. The added fear: As part of a preferred-for-common stock exchange, the government is taking a 34% voting stake in the bank, which investors feared could lead to disruptive interventions.

Ironically, it is the exchange that made Citi a buy. In short, it solved the bank's chief weakness, a dearth of tangible common equity. Banks lacking TCE are risky stock investments because shareholders stand to be diluted by the capital raises needed to boost equity.

At the end of June, the bank had just under $40 billion of TCE, hardly a sufficient buffer to support $1.8 trillion of tangible assets in a tough economy. After the exchange, the estimated proceeds from two deals, as well as the expected hit from bringing assets onto its balance sheet, Citi would have just over $100 billion of TCE. That would be equivalent to about 5.1% of tangible assets -- high for a big bank.

And the higher TCE ratio helps with Citi's other big weakness. The bank has to deal with a large amount of long-term debt coming due, $112 billion from 2010 through 2012.

It is unlikely Citi could have accessed debt markets in the size it did this year without issuing through a government-guaranteed program. That goes away in October. True, the government always can bring it back if needed. But if that were to happen just for Citi, the bank might strengthen its reputation as the sector's problem child.

That now looks less likely. The stronger TCE buffer affords creditors more protection. And if Citi's balance sheet shrinks as planned, it likely won't need to issue the full $112 billion to pay down maturities.

Skeptics note that Citi's TCE total reflects a $42 billion net deferred-tax asset. This balance-sheet item can have value because it can be used to lower income taxes. But the bank needs to make money to use it. And companies have to haircut this asset if profitability takes longer than expected to return.

While that is a risk, Citi has assets it could sell to generate a profit specifically aimed at retaining the value of the deferred-tax asset.

Meanwhile, political fears seem overdone. Despite sitting on a $10 billion paper profit, the government isn't likely to sell out soon, as the stake gives it useful leverage if Citi's management slips. And, so far, pressure from the government and regulators actually may have helped drive Citi forward in certain areas, particularly corporate governance.

Losses will, of course, weigh on Citi. The government's stress tests estimated worst-case losses of $105 billion this year and next, almost equal to the new TCE total. But Citi's loan-loss reserve, which absorbs losses before they hit TCE, is now $37 billion. At 5.6% of loans, it is substantially higher than for most rivals. Citi should also generate pre-provision earnings over the period.

Perhaps the rally hasn't priced all of this in. Citi trades at about one times its estimated new TCE per share versus about 1.55 times for Bank of America, adjusted for recent transactions. It mightn't get there if earnings or the economy disappoints. But if Citi performs, the problem child could continue winning over those who shunned it.

Casino Las Vegas Sands closer to Hong Kong IPO

The Las Vegas Sands Corp (NYSE:LVS) announced on Monday that it has completed a slight restructure to it’s $3.3 billion Macau credit facility.

This move has been necessary to allow the operator to offer a minority share in the business for an IPO on the Hong Kong stock exchange. Casino operators Las Vegas Sands Corp have hit harder times and are currently looking at an initial public offering of its Macau assets and sale of peripheral business, in a bid to raise $3.5 to $4 billion. Las Vegas Corp currently needs approximately $2 billion to complete their latest hotel and casino project.

Las Vegas Sands Corp who also own the Sands casino resort in Macau and the Sands Casino resort Bethlehem in Pennsylvania, are also considering the sale of stores in the company’s Venetian resort in Macau, and condos and retail space in the neighboring four seasons property.

The move to a float on the HK market is proving a strong temptation with Steve Wynn also belived to be exploring the option, and MGM Mirage have been quoted as saying that although they need to improve their Macau numbers first they are certainly not ruling out an IPO.

Las Vegas Sands Corp have altered the Credit arrangement to include six quarters of covenant relief and the ability to both sell a minority interest of it’s Macau operations and also to issue senior secured or unsecured notes in Macau.

So LVS will go first as had been widely predicted. Sheldon Adelson has already announced that they have made headway on the Marina Bay Sands resort and Casino in Singapore, at the recent topping off for the three towers he stated that the complex would beging to open in phases during the first quarter of 2010. It is expected to have 1000 Hotel rooms, the main Casino, The MICE facility, restaurants and 50% of it’s retails space opened buy the end of February.

Las Vegas Sands Corp is raising $400 million to restart the stalled development on Macau’s Cotai strip, there is a slight chance that 3 major resorts so close could cannibalize from each other but on the other hand with LVS’s clear ability to trade in these Asian markets and trade well you would have to look at all 3 being highly successful when the financial climate picks up.

The financial future looks very healthy when you consider that even during the worst financial times many people have seen they will still complete both the Singapore development and the Cotai strip resort in Macau which will be a very large development containing Hotels from names such as St. Regis, Sheraton, Shangri-La, Traders, Hilton, Conrad, Fairmont, Raffles, Holiday Inn, and InterContinental.

The fact the las Vegas Sands are to go first will also be a boost to Steve Wynn, there are not many time when following a competitor to market can be a blessing, however when we look at the potential for the LVS sale to do well it can only only cast a positive glow on whoever goes next.

The winners during these financial troubles will be the proverbial last man standing and all things added up, in Macau at least this seems to be Sheldon Adelson and his Las Vegas Sands corp.

Why Is Buffett Buying Bonds?

In his latest letter to shareholders, Warren Buffett made his views on cash and Treasuries very clear:

"When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary."

Clinging to cash equivalents or long-term government bonds at present yields is almost certainly a terrible policy if continued for long. Holders of these instruments, of course, have felt increasingly comfortable -- in fact, almost smug -- in following this policy as financial turmoil has mounted. They regard their judgment as confirmed when they hear commentators proclaim "cash is king," even though that wonderful cash is earning close to nothing and will surely find its purchasing power eroded over time.

It is true that government bond yields are higher since those words of Warren's were published in late February. The stock market is also up -- a lot -- having closed at its 2009 low on March 9. Even junk bonds have rallied. But the latest filings from Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) do not show Warren Buffett buying more stocks, they show him buying more bonds … non-dollar-denominated ones.

At the end of June, Berkshire held about $11.1 billion in foreign government bonds in its insurance units, quite a bit more than the $9.6 billion it held three months earlier. In total, Berkshire spent $2.6 billion on bonds in the quarter, compared with $350 million on stocks, the lowest equity purchase rate in more than five years.

Forced into bonds
In a way, Buffett is forced to buy bonds because dividends are becoming an endangered species in the current market environment. Core Berkshire holdings Wells Fargo (NYSE: WFC), US Bancorp (NYSE: USB), and General Electric (NYSE: GE) have cut dividends. Another core holding, American Express (NYSE: AXP), surprised some folks by not cutting its dividend -- but then again, it wasn't a huge payer anyway.

Buffett managed to get equity upside by buying preferred shares in Goldman Sachs (NYSE: GS) and GE with very steep coupons that guarantee 10% annual interest, and to boot he got warrants that, if sold today, would bring him a hefty profit for the Goldman deal -- the strike price there was $115. The GE warrants so far are out of the money (the strike price is $22.50). Either way, he managed to get equity upside combined with a very hefty 10% preferred dividend.

Buffett is buying high-yield bonds. Berkshire increased holdings of such securities 13% in the second quarter. He is also buying foreign government bonds, which rose 16% above the previous quarter. Buffett did cut his stake in Treasuries and GSE bonds by 5.3%. The moves allowed investment income to rise by 9%, despite the dividend cuts, reflecting the shift into fixed-income.

Making sense of the moves
Buying high-yield bonds suggests that Buffett thinks the economy is improving, or is about to improve. High-yield bonds returned 23% in the second quarter, according to Merrill Lynch's High Yield Master II index, clearly showing that the market agrees.

Individual investors can capitalize on high-yield bonds via ETFs and mutual funds. One ETF worth considering is the iBoxx $High Yield Corporate Bond ETF (HYG). So I don't look completely foolish -- no pun intended -- I recommended this high-yield ETF in February, before the rally in the high-yield market. For foreign government bonds, look at the iShares S&P/Citigroup International Treasury Bond ETF (IGOV). Foreign investment-grade bonds have sold off since March, but the ETF has risen as the dollar has also declined. Since currency risk is not hedged, this is one way to conservatively bet on a lower dollar.

Keep in mind that if the stock market corrects in the coming months, high-yield bonds will tend to follow, while government bonds tend to rally. The dollar is the wild card. But those are short-term considerations.

I doubt Warren Buffett is making investment moves thinking three months out. His investment horizon is usually in years -- and so should yours be. Of course, if you are not comfortable making complicated asset-allocation moves between bonds and stocks, another option is buying some Berkshire shares and putting Buffett to work for you.

Everything Buffett Needs to Know, He Learned Right Here

Millions of investors chase Warren Buffett. Tens of thousands attend Berkshire Hathaway's annual shareholder meetings. Wealthy fans bid millions of dollars to have lunch with him. His appearances on CNBC bring trading floors to a halt. People want to know what he's thinking. Why he's different. What secret has made him so much more successful than anyone else.

What's interesting -- and a little ironic -- is that Buffett has never held back what his secret is. As he recently told PBS:

I read a book, what is it, almost 60 years ago roughly, called The Intelligent Investor and I really learned all I needed to know about investing from that book, and particular chapters 8 and 20 ... I haven't changed anything since.

One book. Two chapters. Legendary success.
You'd think such precisely guided advice would draw more attention. Not only has Buffett filtered his success down to one book, he's even listed the two specific chapters on which he built his wisdom. He's making this almost embarrassingly easy for us.

What bits of sage advice do these two chapters -- published in 1949 by Buffett's early mentor Ben Graham -- hold? Here are key points from each one.

Chapter 8: The Investor and Market Fluctuations
Markets go up. Markets go down. Most of us accept this fact until we experience the latter, at which time we throw up our hands and consider the whole thing a sham.

That kind of behavior is what Chapter 8 is all about: dealing with market movements, and how fundamental they are to investing success.

We have a tendency to become confident and invest the most money after stocks have logged big gains, and vice versa -- selling in panic after big drops. Two seconds of logical thought will tell you this isn't rational. Yet we do it over and over again.

Buffett built his success on exploiting the market's movements, rather than following them with lemming-like obedience. He bought stakes in companies like Goldman Sachs (NYSE: GS) and General Electric (NYSE: GE) when the market wanted nothing to do with them. He sat on his hands and laughed when companies like Yahoo! (Nasdaq: YHOO) and Cisco (Nasdaq: CSCO) soared during the dot-com boom, ignoring heckles about his technophobic incompetence. It's truly as simple as "being greedy when others are fearful, and fearful when others are greedy."

Here's how Graham puts it in Chapter 8:

The true investor scarcely ever is forced to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgment.

Chapter 20: Margin of Safety as the Central Concept of Investment
Graham opens Chapter 20 with a potent message:

In the old legend the wise men finally boiled down the history of mortal affairs into the single phrase, 'This too will pass.' Confronted with a like challenge to distill the secret of sound investment into three words, we venture the motto, MARGIN OF SAFETY.

We have an overwhelming urge to expect certainty, but live in a world that is anything but. Forward-looking projections of a stock's value are based on assumptions, prone to wild miscalculations and unforeseen events. And by prone, I mean 100% assured.

There's only one surefire solution to this: Pay far less for stocks than your estimate of value, leaving room for error. That's a margin of safety. It's giving yourself room to be wrong, knowing that you probably will be. Think a company is worth $50 a share? Great. Don't pay more than $25 for it. Think a company could earn $2 per share next year? Great. Set yourself up so you'll profit if it only makes a buck. There has to be a wide range of acceptance between the projected and the potential.

One stock that might epitomize the opposite of a margin of safety is Amazon.com (Nasdaq: AMZN).

I love the company as much as the next guy. Its market niche, moat, and growth potential are both real and huge. But how do you justify paying 38 times forward earnings for the stock? There's only one way: To assume everything goes right. To assume there are no management fumbles. No unforeseen competitive risks. No sudden economic woes. No miscalculations of growth. To assume every forecast isn't off by so much as a rounding error.

But assuming that such certainty will prevail is treacherously optimistic, and borderline irrational. Problems arise, and not pricing them into your investments is setting yourself up for disappointment. Google (Nasdaq: GOOG) and Chipotle (NYSE: CMG) may have seemed "fairly" valued when shares peaked in 2007, yet the subsequent nosedives should speak for themselves. There was no margin of safety.

Moving on
These lessons might seem basic and dull. They are. Yet too many investors fail to implement them. Buffett obviously isn't the only one who's read The Intelligent Investor -- he's simply put its lessons and theories to work in a habitual manner.

Buffett sells energy, buys drugmaker stocks

Warren Buffett's Berkshire Hathaway sells ConocoPhillips shares in second quarter; buys Johnson & Johnson.

NEW YORK (CNNMoney.com) -- Investor guru Warren Buffett bought up millions of shares of health care and drugmaker stocks in recent months while shedding energy shares, according to a Friday filing with the Securities and Exchange Commission.

In his biggest acquisition of the second quarter, Buffett's Berkshire Hathaway (BRK.A) investing company added nearly 4 million shares of drug and consumer product maker Johnson & Johnson (JNJ, Fortune 500), bringing his tally to nearly 37 million shares.

Buffett also bought 1.2 million shares of laboratory equipment company Becton Dickinson & Co. (BDX, Fortune 500) He did not hold shares in this company in the second quarter.

0:00 /4:53Buffett: Bet on America

The Omaha, Neb.-based investor sold off nearly 7 million shares of energy producer ConocoPhillips (COP, Fortune 500). But he still held more than 56 million shares of the oil company.

He also sold 14.8 million shares of utility operator Constellation Energy (CEG, Fortune 500), which accounted for his entire stake in the company.

In other large sell-offs, Buffett unloaded more than a million shares of each of the following companies: Home Depot (HD, Fortune 500), Wellpoint (WLP, Fortune 500) and United Health Group (UNH, Fortune 500).

The top 10 highest paid CEOs are...

Ten CEOs take home more than $70 million in 2008, with Blackstone's Stephen Schwarzman topping the list with more than $700 million in compensation.

Highest paid CEOs, 2008

Name Company Compensation Stephen Schwarzman Blackstone Group $702,440,573 Lawrence Ellison Oracle Corp. $556,976,600 Ray Irani Occidental Petroleum Corp. $222,639,705 John Hess Hess Corp. $159,566,940 Michael Watford Ultra Petroleum Corp. $116,929,392 Aubrey McClendon Chesapeake Energy Corp. $114,286,867 Bob Simpson XTO Energy Inc. $103,485,972 Mark Papa EOG Resources, Inc. $90,471,784 Eugene Isenberg Nabors Industries Ltd. $79,333,079 Michael Jeffries Abercrombie & Fitch Co. $71,795,744

Source:The Corporate Library

NEW YORK (CNNMoney.com) -- Last year was a bad one for most chief executives -- but not for the top 10 highest paid CEOs.

Seven chief executives took home more than $100 million in 2008, and three others had paydays that topped $70 million, according to a report released Friday by The Corporate Library.

According to the report, Blackstone's Stephen Schwarzman was the highest paid CEO in 2008, taking home $702,440,573 in salary and stock options. The head of the financial services giant vested nearly $700 million worth, or 25% of the stock options he was granted after taking Blackstone (BX) public in 2007.

Schwarzman will receive the other 75% of his $4.7 billion equity grant from the IPO in equal installments over the next four years, so he will likely remain at the top of this list for at least the next several years.

A Blackstone spokesman stressed that the $702 million for Blackstone is not "compensation," but is mostly the vested portion of his stock from the IPO.

Oracle (ORCL, Fortune 500) Chief Executive Lawrence Ellison, 2007's highest paid CEO, was second on the list, pocketing nearly $557 million.

Like Schwarzman, most of Ellison's compensation came from exercised stock options, which totaled $543 million from a whopping 36 million options. That's despite a 21% drop in Oracle's share price over 2008. With 33.4 million stock options still outstanding and a 24% rise in Oracle's stock, Ellison's likely to keep his top spot on the list in 2009.

The next seven highest paid CEOs all helm energy companies: Ray Irani of Occidental Petroleum (OXY, Fortune 500), John Hess of Hess Corp (HES, Fortune 500)., Michael Watford of Ultra Petroleum (UPL), Aubrey McClendon of Chesapeake Energy (CHK, Fortune 500), Bob Simpson of XTO Energy (XTO, Fortune 500), Mark Papa of EOG Resources (EOG, Fortune 500) and Eugene Isenberg of Nabors Industries (NBR).

Oil prices -- and the stock price of most energy companies -- rocketed higher in the first half of 2008, before plummeting lower in the end of the year. Despite that roller coaster, these CEOs' stock options were still worth quite a bit.

And coming in at No. 10 was Michael Jeffries, chief executive of Abercrombie & Fitch (ANF). Despite a tough year for retail, in which Abercrombie's stock dropped nearly 70%, Jeffries made more than $60 million in stock options.

Jeffries was also awarded a $6 million "stay bonus" after remaining as the company's chairman and CEO through December 2008, on top of his $1.5 million salary, $1.3 million for personal aircraft usage and $382,687 towards his 401(k).

Couple stole S$16,000 worth of toiletries

SINGAPORE: They had stolen toiletries to the tune of about S$16,000 from supermarkets all over Singapore in eight months, and had 17 charges against them.

But because Daniel Wong Chee Kian, 38, is a schizophrenic and his wife, 39—year—old Boo Lee Choo, has a mood disorder — according to their Institute of Mental Health reports — the prosecution had already reduced the number of charges against them to one each.

And on Wednesday, they were both given a conditional discharge for stealing with a common intention. The couple’s lawyer had urged the court to grant them a conditional discharge and said they both seemed to be on the road to recovery after going for medical treatment.

Wong had originally faced 10 charges and Boo seven.

On January 21 last year, Wong and Boo went to the Cold Storage supermarket at Parkway Parade, took toiletries off the shelves and placed them in a shopping basket as they walked through the lanes.

A loss prevention officer, Mr Kelvin Po, who was monitoring the store’s CCTV cameras found their behaviour suspicious and went to the lanes to observe them.

He saw Boo taking out items from the shopping basket that Wong was holding and placing them in a red paper bag.

The couple then walked out of the supermarket without paying for the items in the red paper bag. Those were valued at around S$150.

Mr Po approached them but before he was able to introduce himself, Boo tried to escape. She struggled with Mr Po and scratched his hands. Wong ran away during the scuffle.

Boo was eventually detained. Wong was arrested later.

For Stocks, September May Be the Cruelest Month

September is fewer than three weeks away. Feeling nervous? Maybe you should be. For investors, the period between Labor Day and Halloween is proving an annual fright show. And no one knows why.

It was, of course, in September last year that Lehman collapsed and everything fell apart. But then it was also September-October 2002 that the last bear market plunged to its lows.

The 1998 financial crisis? It began late August, and rolled on for two months.

The famous crash of 1987 came in October. But most people have forgotten that the market actually started sliding downhill in late August.

That's almost exactly what happened in 1929 too. The big crash came in October, but the market peaked just after Labor Day. Prices began falling through September, then tumbled further still.

The worst month of the Depression? September, 1931, when the Dow fell about 30 percent.

It was also in September, 2000, that the bear market really got going.

The 9/11 crisis, of course, came in September. That was hardly caused by investors. But what is forgotten is that the stock market was already looking wobbly. In the two weeks before the terrorist attacks, the Standard & Poor's 500-stock index fell 7 percent.

The great panic of 1907? October. The great crash of 1873? September.

Yikes.

So is there really a September, or a Halloween, effect?

Since 1926, investors have lost nearly one percent on average during September, according to market data tracked by finance professor Kenneth French at Dartmouth's Tuck School of Business. It's the only month with a negative average return.. For each of the other 11 months, investors gained nearly one percent on average.

Other research takes the idea of an autumn dip even further. Georgia Tech doctoral student Hyung-Suk Choi studied the so-called "September effect" as part of his recent Ph.D. thesis. He looked at data for 18 developed stock markets around the world spanning up to 200 years, and found that in 15 of those markets, September brought red ink for investors.

Fund manager Sven Bouman and finance professor Ben Jacobsen concluded that investors in most world markets have historically fared poorly from May through October each year. They made their money between November and April.

Hence the old British investors' saying, "sell in May and go away, don't come back till St Leger Day." (But since St. Leger Day is in the middle of September, even that date may be premature.)

Some of the September or Halloween effect is caused by a few really bad years. But that's not the whole story. To reduce the influence of outliers I looked instead at the median result since 1926 instead of the statistical mean. The performance gap between September and the other months shrank from 2 percent to 1.4 percent. That's smaller, but it's still a difference. The median September saw losses of just 0.07 percent. But the median month for the rest of the year gained 1.37 percent.

As for the causes of a possible September effect, most are stumped.

"There haven't been any good academic stories to explain it," admits Michael Cooper, finance professor at the University of Utah's David Eccles School of Business. "One credible explanation is just luck."

It's been suggested that mutual funds drive down the market by selling their losing stocks before their October 31 year end. Or that third quarter profit warnings come in early September, raising fears about full-year results. Or that these autumn crashes used to be related to the harvest, as Midwestern banks withdrew capital from New York.

(Still another theory cites seasonal affective disorder. Investors simply get more risk-averse, and more prone to sell, as the days get shorter. That's the case argued by York University finance professor Mark Kamstra and others.

So what, if anything, should you do?

In practical terms, maybe not that much. For most people, even a performance difference of one or two percentage points isn't going to cover the transaction costs of selling before the end of August and re-entering the market a month later. And stock market patterns aren't ironclad. The market may even jump in September, as it did in 2006 and 2007.

Perhaps the best you can do is brace for turmoil.

Morakot Typhoon

It's very sad to hear that this typhoon has caused alot of damage and loss of many lives and properties in Taiwan. From the news itself, alot of villages were destroyed in the process and many accidents happened even during the rescue itself.

Wiki has more information on this natural disaster:
http://en.wikipedia.org/wiki/Typhoon_Morakot_(2009)

In fact, Philippines is also affected by this catastrophe and through this disaster, we can see how we as humans, can get together in unity to overcome this nature of destruction. In Taiwan itself, many volunteers from every part of the country did their fair part through donations, volunteered services in the rescue. Many retailers also did their part by donating food and water supplies to the affected areas and factories volunteered to repair electronics of the affected parties with close to no cost. Many other retailers also offered to sell goods at half price for those affected parties...

May god bless the people in Taiwan to overcome this crisis..

US economy has bottomed: George Soros

Tue Aug 11, 2009 3:13pm EDT
By Edward Krudy

NEW YORK (Reuters) - The U.S. economy has hit bottom and the current quarter will see positive growth due to the government's stimulus spending, billionaire financier George Soros said on Tuesday.

"I think it (the stimulus) has made a difference, the economy has actually bottomed and I think we are facing a positive quarter, and I think that is largely due to the stimulus," he said in an interview with Reuters Television in New York.

The Obama administration is pumping $787 billion into the economy in a bid to turn around the deepest recession since the 1930s. The U.S. economy shrank by 1 percent in the second quarter after tumbling 6.4 percent in the quarter before that, the biggest decline since 1982.

Soros said he did not believe the economy needed more stimulus money, despite calls for a second round of spending. Notably, in July, House of Representatives Majority Leader Steny Hoyer said the U.S. should be open to more government spending if needed.

Also on Tuesday, U.S. President Barack Obama sounded a cautious note, saying the economy is "not out of the woods" despite signs lagging business investment was reviving. Last week the White House said there are no plans for a second stimulus package.

Back in June Soros said the United States faces a "stop-go" economy because rising borrowing costs could generate major headwinds for the still-fragile economy. Soros is Chairman of Soros Fund Management.

(Reporting by Edward Krudy; Editing by Andrew Hay)

© Thomson Reuters 2009 All rights reserved.

A very good opportunity.

Taking a firm position in an ongoing debate in the financial markets, Buffett says he's not concerned about deflation, but thinks inflation will be a problem in coming years.

Despite his negative view on the economy, Buffett still believes the stock market is attractive "over the next 10 years" when compared to alternatives like Treasury bonds.

Buffett endorsed Ben Bernanke's reappointment as Federal Reserve Chairman, saying "you couldn't do better." He also praised Treasury Secretary Tim Geithner.

Frank Naylor, head of investments at Hermes Pension Fund, which manages BT's scheme - the largest in the UK - said investment in distressed debt was a "very good opportunity".

"Even though people are talking about the outlook improving, we still think there will inevitably be a lot of bankruptcies and insolvencies," Mr Naylor said. "We will be able to get quite powerful returns."

Singapore Q2 GDP jumps revised 20.7 percent

SINGAPORE - Singapore revised slightly higher its economic growth in the second quarter, but warned U.S. consumption must pick up to sustain the recovery.

Gross domestic product grew an annualized, seasonally adjusted 20.7 percent in second quarter, the Trade and Industry Ministry said in a statement Tuesday. The ministry last month initially reported a 20.4 percent expansion.

Manufacturing surged 49.5 percent, construction jumped 32.7 percent, and financial services rose 22.8 percent from the previous quarter, the ministry said.

"This improvement was largely driven by the spike in output from the volatile biomedical manufacturing cluster and inventory re-stocking," the ministry said. "Financial services was boosted by sentiment-sensitive segments such as stock market activities."

"It is uncertain if these can be sustained into the second half."

Before the April to June period, the economy contracted the previous four quarters as the global recession undermined demand for Singapore's exports. The government expects the economy to fall up to 6 percent this year.

GDP shrank 3.5 percent in the second quarter from a year earlier, better than the previous estimate of a 3.7 percent contraction, the ministry said.

Non-oil exports, which account for about 60 percent of GDP, rose a seasonally adjusted 7.6 percent in the second quarter from the first quarter, while falling 14 percent from a year earlier, the ministry said. The government expects non-oil exports to contract up to 12 percent this year.

An economic recovery in the second half and next year will likely be muted unless U.S. consumer demand grows more than expected, Ravi Menon, deputy trade ministry, said at a news conference.

"The subdued and weak recovery that we see taking place in the second half of this year is likely to continue to next year," he said. "That's not a bad outcome if we continue to avoid financial slippages and double dip recession scenarios."

Jim Rogers Holding China, Buying Commodities

Unless you’re new to investing, chances are you’ve heard of Jim Rogers. Co-founder of the Quantum Fund, he returned a yearly compounded return of 38% over 11 years (source: Streetstories.com).

He has an air of someone who’s seen it all and done it all. As the sprightly 67-year old father of two relaxes in his chair, we start off the interview with his take on the rally.

Rally Skeptic
The world is flush with stimulus money. And Rogers believes some of it has flowed into the stock market. “Nearly every central bank in the world has pumped out and printed huge amounts of money. Most governments around the world have spent huge amounts of money…the money has to go somewhere, and one of these places is into stocks.”

“This is a very strong rally and a very powerful rally…but I do know there are more problems to come down the road,“ says Jim on the rally. He remains skeptical saying, “(governments) can’t keep doing this forever. I’ve seen powerful rallies like this one and they usually last longer than people expect, including me.”

A strong rally doesn’t mean Jim is staying out of the market. He still holds a position in China, although he isn’t adding to it.

Hold China
“Last October and November the China market collapsed…it looked like panic selling. And you should nearly always buy when there’s panic selling,” says Jim on his position in China.

Since then however, he’s been holding, not adding to his China position. “When something doubles in nine months, I don’t like to jump into a moving train. When you see something that strong, normally something causes a correction if nothing else."

Jim intends to hold for a long time; longer than most investors would consider ‘long term’. “I hope I never sell my Chinese shares. I hope my Chinese shares are held by my children someday. If I’m right about China, in that China is the next great country in the world, I want to own these shares for a hundred years.”

This doesn’t mean Jim is blind to the risks, although he remains strongly bullish on China. One issue that could end the China story is the supply of water. “I’ve been around the world a couple of times and I’ve seen whole societies disappear because the water disappeared. If China is unable to solve its water problem, there’s no China story, it’s the end of the story. They’re working on it. They’re spending billions of dollars trying to solve their water problem. And if nothing else, somebody is going to make a lot of money while they try. But we won’t know for several more years.”

While Jim is holding on to China, one other asset he’s bullish on is commodities. And this time, he’s been buying.

Buy Commodities
Jim’s case for commodities seems airtight. “If the world economy is going to get better, in my view commodities will lead the way out because there are shortages developing of all commodities…if the economy is not getting better, you still want to own commodities because people are printing so much money and in a period of shortages the money is going to somewhere and one of the places will be into commodities to protect themselves against declining paper money.”

Another reason for his bullishness on commodities is his belief that the combined efforts of central banks will result in massive inflation. “Prices are already going up and have been going up for many things. Even the US government that lies about inflation, in their most recent inflationary report…they acknowledge that there’ve been price increases. Overall, energy prices are down and down a lot, therefore they say there’s not much inflation. Go shopping; you’ll see prices are going up.”

The commodities story, Jim believes, still has a long way to go. “I’m not good at market timing, but I do know the bull market for commodities still has a long way to go…everything has to go much much much higher.”

So here’s what Jim has been doing: He’s holding China and buying commodities.

Advice To Investors
As the author of A Gift To My Children: A Father’s Lessons For Life And Investing (published by Wiley), Jim believes that money is an important part of a child’s education. “All children need to learn about money. Everybody needs to understand at least the basics of what to do with money, and if you want to do well, you should learn about investing…unless you’re a monk or a poet or a mystic…money’s going to be significant in everybody’s life.”

To investors, Jim offers this piece of advice: Don’t invest into anything unless you know a lot about what you’re doing. “Jumping around, trying to invest in everything in sight has never led to anybody getting rich. The way you get rich is you find something really good, you focus, you concentrate, you put your eggs in that basket. You watch that basket very carefully. That’s how you get rich. You could go broke, but that’s how you get rich.”

2-Star Stocks Poised to Plunge: Citigroup?

Based on the aggregated intelligence of 135,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, banking behemoth Citigroup (NYSE: C) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Citigroup's business and see what CAPS investors are saying about the stock right now.

Citigroup facts

Headquarters (founded)	New York, N.Y. (1812)
Market Cap	$43.6 billion
Industry	Financial Services
TTM Revenue	$34.69 billion
Management	CEO Vikram Pandit President William McNamee
TTM Return on Equity	(12.7%)
5-Month Return	267%
Competitors	Bank of America (NYSE: BAC) Wells Fargo (NYSE: WFC)
CAPS members bearish on C also bearish on	JPMorgan Chase (NYSE: JPM) Ford Motor (NYSE: F)
CAPS members bullish on C also bullish on	General Electric (NYSE: GE) Apple (Nasdaq: AAPL)

Sources: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS. TTM = trailing 12 months.

Over on CAPS, fully 1,698 of the 8,338 members who have rated Citigroup -- some 20% -- believe the stock will underperform the S&P 500 going forward. These bears include bankerman13 and EmmaBem.

Last month, bankerman13 tapped Citigroup as a zombie that needs to be slayed:

This bank is running on government batteries. It won't show a profit for several years to amount to anything. ... Another GM and it keeps all the other banks from showing the improvement they deserve. Break it up. It's worth more that way than being a socialistic run bank.

In a more recent pitch, EmmaBem singled out the stock as a relatively unattractive banking option:

I really want to like Citi, it is so cheap and with the performance of the other banks, I have to think Citi will become a profitable giant once again. But then, I say to myself, why gamble on Citi when you can invest in Bank of America or Wells Fargo, both are still cheap and promise much less government intervention and much more profit. Citi may end up above $5 by the end of the year, but, for my money, [Bank of America] or [Wells Fargo] are a safer and equally profitable investment.

What do you think about Citigroup, or any other stock for that matter?

On the docket

Monday: There are no market-moving economic reports scheduled for Monday.

Tuesday: The Labor Department releases the initial reading on second-quarter productivity in the morning. Business productivity is expected to have gained 4.9% after rising 1.6% in the previous month, according to a Briefing.com survey of economists. Unit labor costs are expected to have fallen 1.9% in the quarter after rising 3% in the first quarter.

The June wholesale inventories report from the Commerce Department, due in the morning, is expected to show a decline for the 10th month in a row, dropping 0.9% after falling 0.8% in May.

The Fed meeting gets underway in the morning, concluding Tuesday.

After the close, Applied Materials (AMAT, Fortune 500) releases results. The chipmaker is expected to report a loss of 8 cents per share, according to Thomson Reuters. Applied Materials earned 15 cents a year ago.

Wednesday: Due in the morning, the June trade gap, from the Commerce Department, is expected to have widened to $28.5 billion from $26 billion in May, a 10-year low.

The weekly oil inventories report from the Energy Information Administration is due in the morning and the July Treasury budget is due in the afternoon.

The Fed decision is due at around 2:15 p.m. ET.

Thursday: July retail sales, released by the Commerce Department, are expected to show modest growth. Sales likely rose 0.3% after rising 0.6% in June. Sales excluding volatile autos are expected to have written 0.1% after rising 0.3% in June.

The weekly jobless claims report from the Labor Department is also due in the morning, along with readings on July import and export prices and June business inventories.

Wal-Mart Stores (WMT, Fortune 500) releases its quarterly results before the start of trade. The Dow component is expected to have earned 86 cents per share, just as it did a year ago.

Friday: The Consumer Price Index (CPI) for July is expected to come in unchanged, as inflationary pressure remains benign. CPI rose 0.7% in June. The so-called Core CPI, which strips out volatile food and energy prices, is expected to have risen 0.2% after rising 0.2% in June. The Labor Department releases the report.

After the start of trading, the University of Michigan releases its initial reading on consumer sentiment in August. The index is expected to have risen to 68.5 from 66 in late July.

Readings on July industrial production and capacity utilization are also due.

Berkshire profit up 14 percent as stocks rebound

NEW YORK (Reuters) - Warren Buffett's Berkshire Hathaway Inc posted its best quarter in nearly two years, as recovering stock markets boosted the value of its equity investments and derivatives bets.

Operating earnings for the second quarter nevertheless fell short of forecasts, reflecting lower underwriting gains, including from the Geico Corp auto insurance unit, and the impact of the recession on Berkshire's more economically sensitive manufacturing and service units.

"Warren hasn't been able to defy the laws of gravity," said Thomas Russo, a partner at Gardner Russo & Gardner in Lancaster, Pennsylvania, which invests more than $3 billion and owns Berkshire shares. "Berkshire's operating companies are not trying to compromise their long-term results. They are taking the hits that come with an economic contraction."

Net income for Omaha, Nebraska-based Berkshire rose 14 percent to $3.3 billion, or $2,123 per Class A share, from $2.88 billion, or $1,859, a year earlier. Earnings had previously fallen for six straight quarters.

Excluding investments, operating profit fell 22 percent to $1.78 billion, or $1,147 per share, from $2.27 billion, or $1,465. On that basis, analysts expected profit of $1,238 per share, according to Reuters Estimates. Revenue fell 2 percent to $29.61 billion.

Berkshire has close to 80 operating units that provide such products as insurance, carpeting, electricity and natural gas, ice cream, paint and underwear.

Results included $1.53 billion of derivatives gains. These were tied mainly to the performance of four market indexes in the United States, Europe and Japan, which rose between 8 percent and 23 percent in the quarter.

The derivatives are a major reason earnings had fallen in recent quarters. Accounting rules require Berkshire to report changes in their value with earnings. Berkshire said the bets will continue to generate "extreme volatility" in earnings.

Book value increased 11 percent from the first quarter and on a per-share basis rose to $73,806 from $66,248. Net income was the highest since the third quarter of 2007 and came on the heels of a first-quarter loss, Berkshire's first quarterly deficit since 2001, Reuters data show.

EQUITY HOLDINGS REBOUND

Berkshire's common stock holdings increased 22 percent from the first quarter to $45.79 billion, reflecting price changes as well the purchase of $350 million of stock.

The company is the largest shareholder of American Express Co and Wells Fargo & Co, whose shares rose a respective 71 percent and 70 percent in the quarter.

Berkshire also ended June with $30.37 billion of "other" investments, including in Dow Chemical Co, General Electric Co, Goldman Sachs Group Inc, Swiss Re and Wm Wrigley Jr Co.

Buffett has become something of a white-knight investor in the financial crisis. Berkshire ended June with $24.51 billion in cash, down from $25.55 billion at the end of March.

"The magnitude of the investments he has been able to make is because of his past discipline, and his credibility," Russo said. "He had to weather a lot of criticism for not making the easy and early bets, but waiting for the big fat pitch."

Berkshire did sell some stock, and said its sales of oil company ConocoPhillips shares continued in July.

While Berkshire on June 30 had $8.23 billion of paper losses on the stock index derivatives, that was down from $10.19 billion at the end of March.

Berkshire said it modified six of the derivative contracts during the quarter, reducing potential losses.

These derivative contracts now mature between 2018 and 2028, and Buffett has said he expects them to be profitable.

Meanwhile, liabilities on contracts tied to the default rates on junk bonds fell to $2.51 billion from $3.67 billion. Buffett has said these contracts may lose money.

INSURANCE UNDERWRITING, MANUFACTURING WEAKEN

While insurance investment income rose 31 percent to $1.16 billion, underwriting profit fell 77 percent to $83 million.

Berkshire said the decline came in part because customers of Geico had higher claims losses, and the weak economy caused them to raise deductibles and reduce coverage to save money.

Though premiums increased, Berkshire now expects underwriting gains at Geico to fall in 2009 from 2008.

Operating profit in noninsurance businesses fell 47 percent to $574 million, despite a 22 percent increase from utilities and energy operations.

Profit fell by two-thirds in manufacturing, servicing and retailing businesses such as industrial conglomerate Marmon Holdings, the carpet maker Shaw, and several jewelry and home furnishings businesses.

Berkshire said each manufacturing business "has taken actions to reduce costs, slow production and reduce or delay capital spending until the economy improves."

The NetJets Inc unit, which provides private jet services to executives, lost $253 million before taxes.

Its longtime chief executive Richard Santulli stepped down this week and was replaced by David Sokol, who chairs Berkshire's MidAmerican Energy unit. Many analysts view Sokol a potential successor to Buffett as Berkshire's chief executive.

In Friday trading, Berkshire Class A shares closed up $1,150, or 1.1 percent, at $108,100, while its Class B shares rose $22.69, or 0.65 percent, to $3,540. Both remain more than one-fourth below their record highs set in December 2007. (Reporting by Jonathan Stempel and Lilla Zuill; editing by Carol Bishopric and Andre Grenon)

End of July

It's the start of August, and there's alot of whipsaw action in the markets. Looking at STI, it is now at the pre-crisis levels and rumored to even hit 3000 by end of the year!

Ok, let's look back. Since the mad sell off in Feb-Mar, the market took a huge turn by killing all the bears and most of the stocks you have bought during that period of time will have made you at least 30-40% gain till date. It seems that Asia markets has recovered quite a fair bit but the US markets has still room to move up. Dow is still below its 10,000 mark and NASDAQ close to its 2000 mark.

Moving back to the STI, Celestial is still suspended, pending its negotiation with the bond holders. Below is the latest reply:

----
CELESTIAL NUTRIFOODS LIMITED
(the “Company”)
(Incorporated in Bermuda)
UPDATE ON EARLY REDEMPTION OF CONVERTIBLE BONDS FOR JULY 2009
Further to the Company’s announcement nos. 00073 and 00175 released on 15 June 2009 and 30 June 2009 respectively, the Board wishes to inform that the Company has had preliminary communications and discussions with bondholders representing a substantial majority interest in the convertible bonds, and has been working with the sole dealer manager, Merrill Lynch Far East Limited and the legal advisor, Milbank,Tweed, Hadley & McCloy LLP to develop potential proposals for bondholders’ consideration.

Should the bondholders wish to communicate with the Company, please find below the contact details of the Company:-

Contact : Sun Feng
Telephone : 0086-10-65561809
Email : info@celestialsms.com

The Company will provide an update as and when there is any further development.


By Order of the Board
Ming Dequan
Executive Chairman
31 July 2009

----

It has missed the bull run recently, with most of the S-Shares moving fast and furious and recovering to its pre-IPO prices. Yangzijiang is currently trading at $0.895, which is at the 2006 pre-crisis levels, and others like China Milk and China XLX moving into the $0.50 levels.

Kinda busy nowadays, as banks are trying to catch this sudden uptrend in the economy, and doing the mid year appraisal is stressful as well!