Archive for April, 2009

6 Signs an Investment’s a Scam (The Motley Fool)

Thursday, April 16th, 2009 | Finance News

There are a lot of shady people hoping that you're after instant riches -- or at least a boost on making up for your recent stock market losses. Boy, do they have the sales pitch down pat. There are tax scams, penny-stock huckster scams, Instant Messaging scams, Nigerian confidence scams, mortgage-servicing scams, wrong-number pump-and-dump scams, bad-roommate-from-Craigslist scams. I could go on, but my keyboard is out of breath.

How can you tell if an investment pitch is a scam? Unfortunately, there is no foolproof system. So occasionally we get a Bernie Madoff in the mix. However, there are telltale signs that something's not right. Here are the top six:

1. The promise of "low risk and high gain." Click your heels three times and repeat to yourself: "There is no such thing as a free lunch." It's a fundamental fact of investing that the higher the potential return, the higher the risk that you may never see that return.

2. Warnings that it will be "too late" if you don't act now. Why will it be too late? Any legitimate investment will be there tomorrow and next week and next year. Never get pressured into investing in something because tomorrow may be too late.

3. Predictions of the future. "It will double in three months." Oh, yeah? Since when did they start marketing crystal balls? Not only is this a ridiculous promise for a broker to make, it's illegal. Also, any broker who guarantees a rate of performance will get tossed out of the industry. Don't throw your money after him.

4. Failing the background check. Any individual -- as well as his or her employer -- selling securities to the public must pass a background check and a series of examinations, and be registered with FINRA. If you would like to check up on the background of your broker or his brokerage firm, use FINRA's BrokerCheck tool. Additionally, don't get hooked by suspicious emails that purportedly come from upstanding institutions. Everyone from online auctioneers to mutual fund companies have gotten spoofed. Don't fall for phishy emails without first checking out the sender.

5. No prospectus or financial statements. If you seek to invest in a new company that is just going public (an initial public offering, or IPO), you must be given a prospectus. If the company has been around a while, ask to see the financial statements for the past two years. If you need help understanding them, check out our online series on how to value stocks and read financial statements.

6. A "hot inside tip." This is especially important to pay attention to -- not because it could make you rich, but because it could land you in jail. It is illegal to pass on or act on material that is inside information. Anyone telling you otherwise is a liar.

Don't let the thought of predators deter your resolve to invest. Check out the Financial Industry Regulatory Authority's running list of investor alerts on its website and tally of alerts from other organizations.

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JPMorgan profit tops view (Reuters)

Thursday, April 16th, 2009 | Finance News

NEW YORK (Reuters) –
JPMorgan Chase & Co (JPM.N) reported better-than-expected first-quarter profit as debt trading and underwriting revenue surged, lifting the shares of the second-largest U.S. bank by as much as 4.5 percent.

JPMorgan said it set aside $10 billion in the quarter to cover losses on credit cards and consumer loans, and warned that if the economy worsens it may have to reserve even more.

But despite economic difficulty, Chief Executive Jamie Dimon said the bank has the money to repay the $25 billion in taxpayer funds it received from the U.S. government in October.

"That's probably the most positive thing any investor could hear from them," said Rob Lutts, chief investment officer of Cabot Money Management in Salem, Massachusetts.

The bank was forced to take the bailout funds in October under the government's Troubled Asset Relief Program.

"We could pay it back tomorrow," Dimon said on a conference call, adding that the bank is waiting for guidance from the government on when it can do so. Goldman Sachs Group Inc (GS.N) earlier this week raised $5 billion in a stock sale to help pay back the $10 billion it received from the government. Goldman also said it would return the funds when regulators gave the green light.

Dimon said JPMorgan could raise capital if it wanted to, adding that no bank should be allowed to repay the government before his bank. Keeping money received under TARP has become a "scarlet letter" for banks, he said.

JPMorgan shares were up 32 cents to $32.88 in afternoon trade on the New York Stock Exchange after rising as high as $34.01 in earlier composite dealings.

First-quarter net income available to JPMorgan common shareholders was $1.52 billion, or 40 cents a share, compared with $2.29 billion, or 67 cents a share, a year earlier. Analysts' average forecast was 30 cents a share, according to Reuters Estimates.

Net income before preferred dividends was $2.14 billion, down from $2.37 billion a year earlier. Revenue increased 45 percent to $25 billion.

Profit was driven largely by the investment bank, which reported record revenue driven by debt underwriting, and higher volumes in credit trading, emerging markets, currencies and rates businesses.

It was a "historic" quarter for the investment bank, Dimon said, noting the bank has increased market share across sectors, helped in part by the acquisition of Bear Stearns Cos just over a year ago.

But he said it was "unreasonable" to expect investment banking to remain as strong as it was in the first quarter.


While JPMorgan largely avoided the losses and writedowns on complex debt securities and subprime mortgages that hurt other banks in 2008, it is heavily exposed to consumer credit.

The bank reported net charge-offs of $1.1 billion from home equity loans in the first quarter, compared with $447 million a year ago; charge-offs for prime mortgages jumped to $312 million from $50 million.

The credit card business reported a loss of $547 million as delinquent loans soared and consumers spent less.

"You have the continuing concerns that things are still dicey for the consumer," said Michael Holland, founder of investment management firm Holland & Co in New York.

Revenue from the bank's retail division was boosted by its acquisition of failed Seattle, Washington-based thrift Washington Mutual Inc last fall, as well as higher mortgage fees and a pickup in refinancing.

JPMorgan's ratio of tangible common equity to tangible assets, an increasingly popular measure of capital strength, was about 4.3 percent in the first quarter. That is high compared to weaker competitors, some of which have ratios below 3 percent. The market is not clear about what level is ideal for this ratio, and some analysts argue banks should be closer to 5 percent.

But with JPMorgan's capital ratios relatively high, the bank feels comfortable returning money to the United States, Dimon said. JPMorgan has no plans to participate in the government's Public-Private Investment Program, where investors receive U.S. support to buy bad loans and securities from banks.

"We're certainly not going to borrow from the Federal government because we've learned our lesson about that," Dimon said.

JPMorgan shares have outperformed the broader sector so far this year, rising about 3 percent through Wednesday, compared with a 20 percent decline in the KBW Bank Index (.BKX).

(Reporting by Elinor Comlay; additional reporting by Dan Wilchins and Jonathan Stempel; editing by Derek Caney and John Wallace)


Canada pension plans hit by falling markets (Reuters)

Thursday, April 16th, 2009 | Finance News

TORONTO (Reuters) –
Private pension plans in Canada were hurt last year as falling stock markets drove asset levels below the plans' liabilities, Canada's financial regulator said on Thursday.

The average solvency ratio of the 400 defined benefit pension plans overseen by the Office of the Superintendent of Financial Institutions (OSFI) fell to 0.85 at the end of 2008, down from 0.98 percent at mid-year, OSFI said.

The solvency ratio compares the assets held by a pension plan to the liabilities it owes members.

Pension plans around the world are facing deficits because of the drop in the value of stocks they hold and are scrambling to shore up asset levels in time to pay benefits to retiring baby boomers, a post-war demographic bulge of people born between 1946 and 1964.

"The deterioration in funded status was due primarily to a decrease in the value of pension plan assets, reflecting losses on equity investments," OSFI superintendent Julie Dickson said in a statement.

Slightly higher interest rates, which lower pension plan liabilities, had a small positive effect, she added.

The federal regulator oversees 7 percent of all private pension plans in Canada, representing about 12 percent of pension assets. Canada's provinces regulate the rest.

OSFI in December warned pension plan sponsors and administrators that they needed to be prepared for the effects of the market downturn and consider a range of longer-term scenarios to deal with what could be protracted market weakness.

(Reporting by Andrea Hopkins; editing by Janet Guttsman)