Investing News Good or Bad

As I become more and more involved with the world of investing, I have noticed one thing that causes me to get a little annoyed. That one thing is how financial news is reported. In a world that has everyone connected and up-to-date with so much information; I have begun to wonder how much that impacts the stock market.

In my opinion, too much news has played upon the fears of many investors. This has turned an already risky game into an extremely volatile game. This is because to many investors simply react out of emotion instead of finding the facts out for themselves. I also think some of the professional investors on Wall Street play on the emotions of the small investors.

So I do pose the question as to whether the markets may become too volatile in the future as people are connected 24 hours a day through so many new technologies. Will this constant access to information make it better or worse for the average investor? In the old days before the internet and 24 hour news channels; I would think less irrational selling of stocks based on news and information would have occurred. Today anyone who invests in stocks online is slammed with news good and bad. Some may say that all this information is a good thing, and investors need to do their own research before putting money in or taking money out of the stock market. I do agree that every investor is responsible for their own actions. However, I think there is increasing number of new investors who will fall victim to their emotions based on too much information.

I realize financial news stories and the technologies that distribute them can not be stopped. However, I do feel that media outlets need to put greater care into what they publish. Comments that may make a stock price go up or down quickly that are not based on realities, or may be over-exaggerated could be playing on the emotions of many investors.

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Author: Chad Surges

Degree: Bachelor of Science (Business)

Career: Logistics Executive

Just One Guys Stock Market Opinion

My feelings are definitely mixed when it comes to the world of investing. On one hand, I truly believe if the average person was taught properly how to begin investing when they are young, people would have a much better quality of life. If I have one regret about my own investing experience it is that I did not take investing seriously at a young age. I do feel that if a person takes their time to learn the proper techniques, and can control their emotions and greed they can be very successful investing their money.

On the other hand, I feel that investing brings out the worst in some people causing them to take risk, and hurt not only themselves but their families as well. Too many people, in my opinion, simply do not understand the risk involved when they invest in the stock market. I think in this day and age easy access to online trading accounts has turned the stock market into more of a gambling environment, where get rich quick fantasies run wild.

I also believe that there are many unethical Wall Street investors who prey on the get rich quick dreams of small investors. There is simply too much behind the scenes action going on with large investors and corporations that make it hard for the individual investors to compete fairly day-to-day.

With all that being said, in the long run investing is better for everyone that goes about it wisely. If you put in the time to learn the ins and outs of the markets you can be successful. I just feel the playing field could be better controlled so that the large Wall Street investors cannot have the upper hand on the small individual investors. Will this ever happen? I highly doubt it because we live in a power driven society, where the top 1% of wage earners are in control.

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Author: Chad Surges

Degree: Bachelor of Science (Business)

Career: Logistics Executive

Mueller Water Products "a" And "b" Shares Are Mispriced

Some smart investors see value in Mueller Water Products (MWA). They're probably right; but, Mueller isn't the kind of situation that jumps out at me as a clear bargain I can understand. However, there is something peculiar about this situation that makes it worth writing about. (Note: The information in this article was current as of Friday, April 6th, 2007 – please consult current market quotes).

There are two shares of Mueller Water Product common stock – Series A common stock and Series B common stock. There are roughly three times as many B shares as A shares. The A shares and B shares have identical economic rights. So, ownership of all of the B shares would provide a roughly 75% economic interest while ownership of all of the A shares would provide a roughly 25% economic interest.

Here's where things get interesting. "Shares of Series A common stock and Series B common stock generally have identical rights in all material respects except Series B shares have eight votes and each Series A share has one vote per share."

So, what's the premium on the B shares? There is none. The last trade on Mueller A shares (MWA) was at $13.98; the last trade on Mueller B shares (MWA.B) was at $13.64. Buyers of the A shares are currently paying $0.34 a share more to reduce their voting power by 87.5%.

You can't convert A shares into B shares or B shares into A shares. If you could, there would be a profit in simply buying, converting, and selling. Unfortunately, you can't do that. So, there's no "manual" arbitrage opportunity here. Obviously, you can bet that the discount on the B shares will be eliminated – but, the market has to close the gap for you.

Regardless, there is a nonsensical discrepancy in price between the A shares and the B shares.

Anyone looking to make a new investment in Mueller should buy the B shares. There's no reason to touch the A shares until they are trading at a discount to the B shares.

Owners of Mueller A shares who currently hold those shares in a manner that would cost them less than $0.34 a share to sell should immediately begin selling their A shares and putting the proceeds into the B shares. Doing so would slightly increase their economic interest in Mueller's business, greatly increase their voting power – and, over the long-term, possibly provide additional appreciation in the share price, if and when the B shares consistently trade at a premium to the A shares.

Do the B shares have to trade at a premium to the A shares? Technically, no. But, in the future, it's possible that circumstances may make the B shares far more attractive to certain investors. The A shares are extremely unattractive to any large shareholder who isn't committed to complete passivity as close to 96% of the votes are tied to the B shares – the A shares are essentially non-voting shares.

Furthermore, there are fewer A shares, so it would be more difficult for a large investor to acquire a meaningful economic interest via the A shares without moving the price of those shares.

While some investors might have very good reasons for buying the B shares when they trade at a higher price than the A shares – no one has a good reason for buying the A shares when they trade at a higher price than the B shares.

Right now, the choice seems simple – dump the A shares; buy the B shares.

Geoff Gannon writes a daily value investing blog and produces a value investing podcast at Gannon On Investing.

The Wonders Of Online Currency Trading

Without a doubt, the most significant impact to have occurred on the foreign

exchange market in the past 20 years has had little or nothing to do with foreign

currencies themselves – it has been the advent of first computer technology and

then the Internet. Prior to both these technological breakthroughs, profit taking

from currency trading was the sole realm of large institutional investors. Today,

thanks to both of these online currency trading means everyone has the chance

to make a profit from FOREX trading.

Hardware needed to start online trading

If you are interested in taking advantage of the opportunity to make some profits

from online FOREX trading, then you will need to have access to either a

desktop computer or a laptop computer. You will also need to have access to the

Internet. Ideally your access to the internet should be broadband. Once you

have these in place you're almost ready to start.

Software needed to start online trading

As well as having access to either a desktop or laptop computer, you will also

need to have access to software programs that can hep you to analyse your

current investment strategy. Here you can either decide to have your software

program via the access to the Internet, or you can elect to download a software

program to your computer so that you can have access to it and work 'off-line'.

Either way, although it possible to currency trade online without a software

program in place, it is not a recommended course of action to take.

Opening an online brokerage account

Once you have your hardware in place, you can also open an online FOREX

brokerage account by which to transact your foreign currency trades. Some

things you need to bear in mind when opening an online account include: (i)

whether or not the software program will be provided to you for free; (ii) whether

or not you'll be paying a commission on trades or whether the broker will be

making their money through their 'spread' (if not both); and (iii) whether or not

you can leverage trade using your online broker.

You are now in a position to start trading foreign currencies. However, before

you execute your first online trade, it is highly recommended that you spend

some time educating how online trades work by taking the opportunity to learn

foreign exchange trading using a dummy FOREX trading account. Once you feel

you have sufficiently mastered your way around all of these, you are ready to

start online currency trading.

Article Written By J. Foley

Article Written By J. Foley

The Economics of Expectations

Economies revolve around and are determined by "anchors": stores of value that assume pivotal roles and lend character to transactions and economic players alike. Well into the 19 century, tangible assets such as real estate and commodities constituted the bulk of the exchanges that occurred in marketplaces, both national and global. People bought and sold land, buildings, minerals, edibles, and capital goods. These were regarded not merely as means of production but also as forms of wealth.

Inevitably, human society organized itself to facilitate such exchanges. The legal and political systems sought to support, encourage, and catalyze transactions by enhancing and enforcing property rights, by providing public goods, and by rectifying market failures.

Later on and well into the 1980s, symbolic representations of ownership of real goods and property (e.g, shares, commercial paper, collateralized bonds, forward contracts) were all the rage. By the end of this period, these surpassed the size of markets in underlying assets. Thus, the daily turnover in stocks, bonds, and currencies dwarfed the annual value added in all industries combined.

Again, Mankind adapted to this new environment. Technology catered to the needs of traders and speculators, businessmen and middlemen. Advances in telecommunications and transportation followed inexorably. The concept of intellectual property rights was introduced. A financial infrastructure emerged, replete with highly specialized institutions (e.g., central banks) and businesses (for instance, investment banks, jobbers, and private equity funds).

We are in the throes of a third wave. Instead of buying and selling assets one way (as tangibles) or the other (as symbols) - we increasingly trade in expectations (in other words, we transfer risks). The markets in derivatives (options, futures, indices, swaps, collateralized instruments, and so on) are flourishing.

Society is never far behind. Even the most conservative economic structures and institutions now strive to manage expectations. Thus, for instance, rather than tackle inflation directly, central banks currently seek to subdue it by issuing inflation targets (in other words, they aim to influence public expectations regarding future inflation).

The more abstract the item traded, the less cumbersome it is and the more frictionless the exchanges in which it is swapped. The smooth transmission of information gives rise to both positive and negative outcomes: more efficient markets, on the one hand - and contagion on the other hand; less volatility on the one hand - and swifter reactions to bad news on the other hand (hence the need for market breakers); the immediate incorporation of new data in prices on the one hand - and asset bubbles on the other hand.

Hitherto, even the most arcane and abstract contract traded was somehow attached to and derived from an underlying tangible asset, no matter how remotely. But this linkage may soon be dispensed with. The future may witness the bartering of agreements that have nothing to do with real world objects or values.

In days to come, traders and speculators will be able to generate on the fly their own, custom-made, one-time, investment vehicles for each and every specific transaction. They will do so by combining "off-the-shelf", publicly traded components. Gains and losses will be determined by arbitrary rules or by reference to extraneous events. Real estate, commodities, and capital goods will revert to their original forms and functions: bare necessities to be utilized and consumed, not speculated on.

Sam Vaknin ( ) is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East.

He served as a columnist for Central Europe Review, Global Politician, PopMatters, eBookWeb , and Bellaonline, and as a United Press International

(UPI) Senior Business Correspondent. He was the editor of mental health and Central East Europe categories in The Open Directory and Suite101.

Visit Sam's Web site at

Warren Buffett's Berkshire Hathaway Discloses 10% Stake in Burlington Northern

Warren Buffett's Berkshire Hathaway has disclosed a greater than 10% stake in Burlington Northern Santa Fe (BNI). Through three insurance subsidiaries (Columbia, National Indemnity, and National Fire & Marine) Berkshire beneficially owns 39,027,430 shares of Burlington Northern common stock according to an SEC filing made on Friday, April 6, 2007.

Berkshire's most recent reported purchase was made on Thursday, April 5th, and consisted of 1,219,000 shares purchased at $81.18 each.

Upon presenting the familiar table of Berkshire's major investment in his most recent letter to shareholders, Buffett wrote:

"We show below our common stock investments. With two exceptions, those that had a market value of more than $700 million at the end of 2006 are itemized. We don't itemize the securities referred to, which have a market value of $1.9 billion, because we continue to buy them. I could, of course, tell you their names. But then I would have to kill you."

It appears that Burlington Northern was one of the two large positions Berkshire was accumulating. Clearly, Berkshire has been a big buyer of Burlington Northern shares since Buffett wrote his letter to shareholders, because Berkshire's position now has a market value of approximately $3.2 billion.

The size of the investment will make it one of about a half dozen large positions held by Berkshire. This investment dwarfs most of Berkshire's investments made during the past few years – it is already considerably larger than any other single investment recently disclosed by Berkshire including the investment in Posco (PKX), US Bancorp (USB), ConocoPhillips (COP), Anheuser Busch (BUD), Johnson & Johnson (JNJ), USG (USG), Wal-Mart (WMT), and Tesco (TSCDY).

Simply put, this is the biggest single common stock investment made by Berkshire in a long time.

It's big news – and it seems to have caught most Buffett watchers off guard. GuruFocus, a site that tracks Buffett's moves religiously, announced that its contest to name the two mystery investments alluded to in Buffett's annual letter had failed to turn up any guesses that Burlington Northern would be among the pair.

Burlington Northern Santa Fe operates one of the largest rail systems in North America. The system includes 32,000 route miles of track of which 23,000 are owned route miles.

In recent years, Burlington Northern Santa Fe has been buying back stock. The company expects share repurchases will remain the primary use of its free cash flow. In fact, Burlington Northern may allow "a moderately higher level of debt" so the company can "devote additional financial capacity to share repurchases".

In that respect, at least, it is a typical Berkshire investment.

Geoff Gannon writes a daily value investing blog and produces a value investing podcast at Gannon on Investing.

Charles Dow's Theory - Part 1

Charles Dow's theory is explained in a series of three articles. This being the first.

Dow Theory is about how to build wealth from the nature of movements in the stock market. Charles Dow (1851-1902) was a journalist, the first editor of the Wall Street Journal, and a co-founder of the Dow-Jones Company, and his theory was taken from editorials that he wrote.

Dow Theory was later refined by William P. Hamilton and others.

But Dow himself never used the term "Dow Theory."

The Theory does not just look at Technical Analysis and price action, but also at Market philosophy.

Many ideas put forward by Dow and Hamilton became axioms in the stock market.

Lot's of people think: "it will be different this time," but Dow Theory has proven that the Stock Market behaves the same today as it did 100 years ago.

Charles Dow developed his Theory from the analysis of Market price action late in the 1800s.

Dow never actually wrote a book on his Theory, but he did, as the editor of the Wall Street Journal, write editorials on his views. And it wasn't until later that William Hamilton refined Dow's Theory through a series of articles, and later in his book: The Stock Market Barometer, that the Theory was explained in detail.

But before you can understand Dow Theory, there are three assumptions that must be accepted.

The first of these is that the Primary trend of any Market cannot be manipulated.

And Hamilton agreed with this. He asserted that intra-day, day-to-day, and even Secondary movements could be prone to manipulation as these were just short movements of a few hours or even a few days. Hamilton also referred to the possibilities of individual stocks being manipulated.

The Primary, long-term trend of the Market would always keep intact, even if stocks were manipulatedin the shorter term. Manipulating a Market was virtually impossible according to Hamilton. Any Marketis just too large for manipulation to happen.

In the early 90s the UK Government tried to hold the British Pound against other currencies but even the fourth largest industrial country in the world could not influence things. The currency markets are huge. And in 1979/80 there was an attempt by the Hunt Brothers to manipulate the price of silver. Silver did skyrocket (temporarily) but only for it to come back down and continue its bear trend (after the attempt to corner the market was discovered).

The second assumption Dow Theory makes is that the markets reflect eveything. The price in the Market represents the sum total of all the hopes, the fears, and expectations of everyone in it.

Also, interest rate movements, earnings, elections, and anything else are already priced into the markeet.

Unexpected events will happen - but they only usually affect the short term trend. The Primary trend stays intact.

Hamilton observed that the Markets could sometimes act negatively on good news. He argued that the Market acts as a barometer of current events. When news comes out, that is already shown in the price - the Market has already acted.

This explains very nicely the Stock Market axiom: "Buy the rumor, sell the news!"

And the third assumption to be taken into account when studying the Theory of Dow is that it's not perfect. No theory can be.

Dow and Hamilton both knew this.

Dow Theory, like any other theory, is just a set of guidelines, albeit, fairly reliable ones.

But the Theory does provide a mechanism that removes a lot of emotion from your trading. And emotion is the number one reason most people fail.

By taking emotion out of trading helps you see what is actually there, NOT what you want to see that is there. And Dow's Theory eliminates the ambiguity.

Dow Theory is extremely efficient at identifying the Primary trend of any Market. It is not intended as a short term indicator.

Neither Hamilton nor Dow intended for the Theory to predict short-term movements beause they admitted that such movements could be manipulated. but in no way could Primary Market movements be manipulated.

They were not interested in predicting the exact tops or bottoms of a Market, in fact, nobody can reliably do that, they were interested in establishing the main (Primary) trend and capitalizing on the big moves. Even if these were to take months, or in some cases, years.

It is human nature to get caught up in sudden price movements, or forget the main trend. But once identified, this is where the big profits are.

In the next article I will get into the heart of Dow Theory - daily fluctuations, Secondary movements, and Primary movements,and the three phass of Bull and Bear Markets.

Understand Dow Theory and you will have a good overall picture of what is going on in your chosen Market.

Peter Woodhead is the webmaster of several Stock Market related websites. He specializes in the old classics. And his Long Lost Stock Trading Secrets contains works by Charles Dow (Scientific Stock Speculation), William Hamilton (The Stock Market Barometer), and Richard Wyckoff (How I Trade and Invest In Stocks and Bonds).